REG - JPMorgan Euro Discov - Final Results
19/06/2025 07:00
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RNS Number : 4766N JPMorgan European Discovery Trust 19 June 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN DISCOVERY TRUST PLC
(the 'Company')
FINAL RESULTS FOR THE YEAR ENDED 31st MARCH 2025
Legal Entity Identifier: 54930049CEWDI46Y3U28
Information disclosed in accordance with the DTR 4.1.3
HIGHLIGHTS
• NAV total return of +2.9% compared with +1.3% for the MSCI
Europe (ex UK) Small Cap Net Total Return Index (the 'Benchmark'). Share price
return of +7.0%.
• For three years cumulative ended 31st March 2025, NAV total
return of +5.6% compared with +3.8% for the Benchmark. Share price return of
+15.6%.
• For five years cumulative ended 31st March 2025, NAV total
return of +76.0% compared with +70.2% for the Benchmark. Share price return of
+114.1%.
• For ten years cumulative ended 31st March 2025, NAV total
return of +126.7% compared with +117.7% for the Benchmark. Share price return
of +147.1%.
• Revenue return per share of 12.36p as at 31st March 2025
compared with 12.04 as at 31st March 2024 (+2.7%).
• The discount to NAV narrowed from 10.6% as at end March 2024
to 7.3% as at end March 2025, with the average discount over the period of
9.7%. As at 16th June 2025, the discount was 7.7%.
• During the year, the Company repurchased 14,660,188 shares
at an average discount of 9.8%. A further 16,347,505 shares have been
re-purchased since the period end.
The Chairman of the Company, Marc van Gelder, commented:
"I am happy to report that this year's outperformance has enhanced the
Company's already robust long-term performance track record. The Company has
made absolute gains and outperformed the market over the three, five and ten
year periods ending 31st March 2025.
While recent geopolitical developments are certainly unsettling, they are
likely to bring positive long-term benefits for the sector. Smaller companies
are relatively insulated from the adverse impact of US tariffs benefiting from
their significant regional market exposure. Increased government spending on
defence and infrastructure across EU and other continental European nations
should also benefit small and mid-cap companies.
The Portfolio Managers' have positioned the portfolio to capitalise on recent
positive developments by focusing on companies with strong growth prospects
and some immunity from the volatility generated by macroeconomic and
geopolitical developments."
Portfolio Managers, Jon Ingram, Jack Featherby, Jules Bloch, commented:
"This year, our team has successfully navigated a turbulent macroeconomic
environment, demonstrating resilience and expertise. European smaller
companies offer a rich landscape for outstanding investment opportunities. Our
skilled team is dedicated to discovering these future leaders, which we
affectionately term hidden gems."
"European small caps are presenting a unique opportunity, trading at a notable
discount relative to other asset classes while offering robust growth
potential. This gap strengthens our confidence in the future of this asset
class, especially as Europe's macroeconomic outlook begins to brighten. By
seizing these undervalued prospects, we are poised to deliver significant
returns and foster enduring success for our shareholders."
CHAIRMAN'S STATEMENT
Dear Shareholder,
I am pleased to present the Annual Report for the year ended 31st March 2025
and to report that our Company has:
• outperformed its benchmark over the year, achieving a total return on
net assets of +2.9%, against the MSCI Europe (ex UK) Small Cap Index return of
+1.3%;
• outperformed the market over the three, five and ten year periods
ending 31st March 2025;
• record revenue return for the year of 12.36p, an increase of +2.7%.
Investment Performance
The market environment remained supportive over the past year. An easing in
inflation pressures and a gradual reduction in interest rates combined with
rising wages, lifted consumer spending across the region leading to increased
investment. On the political front, developments over the past year have been
dramatic and historically significant. The new US administration's aggressive
tariffs and other policy pronouncements threaten to upend the post-World War
II economic and political order. Consequently, European countries have been
forced to reassess their relationship with the US and in particular, commit to
higher defence spending. As an example, the new German government elected in
February 2025 has promised a major increase in domestic defence and
infrastructure investment.
Most major equity markets saw sharp declines in early 2025 due to concerns
that higher US tariffs would slow global growth, raise inflation and delay or
curtail investment plans. However, since the beginning of 2025, European small
and mid-cap companies have fared better than most market sectors, including
European large caps. This is supported by the fact that they generate much of
their revenue from domestic sales and are thus relatively insulated from the
impact of a global trade war. Investors are also clearly mindful that small
cap and mid-cap companies will benefit from increased spending on defence and
infrastructure.
For the financial year ended 31st March 2025 the MSCI Europe (ex UK) Small Cap
Index returned +1.3%. Our Company outperformed its benchmark over the year,
achieving a total return on net assets of +2.9%, while the total return on
share price was +7.0%. This led to a significant narrowing of the discount at
which the Company's shares trade relative to net asset value (NAV) from 10.6%
to 7.3% over the course of the year.
While the past year's performance has been pleasing, the Company adopts a
long-term investment strategy. Therefore, it is important to also consider the
performance over a longer timeframe. I am happy to report that this year's
outperformance has enhanced the Company's already robust long-term performance
track record. The Company has made absolute gains and outperformed the market
over the three, five and ten year periods ending March 2025. Significantly,
over ten years making annualised returns of +8.5% on an NAV basis versus the
annualised benchmark return of +8.1%.
Portfolio Enhancements
During the past year, the Portfolio Managers implemented some important
enhancements to their process and risk management. Whilst the Company's
investment strategy continues to seek to identify and invest early in
high-quality companies when they are relatively unknown and undervalued, the
Portfolio Managers noted in their 2024 Half Year Report that this strategy
works best when markets are trending higher but tends to struggle during
periods of high volatility caused by global crises and other sources of macro
uncertainty. However, historically, once these periods of stress end,
portfolio performance has bounced back strongly.
The changes made by the Portfolio Managers during the second half of FY25 are
intended to minimise downside risk during periods of volatility and capture
upside risk when volatility reduces. So far, these changes have had a
positive impact on performance. All the gains made by the Company over the
past year were made in the last six months of the financial year. During this
period, the NAV rose +3.4%, against the benchmark return of +0.3%. The
Portfolio Managers' report on pages 16 to 24 of the Annual Report provides
further detail on this positive turnaround in performance, along with
commentary on portfolio positioning and the investment outlook.
Gearing
Gearing can be a differentiator for an investment trust. The Board believes
that it can be beneficial to performance and it sets the overall strategic
gearing policy and guidelines which are reviewed at each Board meeting.
Borrowings during the year consisted of a EUR125m revolving credit facility,
which was EUR70m drawn down at year end. During the year gearing varied
between 9.6% geared and 10.3% cash as a result of the Tender Offer. At the end
of the financial year, gearing stood at 5.2%.
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, therefore the Portfolio Managers are not
constrained to deliver income in any one financial year.
On 5th February 2025, an interim dividend of 3.0 pence per share was paid,
which was an increase from the previous year's interim dividend of 2.5 pence.
This increase reflects the higher income that the Company has received during
the first six months of the financial year compared to the previous year.
Considering the income received during the financial year, the Company's
revenue reserves, and pending shareholder approval at the upcoming Annual
General Meeting (AGM), the Directors have declared a final dividend of 10.0
pence per share. This final dividend together with the interim dividend paid,
is higher than the revenue return per share of 12.4 pence earned during the
financial year ending 31st March 2025.
This will take the total dividend for the year to 13.0 pence, compared to a
total dividend of 10.5 pence for the previous year. The final dividend will be
paid on 4th August 2025, to shareholders registered at the close of business
on 4th July 2025, with the ex-dividend date being 3rd July 2025. Following
this dividend payment, the Company's revenue reserves will total £12.3
million, compared to £9.0 million as at 31st March 2024.
The dividend level is influenced by the share buybacks conducted since the
year-end while allowing the Company to fulfill the distribution requirement of
section 1158 of the Corporation Tax Act 2010 and maintain its investment trust
status.
Discount Management and Share Repurchases
The Company's share price discount relative to net asset value narrowed during
the Company's financial year, from 10.6% as at end March 2024 to 7.3% at end
March 2025. The average discount over the period was 9.7% and as at 16th June
2025, the discount was 7.7%.
The Board monitors the level of the discount carefully. When appropriate,
it uses the ability to repurchase shares to minimise the short-term volatility
and the absolute level of the discount. During the year, the Company
repurchased 14,660,188 shares at an average discount of 9.8%. A further
16,347,505 shares have been re-purchased since the period end.
As set out in the circular to shareholders dated 28th April 2025, the Board
and the Investment Manager anticipated that, in the light of recent buy-back
activity, the Company's authority to repurchase Ordinary Shares granted at the
2024 Annual General Meeting would likely be fully utilised before it could be
refreshed at the Company's Annual General Meeting in July 2025. In order to
ensure that the Company could continue to operate its discount management
policy, on 16th May 2025, shareholders approved the early renewal of the
Company's authority - to effectively repurchase up to 14.99% of its issued
share capital (such authority to expire at the conclusion of the 2025 Annual
General Meeting). Subsequent to this renewal, the Company has continued to use
this buy-back authority.
Management Fee and Manager Evaluation
Following the Board's discussions with the Manager during the year an
agreement was reached to reduce the investment management fee. With effect
from 1st April 2025, the fee is now charged on a tiered basis on the
Company's net assets at an annual rate of 0.70% on the first £300 million and
0.65% of net assets above that amount, compared to the previous flat fee of
0.75%.
During the year the Management Engagement Committee conducted the annual Board
and Manager review facilitated by an independent board evaluation firm. The
review of the Manager encompassed investment management, company secretarial,
administrative and marketing services provided. The review took account of the
Manager's investment performance record, management processes, investment
style, resources committed and risk controls. The Board concurred with the
Committee's recommendation that the continued appointment of the Manager was
in the best interests of shareholders.
The Board
The Board continues to look ahead to manage its succession planning. In the
normal course, having served for nine years I would step down from the Board
at the forthcoming AGM. However, the Board is mindful of the changes over the
last 18 months, in particular the investment management team and the
appointment of two new Directors during the period. In order to ensure ongoing
stability and continuity, the Board, in consultation with shareholders,
believed that it was in the Company's best interests that I should extend my
term to the AGM in 2026. The Board has commenced the recruitment process for a
new Non-Executive Director.
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 investment decisions. The Portfolio Managers regularly
discuss financially material ESG issues with the management teams of potential
and current investee companies. Further information on the Manager's ESG
process and engagement is set out in the ESG Report on pages 35 to 37 of the
Annual Report.
Shareholder Engagement
The Board values regular interactions with a cross section of shareholders as
they are very helpful in assisting with the management of the Company's
affairs. The Board members seek opportunities to have such meetings and
welcome approaches from shareholders at any time.
Over the course of the year, we have engaged with several of the Company's
largest shareholders to listen to their perspectives. The Board values the
feedback it has received and insights it has gained through this engagement
process. We remain committed, as ever, to continued engagement over the coming
year. I would like to take this opportunity to thank shareholders for their
time and ongoing support.
With the Company's improved performance and positive outlook for the sector, a
sub-committee of the Board has been working closely with the Manager's sales
and marketing teams to raise the profile of the Company to attract more retail
investors and to communicate the appeal of the European small and mid-cap
sector.
Annual General Meeting
The Company's Annual General Meeting will be held on Wednesday, 23rd July 2025
at 12.30 p.m. at 60 Victoria Embankment, London EC4Y 0JP.
The Portfolio Managers will present to shareholders, reviewing the past year
and commenting on the outlook for the current year. The meeting will be
followed by lunch to provide shareholders the opportunity to meet the
Directors and the Manager's representatives. My fellow Directors and I 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, we will be able to welcome you through our conferencing software.
Details on how to register together with access details will shortly be
available on the Company's website: www.jpmorganeuropeandiscovery.co.uk, or by
contacting the Company Secretary at jpmam.investment.trusts@jpmorgan.com
As is normal practice, all voting on the resolutions will be conducted by a
poll. For technical reasons, shareholders viewing the meeting via conferencing
software will not be able to vote on the poll. We therefore encourage all
shareholders who cannot attend in person, to exercise their votes in advance
of the meeting by completing and submitting their proxy form.
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.
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
or by scanning the QR code provided in the Annual Report.
Outlook
The outlook for European small and mid-caps and our Company has brightened
considerably since my last report.
The regional economy is strengthening, supported by declining interest rates.
At the same time while recent geopolitical developments are certainly
unsettling, they are likely to bring positive long-term benefits for the
sector. Smaller companies are relatively insulated from the adverse impact of
US tariffs benefiting from their significant regional market exposure.
Increased government spending on defence and infrastructure across EU and
other continental European nations should also benefit small and mid-cap
companies.
In addition, the increasingly rapid spread of artificial intelligence (AI) is
likely to be particularly advantageous for small and mid-cap companies. By
their very nature, such businesses tend to be innovative and nimble. These
characteristics suggest they will lead the way in their adoption of AI tools
and will thus be amongst the first to realise related productivity gains and
cost savings.
Finally, valuations in this part of the market remain very attractive in
relative and absolute terms versus European large caps, the US and other
global markets. All the favourable factors are aligned in support of small
and mid-caps which suggest that the sector's long overdue rebound cannot be
far off.
The Portfolio Managers' have positioned the portfolio to capitalise on recent
positive developments by focusing on companies with strong growth prospects
and some immunity from the volatility generated by macroeconomic and
geopolitical developments. So I look forward with some confidence of reporting
on the continuation of our Company's long track record of strong gains and
outperformance over the coming months.
Marc van Gelder
Chairman
18th June 2025
INVESTMENT MANAGER'S REPORT
Review
The financial year ending 31st March 2025 was relatively stable compared to
the turbulent years we have recently experienced. Notable events in the past
few years included a mini financial crisis following the bankruptcies of
Silicon Valley Bank (SVB) and Credit Suisse, an inflation shock following
post-COVID supply chain disruptions, and an energy crisis spurred by Russia's
invasion of Ukraine. In contrast, the 2024-25 financial year passed quite
smoothly, with gradual declines in European energy prices and CPI
expectations, and a resultant steady easing of policy rates by central banks.
At the same time, there has been a growing realisation of the potential of
artificial intelligence (AI) which could prove to be a once in a generation
event for investors.
Where there was volatility, it was mainly driven by politics, and this
impacted performance, both positively and negatively. Over the summer of 2024
the Trust's performance was impacted by the French parliamentary elections,
due to our French overweight. Conversely the German elections at the start of
2025 brought with them hopes of fiscal stimulus, which benefited performance
due to our positive positioning towards a resurgent and recovering Europe.
However, the most significant political event over the period happened outside
Europe - the US presidential election - which saw Donald Trump decisively
re-elected, leading to a surge in US markets amid shouts of US
exceptionalism. The markets' initial enthusiastic response was fired by the
view that the new administration would be good for markets and business. There
was also optimism about the prospect of a peace dividend from the resolution
of conflicts in Ukraine and the Middle East, which President Trump promised to
end quickly.
What a difference a few months can make. The narrative of US exceptionalism
has shifted dramatically with speculation that the US's post-war dominance of
the international political and economic landscape is coming to an end.
President Trump's 'America First' policies are beginning to destabilise the
post-World War II economic order by prioritising domestic manufacturing over a
global trade system based on comparative advantage. Following the end of the
Trust's financial year, the administration launched an unpredictable 'on-off'
approach to tariff policy that has generated huge uncertainty among consumers
and investors in the US and around the world.
The US's relationship with its European allies has also shifted dramatically.
US Vice President Vance's speech at the Munich Security Conference harshly
criticised NATO and European leaders and is being widely interpreted as a
turning point for post-war trans-Atlantic relations. The speech has sparked
calls for European rearmament and increased spending by EU governments.
We believe these political shifts are significant for the Trust. In our view,
the impact on the European Small Cap asset class could be profoundly positive
over the long-term. We delve into this in more length in this report's Outlook
section, but in summary, European domestically-focused companies
- particularly European Small Caps with substantial domestic revenue exposure
- are relatively insulated from a global trade war and poised to benefit from
greater investment in European infrastructure and increased defence spending.
In addition, smaller companies stand to gain from initiatives like former
Italian Prime Minister and ECB governor, Mario Draghi's report on reducing
European red tape to enhance competitiveness (see further discussion below),
and from a number of other positive developments we foresee, including,
falling interest rates (given smaller businesses' sensitivity to floating rate
debt), improving consumer confidence driven by rising wage growth, and the
efficiency gains offered by AI.
Indeed, if we examine the performance of European Small Caps since the
November 2024 US presidential election, it is clear they have already begun
to factor in these favourable influences. The sector has demonstrated strong
relative performance compared to European large caps, especially since the
German elections. Since the US's announcement of its new tariff regime,
European Small Caps have continued to outperform (and they recovered more
swiftly from the post-tariff announcement sell-off).
Table 1: Key European macroeconomic indicators
Key EU macro indicators March 23 March 24 March 25
ECB main refinancing rate 3.50% 4.50% 2.65%
EU Inflation (Harmonised index of
consumer prices, yoy) 8.30% 2.60% 2.50%
EU GDP Growth (real, yoy) 1.20% 0.60% 1.40%
PMIs 53.6 50.3 50.9
Manufacturing PMIs 47.3 46.3 48.6
Services PMIs 55.0 51.5 51.0
Source: Eurostat, S&P Global, Bloomberg.
Portfolio Performance
Over the 12-month period ended 31st March 2025, the Company returned +2.9% on
a total return NAV basis and +7.0% in share price terms, outperforming its
benchmark, the MSCI Europe (ex UK) Small Cap Index, which rose by +1.3% over
the period. The Company has also delivered positive absolute returns in both
NAV and share price terms, and has outperformed the benchmark, over the one,
three, five and 10-year periods ending 31st March 2025. The Company has made
annualised total returns of +8.5% on an NAV basis and +9.5% in share price
terms over the 10-year period, ahead of the corresponding benchmark return of
+8.1%.
Performance attribution
Year ended 31st March 2025
% %
Contributions to total returns
Benchmark return 1.3
Asset allocation (0.3)
Stock selection 0.9
Gearing/cash effect 0.8
Currency effect (0.3)
Investment Managers' added contribution 1.1
Portfolio return 2.4
Management fees and other expenses (0.9)
Shares repurchased 1.1
Tender offer 0.3
Other effects 0.5
Return on net assets(A) 2.9
Return on share price(A) 7.0
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 on pages 106 and 107 of the Annual
Report.
Sector contribution
Table 2: Sector performance - Top 3 and Bottom 3 sectors contributing to
performance
Portfolio Benchmark Attribution
(%) (%) (%)
Average Average
Sector Weight Return Weight Selection Allocation Total
Consumer Discretionary 11.59 4.59 8.53 1.25 -0.34 0.91
Consumer Staples 3.75 -2.37 4.77 0.34 0.10 0.44
Communication Services 7.84 7.88 4.57 0.41 0.02 0.43
Real Estate 7.00 -0.72 8.02 -0.12 -0.15 -0.27
Materials 5.57 -11.97 7.95 -0.65 0.21 -0.44
Industrials 31.09 -2.27 25.98 -0.67 0.03 -0.64
Source: JPMorgan Asset Management.
Positive Contributors to Performance
At the sector level, over the period the Company's overweight positioning in
the Consumer Discretionary sector made the most significant positive
contribution to performance. Within this sector, investments in Irish
housebuilder, Cairn Homes and Swedish school operator, AcadeMedia, were
notable positive contributors. Cairn Home's performance was driven by
persistently high demand for housing in Ireland, supported by a strong
economy, falling interest rates and a structural housing shortage. AcadeMedia
is the largest private education provider in Northern Europe. We added this
company to the portfolio in December 2024 due to its attractive valuation and
promising return profile, which is independent of short-term macroeconomic
fluctuations thanks to the multi-year nature of its services. Over the period,
AcadeMedia benefited from a strong start to the school year, driven by
sustained demand across all levels of education. Alongside this, the company
also announced an increase to the reimbursement rates that local governments
pay for each child for the next academic year. This increase was the result of
a catch-up for inflation effects.
Other strongly performing sectors were Consumer Staples and Communication
Services sectors. The Consumer Staples sector saw strong returns on the back
of the Company's position in AAK, a Swedish manufacturer of speciality
vegetable oils and fats. This business has benefited over the last 12 months
from soaring cocoa prices, which have encouraged users to switch to AAK's
cocoa butter alternatives. The Communication Services sector also did well on
the back of a good performance by CTS Eventim, a German online ticketing
platform that has delivered consistently strong results over the past year.
CTS is benefiting from the ongoing growth in the live music industry, as major
artists look to diversify their revenue streams away from declining
traditional sales channels. Returns within this sector were also enhanced by
an overweight in Scout 24, a digital classifieds platform operator focused on
German and Austrian real estate, which consistently outperformed over the
period given continued strong operational momentum.
Detractors from Performance
The Company's largest detractors from a sectorial standpoint were Industrials,
Materials and Real Estate. The underperformance of the Industrial sector was
largely driven by the poor performance of holdings with exposure to
Electrification or Green environmental characteristics. These stocks came
under pressure following the US election, due to President Trump's very vocal
support for fossil fuels and his efforts towards subverting net zero carbon
emissions targets. Names which came under pressure included France's Nexans, a
global leader in the high voltage cables needed to modernise electricity grids
and connect to renewable energy sources, and Arcadis, a Dutch environmental
consultancy which is also a leader in its field. Both stocks underperformed on
concerns that the US administration's anti-environmental stance will cause
Green energy projects to be delayed or cancelled.
Our underweight position to both the Real Estate and Materials sectors also
detracted, primarily due to stock selection decisions. In real estate, the
Company's investments in the German residential sub-sector (TAG and LEG
Immobilien) underperformed on concerns that increased German government
spending would fuel inflation, limiting scope for lower interest rates which
would support the sector. Within the Materials sector, Hexpol was the main
detractor. Hexpol is a Swedish company which is a leading producer of
synthetic polymers and rubbers. It has been hurt by continued weakness in the
automotive sector. There is little prospect of any near-term recovery in the
sector as car makers are among the businesses most exposed to US tariff
increases.
Stock contribution
Table 3: Investment performance - Top 3 and Bottom 3 investments contributing
to performance
Account Benchmark Attribution
(%) (%) (%)
Average Average Weight Total
Company Weight Return Weight Difference Effect
Top 3 Contributors
Bilfinger 2.72 54.29 0.17 2.55 1.31
Unipol 2.14 91.64 0.30 1.84 1.12
Lottomatica 1.75 68.40 0.18 1.57 1.03
Bottom 3 Contributors
Ipsos 1.76 -36.12 0.24 1.52 -0.68
Fugro 1.88 -37.54 0.27 1.61 -0.68
BFF Bank 1.31 -32.55 0.20 1.11 -0.71
Source: JPMorgan Asset Management.
Positive Contributors to Performance
At the stock level, our most significant contributors to performance during
the year were: Bilfinger, a German industrial services provider which
produced strongly improving results, thereby confirming our expectation that a
successful operational turnaround of the business would drive margin
improvement and earnings growth. This success can be attributed to the
company's new management team, which has been implementing better risk
controls and pricing mechanisms. Resultant strong cash generation provided
scope for Bilfinger to initiate a share buyback programme. Alongside this, the
German government's announcement of fiscal stimulus measures provided
a further boost to the stock, as the company is likely to be a direct
beneficiary of the increase in public investment spending. The second, Unipol,
an Italian general insurance provider (which was also one of the top
contributors to performance during the 2023-24 financial year), continued its
run of stellar performance. Its investments in the banking sector continued to
perform, and overall insurance results were positive. Lottomatica, an Italian
gaming company, was the third top contributor. This company has grown strongly
on the back of its increasing online market penetration and by taking market
share from its smaller, less efficient regional rivals.
Detractors from Performance
The biggest detractors from performance were: Ipsos, the world's third-largest
market research company. This French business is currently suffering from the
weak performance of its US operations, which have been adversely impacted by a
change of local management, and a lack of spending by the public sector and
healthcare companies. The second was Fugro, a Dutch geological data
specialist, is facing uncertainty due to the new US administration's stance on
offshore energy. This uncertainty has delayed investment decisions and
projects across Fugro's end markets. By the end of the financial year, we had
exited our position in this stock on the view that the lack of policy clarity
is likely to persist for the foreseeable future. The third, BFF Bank, an
Italian bank focused on factoring, a process whereby a business sells its
accounts receivable (outstanding invoices) to a third-party financial
institution (a 'factor') at a discount, to receive immediate cash. BFF
underperformed after the Bank of Italy required BFF to pause its dividend
payments while they examined how they were classifying their overdue invoices.
We have also now exited our position in BFF.
Portfolio Changes and Current Portfolio Positioning
Table 4: Company absolute and relative sector positioning as at 31st March
2025
Full table is provided in the Annual Report.
Over the course of the year, as geopolitical tensions and macroeconomic
uncertainty have increased, we have taken the decision to reduce the Company's
various exposures to political and macro-specific risks and to focus instead
on bottom-up stock selection. We are focused on targeting companies driven by
idiosyncratic, stock specific factors. We expect this focus to reduce the
Company's exposure to drawdown risks related to individual political
announcements and economic shocks, and to ensure performance is driven
primarily by the underlying performance of its portfolio holdings. For
example, over the past year we have reduced the Company's overweight to the
Industrial sector by c.5%. This was done by trimming or exiting those
companies such as Nexans (a trim) and Fugro (an exit) with the greatest
exposure to potentially damaging US policy announcements.
For each reduction in overweight positions there was a corresponding reduction
in an underweight position. For example, the Company's underweight exposure to
Materials over the year fell from c.4% to c.1%. We achieved this by investing
in companies such as AlzChem Group, a German speciality chemicals company
which has been performing strongly. AlzChem produces creatine, a sports
focused health supplements. It also produces munitions propellants, which are
currently experiencing an exponential increase in demand because of increased
defence spending by the US and European Union. We also opened a position in
Buzzi, an Italian cement and construction materials company. Buzzi offered an
attractive valuation at our entry point and was being supported by strong
growth momentum following several positive quarters. The company should also
benefit from any potential infrastructure spend within Europe and potentially
from expenditure on the reconstruction of Ukraine, as and when a peace deal is
finally agreed.
Following these portfolio changes, the Company's largest sectoral overweights
are Communication Services, Industrials, and Consumer Discretionary. Despite
the reduction in the Company's overweight in the Industrials sector, via the
reduction and liquidation of positions in policy sensitive names such as
Nexans and Fugro, the sector remains the Company's second largest sectoral
overweight. Many of the Company's largest active positions in the Industrials
sector have company-specific drivers that should help them perform regardless
of the economic environment. As examples, in addition to Bilfinger, mentioned
above, we would also cite our holding in Do&Co, an Austrian airline
catering company, which is 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 adds new
airlines to its client base. Additionally, Do&Co targets airlines
providing business class travel, and it has been observed that even in
recessions, business air travel only declines modestly.
Conversely, the Company's largest sectoral underweights are in Consumer
Staples, Real Estate and Utilities. These underweights have been motivated
either by the sector's exposure to policy announcements or macroeconomic
variables, or by a lack of differentiating stock specific alpha opportunities.
As at the end of the financial year, 31st March 2025, the Company's NAV was
geared 5.2%. This level of gearing reflects our positive view both the asset
class and on our ability to add value through our investment approach.
Outlook
The current investment landscape has shifted dramatically over the last few
months:
l The policies of the new US administration look set to upend the post-war
world order and accepted norms in international relations between the US and
both its allies and its perceived adversaries, most notably China.
l 'America First' policies, especially aggressive tariffs, are also likely
to result in slower global growth and higher inflation.
l There has been what appears to be the biggest shift in Western defence
policy for a generation or more. US Vice President Vance's Munich speech has
prompted Europe and the UK to reassess their interests and allegiances and
increase defence spending.
l In response, the new German coalition government has removed borrowing
constraints, unlocking hundreds of billions of euros for domestic defence and
infrastructure spending.
l There is potential for a peace dividend from the eventual resolution of
conflicts in Ukraine and in the Middle East.
l Draghi's report on EU competitiveness could be another game-changer. It
lays out clear recommendations on how Europe can boost its productivity and
economic growth. Draghi focuses on the EU's need to foster more investment,
coordinate industrial policy and instigate rapid decision-making to increase
productivity across the region. Though details around planned action are yet
to be announced, the report could represent a catalyst for future reform.
As discussed above, we believe these developments will be very positive for
European Small Caps over the long term. The inherent characteristics of
European Small Caps (domestic focused and domestically geared), the long-term
impacts of these developments (increased investment and higher productivity)
and Small Caps' current relative and absolute value versus large caps, all
bode well for the sector.
We are strategically positioning the Company to capitalise on these favourable
developments, as we have detailed in the Portfolio Positioning section. We
have reduced the Company's macro-level bets due to the unpredictability of the
US administration, and we are instead focusing on companies with strong
bottom-up investment metrics which can thrive regardless of macroeconomic
events.
Alongside this, we are utilising the closed ended nature of the Company by
taking a leveraged (geared) position on the asset class. As mentioned in the
Current Portfolio Positioning section, the Company's NAV was geared 5.2% at
year end. The gearing level reflects our positive view of both the asset class
and our ability to add value through our investment approach. Our absolute
level of gearing has and will evolve as we see market conditions unfold.
Our view on the investment case for European Small Caps remains similar to
what we presented in last year's investment report. We repeat it below,
updated to reflect the current investment environment.
The Case for European Small Caps
Domestic Revenue Exposure: European Small Caps, by virtue of their size and
home bias, offer greater domestic exposure than larger, more globally oriented
companies. These smaller companies typically dominate their domestic markets
or excel in global specific niches, positioning them to benefit from increased
domestic stimulus and to weather the adverse effects of tariffs. Our expertise
allows us to sift through more than 1,000 companies in our investment universe
to select those best positioned to benefit from current market dislocations.
Table 5: Revenue contribution by region of each index.
From the table you can see that both the JPMorgan European Discovery Trust and
the MSCI Europe Small Cap (ex UK) index offer far greater domestic European
revenue exposure.
MSCI Europe
Company (ex UK) Small Cap MSCI Europe MSCI World
Europe (ex UK) 59.6% 58.5% 31.0% 11.9%
United Kingdom 4.8% 4.3% 8.7% 3.3%
North America 10.7% 12.9% 26.0% 52.6%
Japan 0.9% 1.2% 2.4% 4.6%
Asia (ex Japan) 2.1% 1.5% 3.1% 4.2%
Emerging Markets 21.8% 21.7% 28.8% 23.3%
Source: JPMorgan Asset Management, FactSet. Data as of 31st March 2025. Data
unaudited, unofficial, for indicative purpose only and should not be relied
upon for investment decisions.
Valuation Advantage: The valuations of European Small Caps are compelling,
especially when compared to global markets such as the US, which until
recently traded at all-time high valuations. European Small Cap valuations,
coupled with their growth potential, make them an attractive investment
option.
Table 6: Long term growth and current valuation measures for the European
small and large cap investment universes together with relevant market indices
Sales Earnings
growth growth P/E
CAGR CAGR Cyclically Price-to- Price-to-
'02-24 '02-24 P/E Adjusted sales book
MSCI Europe (ex UK) SC 6.3% 8.7% 15.8x 15.6x 0.9x 1.5x
MSCI Europe (ex UK) 2.6% 5.4% 16.0x 22.1x 1.7x 2.2x
FTSE 100 3.4% 4.5% 12.7x 18.7x 1.4x 1.9x
FTSE 250 5.0% 6.7% 15.1x 12.6x 0.9x 1.4x
S&P 500 6.2% 8.3% 24.0x 31.8x 3.0x 4.8x
Source: JPMorgan Asset Management, Bloomberg. Data as of 31st March 2025.
Growth rates shown in GBP. Earnings growth rates calculate at the index level
using positive earnings before extraordinary items (index member companies
with negative earnings before extraordinary items are excluded from the
calculation with the index divisor adjusted to exclude those companies).
Performance Potential: European Small Caps are experiencing the longest period
of relative underperformance compared to Large Caps in their history,
suggesting that positioning is very stretched and that the sector is open to a
potential rebound in relative performance.
Sensitivity to Macroeconomic Indicators: As a more domestically exposed asset
class, Small Caps are more sensitive to European macroeconomic indicators than
other asset classes. The current environment, which features increasing
domestic stimulus, falling interest rates (which typically benefit smaller
companies more) and real wage increases, should stimulate aggregate demand and
benefit domestically focused Small Caps accordingly. While global trade risks
pose short-term challenges, the long-term outlook is positive as these
companies benefit from reshoring and a renewed national focus.
We conclude this Investment Report by revisiting a chart from last year. Over
the long term, Small Caps have demonstrated enviable performance, this
performance has been driven by their superior growth. We believe current
valuations combined with the geopolitical environment are conducive to
continued superior Small Cap performance.
Uncovering Europe's hidden gems
As part of our ongoing commitment to refining and enhancing our investment
strategies, we have significantly increased our research efforts into more
illiquid stocks within the European small cap asset class. This segment is
renowned for its potential to deliver multifold returns over the long term,
offering unique opportunities for discerning investors. Through meticulous
analysis of past winners, we have identified a compelling need to intensify
our focus on smaller market capitalisations, specifically those below one
billion euros. Many of these stocks often exhibit high earnings growth,
superior returns, and robust cash flows, yet remain under-researched by the
sell side and largely overlooked by the majority of market participants. By
concentrating our efforts on these hidden gems, we aim to uncover exceptional
businesses that possess the potential for asymmetric returns.
Furthermore, we are taking advantage of the closed-end nature of the Company,
which allows us to invest in these illiquid opportunities without the pressure
of daily redemptions, thereby enabling a long-term investment horizon. Our
enhanced research approach is designed to capitalise on the inefficiencies in
the market, allowing us to identify and invest in high-quality companies that
are poised for substantial growth.
Jules Bloch
Jack Featherby
Jon Ingram
Portfolio Managers
18th June 2025
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 an imminent recession had receded and the adverse
impact of further pandemics as having declined over the last two years.
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 along with impact of trade tariff
polices from the new US Administration, growing usage of Artificial
Intelligence and continuing evidence of 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 and 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 in the Middle East. Along with The Board can, with shareholder approval, amend the investment policy and
the implications of trade and tariff policies emanating from the new objectives of the Company to mitigate the risks arising from geopolitical
US Administration. 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 on page 57 of 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 six months against industry
standards.
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 compliance.
Failure to comply with existing and emerging accounting, fiscal regulatory Relying on relevant processes reviewed on a regular basis including by
rules. The Company operates in an environment with significant regulation Internal Audit and Risk & Operational audits together with regular
including the UK Listing Rules, The UK Companies Act, the Corporation Taxes consultation with External Auditors and meetings of the Audit Committee.
Act, Market Abuse Regulation, Disclosure Guidance and Transparency Regulations
and the Alternative Investment Fund Managers Directive (AIFMD). Specifically, the Section 1158 compliance is continually monitored by the
Manager and the results reported to the Board each month.
An example is the breach of Section 1158 which would lead to a loss of
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 on
page 51 of the Annual Report. The management fee payable to the Manager for
the year was £5,034,000 (2024: £5,773,000), of which £nil (2024: £nil) was
outstanding at the year end.
Included in administration expenses in note 6 on page 80 of the Annual Report
are safe custody fees payable to JPMorgan Chase Bank N.A. amounting to
£91,000 (2024: £79,000) excluding VAT of which £12,000 (2024: £8,000) 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 £3,000
(2024: £44,000) of which £nil (2024: £nil) was outstanding at the year end.
Securities lending income amounting to £461,000 (2024: £131,000) were
receivable by the Company during the year. JPMAM Chase Bank N.A. commissions
in respect of such transactions amounted to £51,000 (2024: £15,000).
Handling charges on dealing transactions amounting to £39,000 (2024:
£49,000) were payable to JPMorgan Chase Bank N.A. during the year of which
£8,000 (2024: £17,000) was outstanding at the year end.
At the year end, the Company held cash of £662,000 (2024: cash held of
£312,000 and £394,000 overdraft) with JPMorgan Chase Bank N.A. A net amount
of interest of £5,000 (2024: £118,000) was receivable by the Company during
the year from JPMorgan Chase Bank N.A of which £nil (2024: £nil) was
outstanding at the year end.
The Company also invests in JPMorgan EUR Liquidity Fund, which is managed by
JPMorgan Asset Management (Europe) S.à r.l. At the year end, this was valued
at £23.0 million (2024: £7.2 million). Interest amounting to £1,154,000 was
receivable (2024: £683,000) during the year of which £nil (2024: £53,000)
was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on page
62 of 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 on page 50 of 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
18th June 2025
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st March
2025 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments and derivatives
held at fair value through profit or loss - (8,236) (8,236) - 25,759 25,759
Foreign exchange losses on JPMorgan EUR
Liquidity Fund - (1,490) (1,490) - (172) (172)
Net foreign currency gains - 2,367 2,367 - 2,225 2,225
Income from investments 21,033 4,956 25,989 23,050 - 23,050
Interest receivable and similar income 1,620 - 1,620 932 - 932
Gross return/(loss) 22,653 (2,403) 20,250 23,982 27,812 51,794
Management fee (1,510) (3,524) (5,034) (1,732) (4,041) (5,773)
Other administrative expenses (900) - (900) (860) - (860)
Net return/(loss) before finance costs and taxation 20,243 (5,927) 14,316 21,390 23,771 45,161
Finance costs (1,162) (2,721) (3,883) (1,227) (2,861) (4,088)
Net return/(loss) before taxation 19,081 (8,648) 10,433 20,163 20,910 41,073
Taxation (3,189) (701) (3,890) (1,493) - (1,493)
Net return/(loss) after taxation 15,892 (9,349) 6,543 18,670 20,910 39,580
Return/(loss) per share (note 3) 12.36p (7.27)p 5.09p 12.04p 13.49p 25.53p
A final dividend of 10.0p per share (2024: 8.0p per share) is proposed in
respect of the year ended 31st March 2025, costing £9,552,000 (2024:
£11,815,000). More details can be found in note 10(a) on page 82 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.
STATEMENT OF CHANGES IN EQUITY
Called up Share Capital
share premium redemption Capital Revenue
capital account reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000
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 after taxation on ordinary shares - - - 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
Tender offer shares acquired and cancelled (1,058) - 1,058 (104,897) - (104,897)
Cost in relation to Tender offer - - - (421) - (421)
Repurchase of shares into Treasury - - - (69,126) - (69,126)
Net (loss)/return after taxation on ordinary shares - - - (9,349) 15,892 6,543
Dividends paid in the year (note 2) - - - - (14,895) (14,895)
At 31st March 2025 6,816 1,312 8,820 547,496 21,806 586,250
( )
(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) 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
2025 2024(1)
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss(1) 591,594 776,749
Investments on loan held at fair value through profit or loss(1) 24,941 52,989
Total investments held at fair value through profit or loss 616,535 829,738
Current assets
Debtors 7,728 6,815
Current asset investments(1) 23,039 7,242
Cash at bank(1) 662 312
31,429 14,369
Creditors: amounts falling due within one year (61,714) (2,391)
Net current (liabilities)/assets (30,285) 11,978
Total assets less current liabilities 586,250 841,716
Creditors: amounts falling due after more than one year - (72,670)
Net assets 586,250 769,046
Capital and reserves
Called up share capital 6,816 7,874
Share premium account 1,312 1,312
Capital redemption reserve 8,820 7,762
Capital reserves 547,496 731,289
Revenue reserve 21,806 20,809
Total shareholders' funds 586,250 769,046
Net asset value per share (note 4) 524.0p 520.7p
( )
(1) Prior year comparatives have been restated as explained further in
note 1(a).
STATEMENT OF CASH FLOWS
For the year ended 31st March
2025 2024
£'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 14,316 45,161
Adjustment for:
Net losses/(gains) on investments held at fair value through profit or 8,236 (25,759)
loss
Foreign exchange losses on JPMorgan EUR Liquidity Fund 1,490 172
Net foreign currency gains (2,367) (2,225)
Dividend income (25,989) (23,050)
Interest income (1,159) (801)
Realised gain/(loss) on foreign exchange transactions 451 (486)
Realised foreign exchange losses on JPMorgan EUR Liquidity Fund (1,483) (267)
Increase in accrued income and other debtors (1) (37)
Increase/(decrease) in accrued expenses 50 (31)
Net cash outflow from operations before dividends, interest and taxation (6,456) (7,323)
Dividends received 22,390 23,751
Interest received 1,212 748
Overseas withholding tax recovered/(paid) (252) (2,881)
Net cash inflow from operating activities 16,894 14,295
Purchases of investments (389,557) (683,947)
Sales of investments 594,797 723,852
Net cash inflow from investing activities 205,240 39,905
Dividends paid (14,895) (15,976)
Tender offer shares acquired and cancelled (104,897) -
Repurchase of shares into Treasury (69,319) (39,592)
Cost in relation to Tender offer (421) -
Proceeds from unclaimed shares forfeited - 658
Repayment of Bank loan (33,562) (34,447)
Drawdown of Bank loan 21,377 -
Interest paid (3,881) (4,770)
Net cash outflow from financing activities (205,598) (94,127)
Increase/(decrease) in cash and cash equivalents 16,536 (39,927)
Cash and cash equivalents at start of year 7,160 47,000
Exchange movements 5 87
Cash and cash equivalents at end of year 23,701 7,160
Cash and cash equivalents consist of:
Cash at bank 662 312
JPMorgan EUR Liquidity Fund 23,039 7,242
Cash at bank and current asset investments per the Statement of
Financial Position 23,701 7,554
Bank overdraft (included as part of current liabilities in note 13) - (394)
Total cash and cash equivalents 23,701 7,160
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 on page 43 of 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 2025 and therefore
reflect market participants view of climate change risk. All of the Company's
operations are of a continuing nature.
In the Statement of Financial Position, the value of investments on loan,
previously included within the total value of investments held at fair value
through profit or loss, has been disclosed separately this year. Prior year
figures have been restated accordingly. These changes do not impact the
Company's Net assets, Statement of Comprehensive Income, or Statement of Cash
Flows.
The 'Cash and cash equivalents' line item in the Statement of Financial
Position has been revised to 'Cash at bank' and 'Current asset investments'.
This adjustment separately reports the investment in the JPMorgan EUR
Liquidity Fund as 'Current asset investments' and 'Cash at bank', in
compliance with the statutory format required by the Companies Act 2006. This
change does not affect any other line items in the Statement of Financial
Position or the total current assets.
Going Concern
The financial statements have been prepared on a going concern basis. The
Board has, in particular, considered the impact of market volatility 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 2026 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
2025 2024
Pence £'000 Pence £'000
Dividends paid
Unclaimed dividends returned to the Company - - - (120)
Final dividend in respect of the prior year 8.0 11,383 7.8 12,283
Interim dividend 3.0 3,512 2.5 3,813
Total dividends paid in the year 11.0 14,895 10.3 15,976
Dividend proposed
Final dividend 10.0 9,552(1) 8.0 11,815
(1) Based on prevailing number of shares as on the report date.
All dividends paid and declared in the period have been funded from the
revenue reserve.
The final dividend proposed in respect of the year ended 31st March 2024
amounted to £11,815,000. However, the amount paid amounted to £11,383,000
due to ordinary shares repurchased after the balance sheet date but prior to
the record date.
The final dividend has been proposed in respect of the year ended 31st March
2025 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 2026.
(b) Dividends for the purposes of Section 1158 of the Corporation Tax
Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of dividends
declared in respect of the financial year, shown below.
The revenue available for distribution by way of dividend for the year is
£15,892,000 (2024: £18,670,000). The revenue reserve after payment of the
final dividend will amount to £ 12,254,000 (2024: £8,994,000).
2025 2024
Pence £'000 Pence £'000
Interim dividend 3.0 3,512 2.5 3,813
Final dividend 10.0 9,552 8.0 11,815
Total 13.0 13,064 10.5 15,628
3. Return per share
2025 2024
£'000 £'000
Revenue return 15,892 18,670
Capital (loss)/return (9,349) 20,910
Total return 6,543 39,580
Weighted average number of shares in issue during the year 128,544,579 155,063,487
Revenue return per share 12.36p 12.04p
Capital (loss)/return per share (7.27)p 13.49p
Total return per share 5.09p 25.53p
4. Net asset value per share
2025 2024
Net assets (£'000) 586,250 769,046
Number of shares in issue 111,872,243 147,692,459
Net asset value per share 524.0p 520.7p
5. Analysis of changes in Net Debt
As at As at
31st March Cash Exchange 31st March
2024 flows movements 2025
£'000 £'000 £'000 £'000
Cash at bank and current asset investments
Cash at bank 312 338 12 662
Cash held in JPMorgan EUR Liquidity Fund 7,242 15,804 (7) 23,039
Bank overdraft (394) 394 - -
7,160 16,536 5 23,701
Borrowings
Bank Loan (72,670) 12,815 1,904 (58,581)
Net debt (65,510) 28,721 1,909 (34,880)
6. Non-statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31st March 2025 but is derived from
those accounts. Statutory accounts for the year ended 31st March 2025 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.
JPMORGAN FUNDS LIMITED
18th June 2025
For further information, please contact:
Priyanka Vijay Anand
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or or +44 1268 44 44 70
E-mail: jpmam.investment.trusts@jpmorgan.com
(mailto:jpmam.investment.trusts@jpmorgan.com)
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.
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.
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