LONDON STOCK EXCHANGE
ANNOUNCEMENT
JPMORGAN EUROPEAN GROWTH
& INCOME PLC
FINAL RESULTS FOR THE YEAR
ENDED
31ST MARCH 2024
The
Directors of JPMorgan European Growth & Income plc announce the
Company's results
for the
year ended 31st March 2024
HIGHLIGHTS
-
Total return to shareholders 15.6% (Benchmark
12.7%)
-
Return on net assets 16.8% (Benchmark
12.7%)
-
Dividends per share 4.2p (2023:4.0p)
Legal Entity Identifier:
549300D8SPJFHBDGXS57
Information disclosed in accordance
with DTR 4.1
Chair's
Statement
Introduction
In this 12-month reporting period to
31st March 2024, I am delighted to report the Company continued to
outperform its benchmark. In what remains a tricky backdrop of
evolving inflation expectations and geopolitical difficulties, the
Board believes the proposition of the Company is robust and
effectively implemented, allowing the Investment Managers the
freedom to navigate European markets, whilst delivering to our
shareholders the best of capital growth combined with a consistent
income.
During the reporting period the
devastating conflicts in Ukraine and Gaza raged on engaging hearts
and minds across the globe, either without an obvious long term
solution on the horizon. Although neither war seems likely to
engulf other nations, it is not impossible to create a scenario
where both escalate quickly.
In Europe, muted economic growth has
been the backdrop of this reporting period, which is unsurprising
given the sharp increases in the level of interest rates in 2022
and 2023. But this has had the desired effect on inflation, with
rapid declines observed during the last 12 months. The worries
early in the reporting period regarding a wider fallout from the
failure of Credit Suisse and of a 'hard landing' for global
economies seem to have eased. However, Germany, Europe's largest
economy, has been particularly affected by the economic slow down
of China and continuing trade tensions with China, which is an
important market for many European companies, lurks in the
background. Despite this melting pot of machinations, European
stock markets have shrugged off these issues producing healthy
returns over the period.
Performance
Return on net assets (NAV) and return to
shareholders
For the Company's financial year
ended 31st March 2024 the total return on net assets was +16.8%
(debt at fair value). This was an outperformance of 4.1% over its
benchmark, which returned +12.7%. Strong relative stock selection
was the main reason for this. In their Report on page 12 of the
Company's annual report and financial statements, the Investment
Managers review in more detail some of the factors underlying the
performance of the Company as well as commenting on the economic
and market background over the period in question.
The total return to shareholders,
which takes into account the movement of the share price, over the
12 months delivered a return of +15.6%, which was also an
outperformance of the benchmark although by a smaller margin than
the net assets performance.
For an explanation of the
calculation of the Company's total return on net assets and the
total return to shareholders, please see the Glossary of Terms and
Alternative Performance Measures on page 99 of the Company's annual
report and financial statements.
The Company's restructuring in
February 2022 has resulted in some of the performance and dividend
data for periods prior to this reporting period being calculated on
a transitional basis as detailed in various footnotes throughout
this report.
Revenue and Dividends
During the 12 months to 31st March
2024, the Company's net revenue attributable to shareholders (net
return after taxation) was 10.8% higher at £13,683,000 (2023:
£12,354,000) following the trajectory of the Company's
performance.
As detailed in the Company's
previous annual report, an aim of the Company's restructuring was
to provide shareholders with a predictable dividend income at a
level that is consistent and frequent, based on 4% of the preceding
year end net asset value per share. The Company pays quarterly
dividends in July, October, January and March. In line with the
above aim, in respect of the year ending 31st March 2024, the
Company's dividend was 4.2 pence per share, amounting to £18.1
million. This represents an increase from the £17.4 million paid in
2023, as illustrated in note 10(b) on page 75 of the Company's
annual report and financial statements.
For the Company's financial year
ending 31st March 2025 the Board is expecting to adopt the same
approach with 4% of the net asset value per share as at 31st March
2024 being paid as dividend for the year ending 31st March
2025.
On 21st May 2024, the Board declared
a first interim dividend of 1.2 pence per share in respect of the
financial year ending 31st March 2025, payable on 5th July 2024. As
was the case for the Company's dividends in respect of the year
ended 31st March 2024, to the extent that brought forward revenue
reserves are not sufficient, dividends will be paid from
distributable capital reserves for the financial year ending 31st
March 2025, as permitted by the Company's Articles.
Gearing
There has been no change in the
Investment Manager's permitted gearing range, as previously set by
the Board, of between 10% net cash to 20% geared. At 31st March
2024 the Company was 4.5% geared (31st March 2023:
3.1%).
Discounts, Share Issuance and Repurchase
During the period under review, the
average discount across the Investment Trust sector has remained at
gaping levels. Although the initial widening was indiscriminate,
particular signs of stress is evident in those Trusts with
significant alternative investments with worries over liquidity,
realisation and valuation of the underlying positions. The Board
remain confident in the liquidity and transparency of the markets
in which your Company invests, however we remain alive to
dislocations beyond our comfort levels, addressing imbalances in
the supply of and demand for the Company's shares through a
buy-back of shares. The Board does not wish to see the discount
widen beyond 10% under normal market conditions (using the
cum-income NAV with debt at fair) on an ongoing basis. The precise
level and timing of repurchases is dependent on a range of factors
including prevailing market conditions. In the period under review,
5,268,397 Ordinary shares were bought into Treasury. From 1st April
2024 to 29th May 2024, 200,000 Ordinary shares were bought into
Treasury. No Ordinary shares were issued.
The Company's Ordinary share
discount as at 31st March 2024 was 12.1% to NAV with debt at fair
value. The average discount of a peer group of six companies as at
the same date was 10.0%. On 29th May, 2024, the Company's Ordinary
share discount was 10.3%, which compares to an average discount of
the same peer group of 8.7% as at the same date, though this hides
variation in strategy and performance across the sector. It also
masks the corporate activity that has occurred in the sector this
past year which your Board is conscious of monitoring thoughtfully
for any implications for the Company.
Marketing and Shareholder Interaction
The Company continues to raise its
profile with shareholders and potential investors. It is the
Board's view that enhancing the Company's profile will benefit all
shareholders, by creating sustained demand for its shares, thereby
improving liquidity and scale. Our range of activity is broad
seeking to showcase the Company to as wide a relevant audience as
possible. The Manager follows an established marketing and investor
relations programme targeting institutions, private client
stockbrokers and platforms via video conferences, podcasts and
in-person meetings. Additionally, we have on-going interaction with
national and investment industry journalists demonstrating the
knowledge and insight of our managers.
We are careful to undertake this
promotional activity in the most effective and controlled
manner.
The Board and the Investment
Managers maintain a dialogue with the Company's shareholders via
regular email updates, which deliver news and views, and discuss
the latest performance. If you have not already signed up to
receive these communications and you wish to do so, you can opt in
via https://tinyurl.com/JEGI-Sign-Up or by
scanning the QR code in the margin.
It is the Board's hope that these
initiatives will give many more of the Company's investors and
potential shareholders the opportunity to interact with the Board
and Investment Managers.
As referred to in my report included
in the Company's half year report released in November 2023,
I am delighted that the Company was voted the best investment
company in the European sector at the annual AIC Investment Week
Award ceremony held during the year. The judges commended the
Company's performance and the benefits provided by its simplified
and shareholder focused structure.
Board of Directors
The Board are delighted that, as
previously announced, Andrew Robson was appointed as an independent
Non-executive Director of the Company on 6th February 2024. The
intention is that Andrew will be appointed as the Company's Audit
Committee Chair when Jutta af Rosenborg, the current incumbent,
retires at the Company's next Annual General Meeting, scheduled for
3rd July 2024.
During the year, the Board
evaluation process reviewed Directors, the Chair, the Committees
and the working of the Board as a whole. It was concluded that all
aspects of the Board and its procedures were operating effectively.
In accordance with corporate governance best practice, all of the
Directors retire by rotation at this year's AGM and will offer
themselves for re-election/election.
Environmental, Social and Governance
The Board shares the Investment
Managers' view of the importance of taking into account the
financial impact of ESG considerations in their investment process
and of the necessity of continued engagement with investee
companies throughout the duration of the investment.
Investment Managers
The performance of the Investment
Managers is formally evaluated by the Board annually. The
evaluation of the Manager was undertaken in January 2024 and based
on the data available at that time; the Board concluded that the
performance of the Manager was of a high standard and that their
services in the new restructured format should be
retained.
Annual General Meeting
The Company's ninety fifth Annual
General Meeting (AGM) will be held at 60 Victoria Embankment,
London EC4Y 0JP at 2.30 p.m. on Wednesday, 3rd July 2024. We are
pleased to invite shareholders to join us in-person for the
Company's AGM, hear from the Investment Managers and ask questions.
Shareholders wishing to follow the AGM proceedings but choosing not
to attend in person will be able to view proceedings live and ask
questions (but not vote) through conferencing software. Details on
how to register, together with access details, will be available
shortly on the Company's website at www.jpmeuropeangrowthandincome.com or by contacting the
Company Secretary at invtrusts.cosec@jpmorgan.com
If you hold your shares via an
online platform, for further details of how to vote your shares
and/or attend the Company's AGM, please see the 'Investing in
JPMorgan European Growth & Income plc' on page 103 of the
Company's annual report and financial statements.
My fellow Board members,
representatives of JPMorgan and I look forward to the opportunity
to meet and speak with shareholders after the formalities of the
meeting have been concluded. Shareholders who are unable to attend
the AGM are strongly encouraged to submit their proxy votes in
advance of the meeting, so that they are registered and recorded at
the AGM. Proxy votes can be lodged in advance of the AGM either by
post or electronically: detailed instructions are included in the
Notes to the Notice of Annual General Meeting on pages 95 to 98 of
the Company's annual report and financial statements.
If there are any changes to these
arrangements for the AGM, the Company will update shareholders via
the Company's website and an announcement on the London Stock
Exchange.
Outlook
Despite the backdrop of geopolitical
conflicts and uncertainty over the trajectory of inflation, the
Euro zone has remained relatively resilient. For the first quarter
of 2024 economic growth in the Euro zone was higher than expected
helped by an improved performance from the economies of Germany and
some of the zone's southern European countries. Inflation has
fallen rapidly, though the rate of decline has eased somewhat with
a resilient labour market and rising consumer sentiment, suggesting
interest rate reductions by the ECB are likely to be later than
expected. With an unprecedented number of elections around the
world this year, the near term could hold significant regime
change. Throw in the emergence of generative AI impacting corporate
business models and there is a lot to be mindful of.
It is your Board's belief the merits
of investing in European stock markets are yet to be fully
realised. Europe has truly world class companies attractively
valued particularly in relation to the US equity market. This
continues to present an exciting opportunity on which our
Investment managers remain focussed. As always dedication to
delivering good returns through careful stock selection and a
diversified portfolio remain core to the approach. The Board remain
confident in the abilities of the Investment Managers to do
so.
For and on behalf of the Board
Rita Dhut
Chair
31st May 2024
Investment Managers'
Report
Market Background
Following a somewhat muted first
half performance from Continental European equities as economic
growth slowed in the face of a series of interest rate hikes, the
market bottomed in late October and ended the Company's financial
year up 12.7% in Sterling terms. Investors started to believe
inflation was back on a downward trend due to a series of softer
inflation prints. This boosted market expectation in the ECB
potentially reducing interest rates sooner than expected. The ECB's
last hike was in September, by December its outlook statement was
more nuanced and by April this year the market was expecting the
ECB to be the first Central bank to start cutting rates again. At
the same time, it started to look possible the tightening cycle
would not tip the economy into recession. As real wages have turned
positive consumer confidence has improved which has been reflected
in stronger PMI releases from the service side of the economy.
Meanwhile it appears as though manufacturing destocking has run its
course and new orders have shown signs of picking up again. With
this backdrop, investors began to hope Central Banks were on track
to successfully lower inflation while engineering a soft
landing.
Portfolio positioning
Our investment process focuses on
identifying companies with improving operational momentum, higher
quality characteristics, and lower valuations. Not every company in
the portfolio ticks all three boxes but the portfolio as a whole
does. During the year under review this has resulted in
a clear tilt towards cyclicals and financials. Within
retailers we increased the position in Industria de Diseno Textil
(Inditex), the fashion retailer which owns brands such as Zara and
Massimo Dutti. Inditex's sourcing model and ongoing reinvestment in
its stores and technology has allowed it to steadily compound
growth and free cash flow despite the emergence of more competition
from online and discount players.
The Company remains exposed to the
technology sectors. Within semiconductors it has a position in ASML
which manufactures tools to produce the chips required, for
example, in the emerging Artificial Intelligence market. ASML's
order intake continues to beat expectations and gives some
visibility on future earnings. Within software we increased the
holding in SAP which has seen clients accelerate their migration to
its S4/HANA enterprise resource planning software as well as a more
widespread move towards the Cloud. SAP specifically cites clients'
demand for AI as a key development.
We also increased exposure to the
bank sector by adding names such as Danske Bank and BAWAG. Many
bank stocks have been trading at low valuations but at the same
time have well capitalised balance sheets delivering steadily
rising earnings estimates and generating double digit returns on
tangible equity. This has allowed the sector to return significant
amounts of capital to shareholders through both dividends and share
buybacks.
To
view the graph of MSCI Europe Banks vs MSCI
Europe exUK Total Return please see the Company's annual report
and financial statements, which will be available to view on the
Company's website shortly after release of this
announcement.
The Company's biggest underweight is
to the healthcare sector. Many of the equipment and services names
have seen estimates downgraded quite dramatically and also trade on
expensive valuations. Within the pharmaceutical sector we have
focused on those companies where the operational momentum continues
to improve, Novo Nordisk and Novartis in particular, and avoiding
those with relentless downgrades such as Bayer and
Lonza.
To
view the graph of Novo Nordisk vs MSCI Europe
exUK Total Return please see the Company's annual
report and financial statements, which will be available to view on
the Company's website shortly after release of this
announcement.
One of the advantages of using both
quantitative and fundamental analysis in our investment process is
that it allows us to consider a wide range of potential investments
before determining which companies to investigate in more
fundamental detail. It is noticeable certain smaller companies are
gathering interest after a prolonged period of underperformance. We
have added a number of names in this area such as Danieli
which manufactures machines for steel production including electric
arc furnaces which are more eco-friendly, and Bilfinger which has
focused its business away from construction projects towards
buildings and facilities management and services.
To
view the bar chart of the Company's active and absolute sector
positions relative to benchmark please see the Company's annual
report and financial statements, which will be available to view on
the Company's website shortly after release of this
announcement.
Portfolio performance and attribution
The portfolio outperformed its
benchmark index by 4.1% with the NAV rising 16.8% (with debt valued
at fair) with most of this coming from stock selection. Novo
Nordisk was again the top contributor to performance as it
continued to deliver growth ahead of expectations driven by its
diabetes and obesity franchise. The potential market for its weight
loss drug Wegovy is enormous, particularly as the product appears
to have a beneficial impact on related conditions such as
cardio-vascular problems. In the short term there are concerns
about Novo Nordisk's ability to fill that demand but the company
has taken steps to expand its manufacturing capacity to address
that issue.
The biggest detractor from
performance last year was RWE, a German utility, which
underperformed as power prices pulled back faster than we expected
earlier this year. Nestle, another stock traditionally seen as
defensive, also detracted from performance as it reported
disappointing results with lower volumes than expected. Elsewhere
the portfolio's holdings in LVMH and Richemont also performed
poorly as earnings expectations struggled in the face of weaker
news from China.
On a more positive note, Unicredit,
an Italian bank, was the portfolio's stand out holding in
financials, almost doubling during the year. It has consistently
beaten analysts' estimates and raised guidance throughout the year
confounding concerns that these upgrades would tail off when
interest rates stopped rising. Despite the increase in the share
price the stock's valuation has hardly rerated because earnings
have risen almost as much. Given the strong returns that Unicredit
is making and its robust balance sheet the company is returning
significant amounts of excess capital to shareholders through both
dividends and share buybacks.
Portfolio Performance
Year ended 31st March
2024
|
%
|
%
|
Contributions to total
returns
|
|
|
Benchmark total return
|
|
12.7
|
  Asset Selection
(stock/sector/currency)
|
|
4.7
|
  Gearing
contribution1
|
0.5
|
|
  Return on cash
|
0.1
|
|
  Cost of
gearing2
|
-0.3
|
|
Cash/Gearing impact
|
|
0.3
|
Portfolio return
|
|
17.7
|
  Management fee/Other
expenses
|
-0.7
|
|
  Share buyback/Issuance
|
0.1
|
|
Other effects
|
|
-0.6
|
Return on net assets with debt at
par valueA
|
|
17.1
|
Impact of debt at fair
value3
|
|
-0.3
|
Return on net assets with debt at
fair valueA
|
|
16.8
|
Effect of movement in
discount
|
|
-1.2
|
Return to
shareholdersA
|
|
15.6
|
Source: JPMAM and MorningStar. All
figures are on a total return basis.
Performance attribution analyses how
the portfolio achieved its recorded performance relative to its
benchmark.
1 Gearing contribution is the aggregated effect of daily
gearing on the daily benchmark return during the period.
2 Cost of Gearing calculation is based on finance costs
in the annual accounts and includes the amortisation of private
placement issue costs.
3 See note 17 on page 79 of the
Company's annual report and financial statements
for reference to fair value of debt.
A Alternative Performance Measure ('APM').
A glossary of terms and APMs is
provided on page 99 of the Company's annual
report and financial statements.
Outlook
Looking ahead, equity returns will
likely hinge on whether the economy can continue to deliver steady
growth and slowly declining inflation. At the moment we remain
cautiously optimistic as consumer confidence in Europe continues to
improve. Meanwhile it looks as though the manufacturing inventory
correction has run its course and new orders have started to show
signs of picking up again. At the time of writing the Q1 reporting
season has only just started so it is too early to see if this
optimism is reflected in quarterly reports.
Inflation continues to moderate as
expected. Given the recent stronger inflation prints from both the
US and the UK it now looks likely that the ECB will be the first
central bank to cut rates, assuming of course that there isn't a
similar hotter blip in Europe too. An unexpected and meaningful
rise in inflation is perhaps the biggest threat to this soft/no
landing scenario.
Numerous political and geopolitical
uncertainties do remain a concern - but for now the market seems to
shrug them off. While the gold price hit new highs recently, the
oil price, despite rising in the first quarter, remains well below
the levels seen in early 2022 at the time of the Russian invasion
of Ukraine.
Lastly European equities continue to
trade on an extreme discount to US equities, a discount that has
grown following the strong performance from technology stocks in
the United States during 2023. This argument may not be new to
prospective investors; however, the European equity market today
can offer comparable levels of quality and growth potential. This
valuation support is however recognised by European companies, who
are buying back more stock than ever before. Your investment
managers continue to believe there are opportunities to create
value through stock selection.
Alexander Fitzalan Howard
Zenah Shuhaiber
Tim Lewis
Investment Managers
31st May 2024
Principal and Emerging
Risks
|
|
|
Movement
from
|
Principal risk
|
Description
|
Mitigation/Control
|
Prior Year
|
Investment
|
The Board recognises that
performance of the Company's investment portfolio is fundamental to
the success of the Company.
Investment includes market risk and
this arises from uncertainty about the future prices of the
Company's investments. It represents the potential loss the Company
might suffer through holding investments in the face of negative
market movements. Market risk is currently heightened due to
various factors highlighted in the Chair and Investment Managers'
report, these include interest rates rises, geopolitical conflicts
and sustained inflation. Geopolitical concerns will also impact the
market; the current conflict in Ukraine and tensions with China are
causing increased volatility in the markets.
|
In order to achieve the objectives
given the risks inherent in investment such as market, gearing,
currency and interest rates, investment guidelines, policies and
processes are in place which aim to mitigate these risks. They are
designed to ensure that the portfolios are managed in a way which
is aimed at identifying the best stocks and diversifying risk.
Regular reports are received by the Board from the Manager on stock
selection, asset allocation, gearing, hedging and costs of running
the Company and these are reviewed at each Board meeting in detail.
Compliance with investment guidelines and policies are reviewed by
the Manager and the Board, and discussed at each board meeting in
detail together with an analysis of market parameters affecting the
business.
The Board considers asset
allocation, stock selection and levels of gearing on a regular
basis and has set Investment Restrictions and Guidelines which are
monitored and reported on by JPMF. The Board monitors the
implementation and results of the investment process with the
Manager.
Further details regarding financial
instruments are disclosed in note 21 on pages 81 to 87 of the
Company's annual report and financial statements.
|
No movement
|
Operational
|
In common with most investment
trusts the Board delegates the operation of the business to third
parties, the principal delegate being the Manager JPMF. Disruption
to, failure of, or fraud in JPMF's accounting, dealing or payments
systems or the Depositary or Custodian's records could prevent
timely implementation of investment decisions, and potentially
shortfalls in the accuracy of reporting and monitoring of the
Company's financial position and loss. Cyber crime is a threat to
businesses continuity and security.
|
Details of how the Board monitors
the services provided by JPMF and its associates and the Depositary
and Custodian and the key elements designed to provide effective
internal control are included within the Internal Control section
of the Audit Committee report on page 47 of the Company's annual
report and financial statements. The Board has received the cyber
security policies of its key third party service providers and JPMF
has provided assurance to the Directors that the Company benefits
directly or indirectly from all elements of JPMorgan's cyber
security programme. The information technology controls around the
physical security of JPMorgan's data centres, security of its
networks and trading applications are tested and reported on every
six months against the AAF standard.
|
No movement
|
Regulatory
|
The Company operates in an
environment with significant regulation including the FCA Listing
Rules, The UK Companies Act, the Corporation Taxes Act, Market
Abuse Regulation, Disclosure Guidance and Transparency Regulations
and the Alternative Investment Fund Managers Directive
(AIFMD).
There has been no significant change
to this risk during the year though the environment as a whole is
considered to be one of increasing costs for compliance. The
Company also operates under the requirements of the Bribery Act
2010 as referred to in the Directors Report on page 40 of the
Company's annual report and financial statements.
|
The Board relies on the services of
its Company Secretary, the Manager and its professional advisers to
ensure compliance with the Companies Act 2006, the FCA Prospectus
Rules, Listing Rules, DTRs and the Alternative Investment Fund
Managers Directive.
|
No movement
|
Discount premium to NAV
|
Share price discount or premium to
net asset value per share could lead to high levels of uncertainty
and reduced shareholder confidence.
|
The Board monitors the Company's
discount level and seeks, where deemed prudent, to address
imbalances in the supply and demand of the Company's shares through
share buybacks. For details of the Performance related Tender Offer
and Discount Control arrangements, including recent updates, see
Key Features at the front of this document.
|
No movement
|
Strategy
|
An inappropriate investment
strategy, for example asset allocation may lead to underperformance
against the Company's benchmark index and peer
companies.
|
The Board reviews the overall
strategy and structure of the Company in comparison to performance
against benchmark, peer group and share activity. The Board holds a
separate meeting devoted to strategy each year which includes
consideration of whether the Company's objectives and structures
are appropriate for the long term interests of
shareholders.
|
No movement
|
|
Significant hostile action by
shareholder/s - arbitrageurs diverts attention from normal
business.
|
The Board and Manager regularly
monitor the Company's share register and receipts of formal
disclosures of significant transactions. Regular discussions are
held with the Company's Brokers.
|
Up
|
Pandemic Risk
|
Whilst noting that in May 2023 the
World Health Organization announced that Covid-19 no longer
qualified as a global emergency, the outbreak and spread of
Covid-19 demonstrated the risk of global pandemics, in whatever
form a pandemic takes. Should a new variant of the virus spread
more aggressively or become more virulent, it may present risks to
the operations of the Company, its Manager and other major service
providers.
|
The Board monitors effectiveness and
efficiency of service providers' processes through ongoing
compliance and operational reporting and there were no disruptions
to the services provided to the Company in the year under review.
The Company's service providers are capable of implementing
business continuity plans which include working almost entirely
remotely. The Board continues to receive regular reporting on
operations from the Company's major service providers and would not
anticipate a fall in the level of service in the event of
a reemergence of a pandemic.
|
Down
|
Climate Change
|
The recent trade tensions between
western economies and China, Russia's invasion of Ukraine in
February 2022 and conflict in Gaza may cause long term changes in
global trade and technology. This may challenge future growth
potential and increased frictions in accessing global markets.
Changes in financial or tax legislation in the UK or in some of the
countries in which the Company invests may impact the operating
model of the Company. In addition policies adopted by
Governments/Central banks in response to the issues being seen in
markets (e.g. inflation and interest
rates) may lead to adverse movements in asset prices and could
result in concerns for the ongoing exposure to specific investee
markets.
|
The Company addresses these global
developments in regular questioning of the Manager and with
external expertise as required will continue to monitor these
issues, should they develop. The Manager regularly monitors the
Company's portfolio holdings to ensure compliance with any
applicable sanctions.
|
Up
|
Geopolitical and Economic
concerns
|
The recent trade tensions between
western economies and China, Russia's invasion of Ukraine in
February 2022 and conflict in Gaza may cause long term changes in
global trade and technology. This may challenge future growth
potential and increased frictions in accessing global markets.
Changes in financial or tax legislation in the UK or in some of the
countries in which the Company invests may impact the operating
model of the Company. In addition policies adopted by
Governments/Central banks in response to the issues being seen in
markets (e.g. inflation and interest rates) may lead to adverse
movements in asset prices and could result in concerns for the
ongoing exposure to specific investee markets.
|
The Company addresses these global
developments in regular questioning of the Manager and with
external expertise as required will continue to monitor these
issues, should they develop. The Manager regularly monitors the
Company's portfolio holdings to ensure compliance with any
applicable sanctions.
|
Up
|
Emerging risk
|
Description
|
Mitigation/Control
|
Movement
from
Prior Year
|
Artificial Intelligence
(AI)
|
While it might equally be deemed a
great opportunity and force for good, there appears also to be an
increasing risk to business and society more widely from AI.
Advances in computing power means that AI has become a powerful
tool that will impact a huge range of areas. AI could be a
significant driver for new business as well as a disrupter to
current business and processes leading to added uncertainty in
corporate valuations.
|
The Board will work with the Manager
to monitor the developments concerning AI and its potential impact
on the portfolio, our service providers and the wider
market.
|
Up
|
Transactions with the Manager
and related parties
Details of the management contract
are set out in the Directors' Report on page 40 of the Company's
annual report and financial statements. The management fee payable
to the Manager for the year was £2,381,000 (2023: £2,228,000), of
which £nil (2023: £nil) was outstanding at the year end.
Included in administration expenses
in note 6 on page 72 of the Company's annual report and financial
statements are safe custody fees amounting to £51,000 (2023:
£46,000) payable to JPMorgan Chase Bank, N.A of which £13,000
(2023: £16,000) was outstanding at the year end.
The Manager may carry out some of
its dealing transactions through group subsidiaries. These
transactions are carried out at arm's length. Commission amounting
to £26,000 (2023: £21,000) was payable to JPMorgan Securities
Limited for the year of which £nil (2023: £nil) was outstanding at
the year end.
The Company holds investments in
funds managed by JPMAM. At 31st March 2024 these were valued at
£11.7 million (2023: £10.6 million) and represented 2.2%
(2023: 2.3%) of the Company's investment portfolio. During the year
the Company made £nil purchases of such investments (2023: £nil)
and sales with a total value of £nil (2023: £nil).
Income amounting to £259,000 (2023:
£168,000) was receivable from these investments during the year of
which £nil (2023: £nil) was outstanding at the year end.
The Company also holds cash in the
JPMorgan EUR Liquidity Fund, managed by JPMF. At the year end this
was valued at £10.4 million (2023: £25.2 million). Interest
amounting to £490,000 (2023: £nil) was payable during the year of
which £nil (2023: £nil) was outstanding at the year end.
Stock lending income amounting to
£30,000 (2023: £46,000) was receivable by the Company during the
year. JPMAM commissions in respect of such transactions amounted to
£3,000 (2023: £5,000).
Handling charges on dealing
transactions amounting to £10,000 (2023: £13,000) were payable to
JPMorgan Chase Bank N.A. during the year of which £1,000 (2023:
£5,000) was outstanding at the year end.
At the year end, total cash of £4.7
million (2023: £0.3 million) was held with JPMorgan Chase Bank N.A.
A net amount of interest of £3,000 (2023: £2,000) was receivable by
the Company during the year from JPMorgan Chase Bank, N.A of which
£nil (2023: £nil) was outstanding at the year end.
Full details of Directors'
remuneration and shareholdings can be found on pages 51 to 53 and
in note 6 on page 72 of the Company's annual report and financial
statements.
Statement of Directors'
Responsibilities in Respect of the Financial
Statements
The Directors are responsible for
preparing the Annual Report & the Financial Statements in
accordance with applicable law and regulation.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law the Directors have prepared the financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law).
Under company law, Directors must
not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period.
In preparing the financial statements, the directors are required
to:
• select suitable accounting
policies and then apply them consistently;
• state whether applicable
United Kingdom Accounting Standards, comprising FRS 102 have been
followed, subject to any material departures disclosed and
explained in the financial statements;
• make judgements and
accounting estimates that are reasonable and prudent;
and
• prepare the financial
statements on the going concern basis unless it is inappropriate to
presume that the company will continue in business.
The Directors are responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are also responsible
for keeping adequate accounting records that are sufficient to show
and explain the company's transactions and disclose with reasonable
accuracy at any time the financial position of the company and
enable them to ensure that the financial statements and the
Directors' Remuneration Report comply with the Companies Act
2006.
The maintenance and integrity of the
website maintained by the Manager is, so far as it relates to the
Company, the responsibility of the Manager. Legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The Directors consider that the
annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the company's position and performance,
business model and strategy.
Each of the Directors, whose names
and functions are listed in page 39 of the Company's annual report
and financial statements confirm that, to the best of their
knowledge:
• the company financial
statements, which have been prepared in accordance with United
Kingdom Accounting Standards, comprising FRS 102, give a true and
fair view of the assets, liabilities, financial position and return
of the company; and
• The Strategic Report and the
Directors' Report includes a fair review of the development and
performance of the business and the position of the company,
together with a description of the principal risks and
uncertainties that it faces.
For and on behalf of the Board
Rita Dhut
Chair
31st May 2024
Statement of Comprehensive
Income
For
the year ended 31st March 2024
|
2024
|
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Gains on investments and derivatives
held at fair value through profit or loss
|
-
|
62,285
|
62,285
|
-
|
32,295
|
32,295
|
Foreign exchange (losses)/gains on
JPMorgan Liquidity Fund
|
-
|
(355)
|
(355)
|
-
|
1,141
|
1,141
|
Net foreign currency
gains/(losses)
|
-
|
716
|
716
|
-
|
(2,795)
|
(2,795)
|
Income from investments
|
16,572
|
129
|
16,701
|
15,138
|
-
|
15,138
|
Interest receivable and similar
income
|
523
|
-
|
523
|
48
|
-
|
48
|
Gross return
|
17,095
|
62,775
|
79,870
|
15,186
|
30,641
|
45,827
|
Management fee
|
(714)
|
(1,667)
|
(2,381)
|
(668)
|
(1,560)
|
(2,228)
|
Other administrative
expenses
|
(640)
|
-
|
(640)
|
(557)
|
-
|
(557)
|
Net return before finance costs and
taxation
|
15,741
|
61,108
|
76,849
|
13,961
|
29,081
|
43,042
|
Finance costs
|
(345)
|
(814)
|
(1,159)
|
(359)
|
(837)
|
(1,196)
|
Net return before
taxation
|
15,396
|
60,294
|
75,690
|
13,602
|
28,244
|
41,846
|
Taxation
|
(1,713)
|
-
|
(1,713)
|
(1,248)
|
-
|
(1,248)
|
Net return after taxation
|
13,683
|
60,294
|
73,977
|
12,354
|
28,244
|
40,598
|
Return per share
|
3.17p
|
13.97p
|
17.14p
|
2.83p
|
6.48p
|
9.31p
|
All revenue and capital items in the
above statement derive from continuing operations. No operations
were acquired or discontinued in the year.
The 'Total' column of this statement
is the profit and loss account of the Company and the 'Revenue' and
'Capital' columns represent supplementary information prepared
under guidance issued by the Association of Investment
Companies.
Net return after taxation represents
the profit for the year and also Total Comprehensive
Income.
Statement of Changes in
Equity
|
Called
up
|
Share
|
Capital
|
|
|
|
|
share
|
premium
|
redemption
|
Capital
|
Revenue
|
|
|
capital
|
account
|
reserve
|
reserves
|
reserve
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
At 31st March 2022
|
4,605
|
131,163
|
15,853
|
273,876
|
13,837
|
439,334
|
Reclassification of shares cancelled
in respect of the restructure in the prior year
|
(2,418)
|
-
|
2,418
|
-
|
-
|
-
|
Repurchase and cancellation of the
Company's own shares
|
(2)
|
-
|
2
|
(258)
|
-
|
(258)
|
Repurchase of shares into
Treasury
|
-
|
-
|
-
|
(2,183)
|
-
|
(2,183)
|
Net return
|
-
|
-
|
-
|
28,244
|
12,354
|
40,598
|
Dividends paid in the
year
|
-
|
-
|
-
|
-
|
(22,245)
|
(22,245)
|
At 31st March 2023
|
2,185
|
131,163
|
18,273
|
299,679
|
3,946
|
455,246
|
Repurchase of shares into
Treasury
|
-
|
-
|
-
|
(4,934)
|
-
|
(4,934)
|
Net return
|
-
|
-
|
-
|
60,294
|
13,683
|
73,977
|
Dividends paid in the
year
|
-
|
-
|
-
|
-
|
(13,598)
|
(13,598)
|
At 31st March 2024
|
2,185
|
131,163
|
18,273
|
355,039
|
4,031
|
510,691
|
Statement of Financial
Position
At
31st March 2024
|
2024
|
2023
|
|
£'000
|
£'000
|
Non current assets
|
|
|
Investments held at fair value
through profit or loss
|
533,691
|
469,173
|
Current assets
|
|
|
Derivative financial
assets
|
218
|
12
|
Debtors
|
5,541
|
4,782
|
Cash and cash equivalents
|
15,074
|
25,523
|
|
20,833
|
30,317
|
Current liabilities
|
|
|
Creditors: amounts falling due within one year
|
(392)
|
(364)
|
Derivative financial
liabilities
|
(833)
|
(101)
|
Net current assets
|
19,608
|
29,852
|
Total assets less current
liabilities
|
553,299
|
499,025
|
Non current liabilities
|
|
|
Creditors: amounts falling due after more than one year
|
(42,608)
|
(43,779)
|
Net assets
|
510,691
|
455,246
|
Capital and reserves
|
|
|
Called up share capital
|
2,185
|
2,185
|
Share premium account
|
131,163
|
131,163
|
Capital redemption
reserve
|
18,273
|
18,273
|
Capital reserves
|
355,039
|
299,679
|
Revenue reserve
|
4,031
|
3,946
|
Total shareholders' funds
|
510,691
|
455,246
|
Net asset value per share
|
119.0p
|
104.8p
|
For the 2024 year end, the 'Fixed
Assets' sub-heading was changed to 'Non-Current Assets' to align to
the adapted format under FRS 102. This change did not result in any
measurement changes.
Statement of Cash
Flows
For
the year ended 31st March 2024
|
2024
|
2023
|
|
£'000
|
£'000
|
Cash flows from operating
activities
|
|
|
Net return before finance costs and
taxation
|
76,849
|
43,042
|
Adjustment for:
|
|
|
  Net gains on investments held at
fair value through profit or loss
|
(62,285)
|
(32,295)
|
  Foreign exchange losses/(gains) on
JPMorgan EUR Liquidity Fund
|
355
|
(1,141)
|
  Net foreign currency
(gains)/losses
|
(716)
|
2,795
|
  Dividend income
|
(16,701)
|
(15,138)
|
  Interest income
|
(493)
|
(2)
|
  Realised losses on foreign
exchange transactions
|
25
|
494
|
  Realised exchange gains on
Liquidity
|
155
|
648
|
Decrease in accrued income and other
debtors
|
2
|
27
|
Increase/(decrease) in accrued
expenses
|
33
|
(41)
|
Net cash outflow from operations
before dividends and interest
|
(2,776)
|
(1,611)
|
Dividends received
|
13,858
|
12,264
|
Interest received
|
493
|
2
|
Overseas withholding tax
recovered
|
370
|
661
|
Net cash inflow from operating
activities
|
11,945
|
11,316
|
Purchases of investments and
derivatives
|
(129,717)
|
(120,395)
|
Sales of investments
|
127,480
|
131,716
|
Settlement of forward foreign
currency contracts
|
33
|
(1,531)
|
Net cash (outflow)/inflow from
investing activities
|
(2,204)
|
9,790
|
Equity dividends paid
|
(13,598)
|
(22,245)
|
Repurchase of shares for
Cancellation
|
-
|
(258)
|
Repurchase of shares into
Treasury
|
(4,924)
|
(2,089)
|
Interest paid
|
(1,159)
|
(1,170)
|
Net cash outflow from financing
activities
|
(19,681)
|
(25,762)
|
Decrease in cash and cash
equivalents
|
(9,940)
|
(4,656)
|
Cash and cash equivalents at start
of year
|
25,523
|
29,685
|
Exchange movements
|
(509)
|
494
|
Cash and cash equivalents at end of
year
|
15,074
|
25,523
|
Cash and cash equivalents consist
of:
|
|
|
Cash and short term
deposits
|
4,698
|
280
|
Cash held in JPMorgan EUR Liquidity
Fund
|
10,376
|
25,243
|
Total
|
15,074
|
25,523
|
Notes to the Financial
Statements
For the year ended 31st March
2024
1. Accounting
policies
(a) Basis of accounting
The financial statements are
prepared under the historical cost convention, modified to include
fixed asset investments and derivatives at fair value, and in
accordance with the Companies Act 2006, United Kingdom Generally
Accepted Accounting Practice ('UK GAAP'), including 'the
Financial Reporting Standard applicable in the UK and Republic of
Ireland' ('FRS 102') and with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' (the 'SORP') issued by the Association of
Investment Companies in July 2022.
All of the Company's operations are
of a continuing nature.
The financial statements have been
prepared on a going concern basis. In forming this opinion, the
Directors have considered as part of its risk assessment: the
nature of the Company, its business model and related risks
including ongoing conflict between Ukraine and Russia, the
requirements of the applicable financial reporting framework, the
covenants in respect of the Company's private placement debt and
the system of internal control.
The Directors believe that, having
considered the Company's investment objectives, future cash flow
projections, risk management policies, liquidity risk, principal
and emerging risks, capital management policies and procedures,
nature of the portfolios and expenditure projections, the Company
has adequate resources, an appropriate financial structure and
suitable management arrangements in place to continue in
operational existence to 31st May 2025, being at least 12 months
from approving this annual report and financial
statements.
For these reasons, they consider
that there is reasonable evidence to continue to adopt the going
concern basis in preparing the report.
The policies applied in these
financial statements are consistent with those applied in the
preceding year.
2. Return per share
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Return per
share is based on the following:
|
|
|
|
Revenue
return
|
13,683
|
12,354
|
|
Capital return
|
60,294
|
28,244
|
|
Total return
|
73,977
|
40,598
|
|
Weighted
average number of shares in issue during the year
|
431,452,567
|
435,967,427
|
|
Revenue
return per share
|
3.17p
|
2.83p
|
|
Capital return per share
|
13.97p
|
6.48p
|
|
Total return per share
|
17.14p
|
9.31p
|
3. Dividends
(a) Dividends paid and declared
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Dividends
paid
|
|
|
|
Growth
& Income first interim dividend for 2022 of 1.10p
|
-
|
4,812
|
|
Growth
& Income first interim dividend for 2024 of 1.05p (2023:
1.00p)
|
4,556
|
4,369
|
|
Growth
& Income second interim dividend for 2024 of 1.05p (2023:
1.00p)
|
4,529
|
4,358
|
|
Growth
& Income third interim dividend for 2024 of 1.05p (2023:
1.00p)
|
4,513
|
4,354
|
|
Growth & Income fourth interim
dividend for 2023 of 1.00p
|
-
|
4,352
|
|
Total dividends paid in the
year
|
13,598
|
22,245
|
|
Dividends
declared
|
|
|
|
Growth & Income fourth interim
dividend for 2024 of 1.05p
|
4,510
|
-
|
|
Total dividends
declared1
|
4,510
|
-
|
1 In accordance with the accounting policy of the
Company, these dividends will be reflected in the financial
statements of the following year.
The fourth quarterly dividend of
1.05 was paid on 2nd April 2024 for the financial year ended
31st March 2024. In accordance with the accounting policy of
the Company, this dividend will be reflected in the financial
statements for the year ending 31st March 2025.
The first interim dividend of 1.20
pence per share in respect of the Company's financial year ending
31st March 2025 was declared on 21st May 2024 for shareholders on
the register on 31st May 2024 with payment on 5th July
2024.
All dividends paid and declared in
the financial year have been funded from the Revenue
Reserve.
(b) Dividend for the purposes of Section 1158 of the
Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are
considered on the basis of dividends declared in respect of the
financial year, as follows:
The revenue available for
distribution by way of dividend for the year is £13,683,000 (2023:
£12,354,000).
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
2024 Growth
& Income first interim dividend of 1.05p (2023: 1.00) per
share
|
4,556
|
4,369
|
|
2024 Growth
& Income second interim dividend of 1.05p (2023: 1.00) per
share
|
4,529
|
4,358
|
|
2024 Growth
& Income third interim dividend of 1.05p (2023: 1.00) per
share
|
4,513
|
4,354
|
|
2024 Growth & Income fourth
interim dividend of 1.05p (2023: 1.00) per share
|
4,510
|
4,352
|
|
Total
|
18,108
|
17,433
|
The revenue reserve after payment of
the fourth interim dividend amounts to nil, with the excess
dividend of £479,000 (2023: nil) to be funded out of Capital
Reserves of £303,625,000 as detailed in the 2023 table of note 16.
(2023: revenue reserve of £3,946,000 after payment of the fourth
interim dividend).
4. Net asset value per
share
|
|
2024
Net asset
value attributable
|
2023
Net asset
value attributable
|
|
|
|
|
£'000
|
pence
|
£'000
|
pence
|
|
Net asset value - debt at
par
|
510,691
|
119.0
|
455,246
|
104.8
|
|
Add: amortised cost of the Euro 50
million 2.69% Private Placement Note with Metlife, repayable on
26th August 2035
|
42,608
|
9.9
|
43,779
|
10.1
|
|
Less: Fair Value of the Euro 50
million 2.69% Private Placement Note with Metlife, repayable on
26th August 2035
|
(41,110)
|
(9.6)
|
(41,579)
|
(9.6)
|
|
Net asset value - debt at fair
value
|
512,189
|
119.3
|
457,446
|
105.3
|
2023 Financial
Information
The figures and financial
information for 2023 are extracted from the published Annual Report
and Financial Statements for the year ended 31st March 2023 and do
not constitute the statutory accounts for that year. The
Annual Report and Financial Statements has been delivered to the
Registrar of Companies and included the Report of the Independent
Auditors which was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006.
2024 Financial
Information
The figures and financial
information for 2024 are extracted from the Annual Report and
Financial Statements for the year ended 31st March 2024 and do not
constitute the statutory accounts for the year. The Annual Report
and Financial Statements includes the Report of the Independent
Auditors which is unqualified and does not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006. The Annual Report and Financial Statements will be delivered
to the Registrar of Companies in due course.
Neither the contents of the
Company's website nor the contents of any website accessible from
hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement
Annual Report and Financial
Statements
The Annual Report and Financial
Statements will be posted to shareholders soon after the release of
this report and will shortly be available on the Company's website
www.jpmeuropeangrowthandincome.com or in hard copy format from the
Company's Registered Office, 60 Victoria Embankment London EC4Y
0JP.
A copy of the annual report will
shortly be submitted to the FCA's National Storage Mechanism and
will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Up to date information on the
Company, including daily NAV and share prices, factsheets and
portfolio information can also be found on the Company's website at
www.jpmeuropeangrowthandincome.com
For further information:
Paul Winship
JPMorgan Funds Limited, Secretary -
020 7742 4000
3rd June 2024