TIDMJEDT
RNS Number : 9208C
JPMorgan European Discovery Trust
16 June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN DISCOVERY TRUST PLC
FINAL RESULTS FOR THE YEARED
31st MARCH 2023
Legal Entity Identifier: 54930049CEWDI46Y3U28
Information disclosed in accordance with DTR 4.1.3
CHAIRMAN'S STATEMENT
I present the Company's results for the year ended 31st March
2023.
Investment Performance
This has been a very challenging year for the market and for our
Company. Global themes of rising inflation, central bank tightening
and recession concerns dominated for much of the year. Inflationary
pressures and subsequent monetary tightening by central banks
increased the cost of capital globally. In addition, the war in
Ukraine, continuing after-effects of the pandemic, rising tensions
with China and the failure of Credit Suisse and some regional banks
in the USA, have led to an increasingly uncertain environment. The
Company's relative under performance of 0.6 percent for the year is
disappointing.
Over the year to 31st March 2023 total return on net assets was
-3.8%, slightly underperforming the Company's benchmark index, the
MSCI Europe (ex UK) Small Cap Net Total Return Index, which
returned -3.2% over the same period. The total return to
shareholders was -4.3%, reflecting a slight widening of the
discount at which the Company's shares trade from 14.5% to 15.1%
over the year.
The basis for this performance is explained in the Investment
Managers' report below which provides a detailed commentary on the
portfolio positioning and the outlook for investing.
The Company's longer term performance remains strong, with the
3, 5 and 10 year total return on net assets at 60.3%, 22.2% and
191.1%, respectively, whilst the benchmark total return was 58.7%,
33.5% and 169.8%.
Gearing
Gearing can be a differentiator for an investment trust and the
Board believes that it can be beneficial to performance. The Board
sets the overall strategic gearing policy and guidelines and
reviews these at each Board meeting. Borrowings during the year
consisted of a EUR 125 million revolving credit facility, which was
completely drawn down at the year end. During the year, gearing
varied between 10.4% geared and 6.6% cash.
Revenue and Dividends
The Board's dividend policy is to pay out the majority of the
revenue available each year. This is set against the Company's
objective of maximising capital growth and the Investment Managers
are therefore not constrained to deliver income in any one
financial year.
An interim dividend of 1.2 pence per share was paid on 3rd
February 2023, the same as last year. After taking into account the
income received and the level of the Company's revenue reserves,
and subject to shareholder approval at the forthcoming Annual
General Meeting, a final dividend of 7.8 pence per share will be
paid on 4th August 2023 to shareholders on the register as at the
close of business on 30th June 2023 (ex-dividend date 29th June
2023).
Discounts and Share Repurchases
The discount of the Company's share price to net asset value
widened during the Company's financial year, from nearly 14.5% as
at the end of March 2022 to 15.1% at 31st March 2023, with an
average discount over the 12 months of 15.3%. As at 14th June 2023
the discount was 15.2%. The Board continues to monitor the level of
the discount carefully and seeks to use its ability to repurchase
shares to minimise the short term volatility and the absolute level
of the discount when appropriate. The Company repurchased 995,000
shares during the year. There have been no buybacks since the year
end.
Manager Evaluation
During the year, the Management Engagement Committee undertook a
formal review of the Manager, facilitated by an independent board
evaluation firm, covering the investment management, company
secretarial, administrative and marketing services provided to the
Company. The review took into account the Manager's investment
performance record, management processes, investment style,
resources and risk control mechanisms. In addition, during the
period of market volatility, the Board continued to meet more
frequently to ensure support was available to the Investment
Managers. The Board agreed with the Committee's recommendation that
the continued appointment of the Manager is in the interests of
shareholders as a whole.
Environmental, Social and Governance ('ESG')
The Board has continued to engage with the Manager on the
integration of ESG factors into its investment process which are
considered at every stage of the investment decision. The Board
shares the Investment Managers' view of the significance of ESG
factors both when making long term investments and the requirement
of sustained engagement with investee companies throughout the
period of the investment. Further information on the Manager's ESG
process and engagement is set out in the ESG Report on pages 23 to
26 of the Annual Report with stock specific examples included in
the Investment Managers' Report below.
The Board
As planned and announced previously, Ashok Gupta will be
retiring from the Board at the end of the forthcoming AGM, having
served as a Director since 2013. The Board would like to thank
Ashok for his significant contribution to the Company during his
tenure and wish him well for the future.
Given Ashok's retirement, the Board undertook a search exercise
to identify a new Director in the early part of this year.
Following successful conclusion of the search exercise and as
announced on 9th May 2023, Arun Sarwal has been appointed as an
independent non-executive director, his appointment will take
effect from the conclusion of the forthcoming Annual General
Meeting. Arun brings extensive industry experience of global
equities and fund management gained over some 30 years in the UK,
Europe, and Asia. Building on his chartered accountancy background,
he also has an understanding of the European business environment
having worked in Amsterdam, Dublin and Paris, in addition to
London.
Annual General Meeting
The Company's Annual General Meeting ('AGM') will be held on
Wednesday, 19th July 2023 at 12.30 p.m. at 60 Victoria Embankment,
London EC4Y 0JP.
The Investment Managers will give a presentation to
shareholders, reviewing the past year and commenting on the outlook
for the current year. The AGM will be followed by lunch, providing
shareholders with the opportunity to meet the Directors and
representatives of the Manager. We look forward to seeing as many
shareholders as possible at the AGM.
For shareholders wishing to follow the AGM proceedings but
choosing not to attend, we will be able to welcome you through
conferencing software. Details on how to register, together with
access details, will be available shortly on the Company's website:
www.jpmorganeuropeandiscovery.co.uk, or by contacting the Company
Secretary at invtrusts.cosec@jpmorgan.com.
As is normal practice, all voting on the resolutions will be
conducted by a poll. Due to technological reasons, shareholders
viewing the meeting via conferencing software will not be able to
vote on the poll and we therefore encourage all shareholders, and
particularly those who cannot attend physically, to exercise their
votes in advance of the meeting by completing and submitting their
form of proxy.
If you have any detailed or technical questions, it would be
helpful if you could raise them in advance with the Company
Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the
'Ask a Question' link on the Company's website.
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.
Outlook
Whilst it is futile to predict the market environment and how
the rest of the year will look, there are signs that many of the
inflationary forces seen are now reversing along with growing signs
of wage inflation normalising. The supply chain issues that many
corporates faced are now clearing, which should help drive recovery
and dampen inflation's larger impacts. The end of China's
'zero-covid' policy should further help improve the flow of global
trade in due course. We believe that inflation has peaked, but will
be a bit more persistent than we were accustomed to prior to the
pandemic. Against this backdrop, the outlook for European small and
mid-cap companies looks positive.
The Board retains its confidence in the Investment Manager's
vast industry experience to navigate through these turbulent times
and their high conviction and unconstrained approach leads the
Board to believe that it can look forward with a degree of
tentative optimism.
Marc van Gelder
Chairman 15th June 2023
INVESTMENT MANAGERS' REPORT
Investment Scope and Process
The objective of the Company is to achieve capital growth from a
portfolio of smaller Continental European companies. The investment
universe is defined at the time of purchase by the countries and
market capitalisation range of the constituents of the benchmark,
the MSCI Europe (ex UK) Small Cap Index. At the end of March 2023,
the benchmark index consisted of 735 companies with a free float
adjusted market capitalisation range of GBP 62 million to GBP 5.6
billion. This universe of potential investments is screened using a
proprietary multi-factor model, the results of which we apply
fundamental analysis.
The investment process is driven by bottom-up stock selection
with a focus on identifying market leading growth companies with a
catalyst for outperformance. Stock position sizing is determined by
investment conviction and trading liquidity. Investments are sold
when there is a fundamental deterioration in business prospects,
the valuation becomes unattractive, the market capitalisation has
significantly outgrown the benchmark index or to raise cash for a
more attractive investment.
The Board has set a liquidity range of between 20 per cent cash
and 20 per cent gearing within which the Investment Managers may
operate. The policy is not to hedge the currency exposure of the
portfolio's assets.
Market Review
Equity markets fell for the first half of the Company's
financial year as persistent inflation weighed on consumer
confidence and valuation multiples. Several factors contributed to
inflation including the Russian invasion of Ukraine, continued
supply chain disruptions exacerbated by China's Zero-Covid policy,
and a normalisation of demand post Covid-19 related lockdowns.
Markets rebounded in the second half of the financial year as
data releases appeared to show a peak in headline inflation numbers
globally. Easing of supply chain constraints, the impact of recent
central monetary tightening, and a fall in energy and materials
prices all contributed to reduced concerns around inflation.
However, the rebound in the Company's benchmark was not enough to
offset early falls with the MSCI Europe (ex UK) Small Cap Index
down 3.2 per cent for the year to end March 2023. Small
capitalisation companies significantly underperformed their larger
peers with the MSCI Europe (ex UK) Index rising 8.6 per cent for
the year. As a result, small caps ended the year looking very cheap
versus their own history and versus large caps.
Portfolio Performance
Over the financial year, the net asset value of the Company fell
by 3.8 per cent, underperforming its benchmark by 0.6 per cent.
Top performers over the period include the French market
research company IPSOS, which saw strong demand for market
intelligence as brands and governments try to understand how
consumer behaviour has changed in a post pandemic world; SPIE, the
French technical services company, as demand for installation of
electrical systems was boosted by the ongoing energy transition
towards electrification; Melexis, the Belgian designer of
automotive semiconductors, due to the continued increase in
semiconductor content per vehicle, boosted by the growth of
electric vehicles; Prysmian, the Italian cable manufacturer, as
investments into the European electricity grid accelerated to cope
with the current energy crisis; Elis, the French commercial laundry
service provider, as demand for hospitality quickly rebounded once
the COVID-related lockdowns were lifted; and Sanlorenzo, the
Italian luxury yacht manufacturer, as the design and quality of its
yachts continue to attract orders from wealthy clients.
Stock detractors from performance included the German
manufacturer of warehouse automation solutions and forklift trucks,
Kion, which struggled to increase prices on some projects while
their input costs were rising significantly; VGP, the Belgian
developer of warehouses, due to rising construction costs and
higher interest rates putting pressure on real estate valuations
and increasing financing costs; GN Store Nord, the Danish
manufacturer of audio equipment and hearing aids, as their business
suffered from falling consumer confidence and high debt following a
recent acquisition; Banco de Sabadell, the Spanish banking group,
which suffered from the concerns around the banking sector
following the collapse of SVB and the takeover of Credit Suisse;
and Virbac, the French animal health specialist, as demand
normalised following the end of lockdowns.
PERFORMANCE ATTRIBUTION
YEARED 31ST MARCH 2023
% %
----------------------------------------- ------ ------
Contributions to total returns
----------------------------------------- ------ ------
Benchmark return -3.2%
----------------------------------------- ------ ------
Asset allocation 0.8%
----------------------------------------- ------ ------
Stock selection -2.8%
----------------------------------------- ------ ------
Gearing/cash effect 1.9%
----------------------------------------- ------ ------
Currency effect 0.3%
----------------------------------------- ------ ------
Investment Managers' added contribution 0.2%
----------------------------------------- ------ ------
Portfolio return -3.0%
----------------------------------------- ------ ------
Management fee/other expenses -0.9%
----------------------------------------- ------ ------
Share Buy-Back/issuance 0.1%
----------------------------------------- ------ ------
Other effects -0.8%
----------------------------------------- ------ ------
Return on net assets(A) -3.8%
----------------------------------------- ------ ------
Return to shareholders(A) -4.3%
----------------------------------------- ------ ------
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')
Portfolio Positioning
Industrials remained the largest sector overweight during the
financial year. The Company continues to have high exposure to
investments into energy efficiency and electrification. Within this
theme, the Company owns companies that are enabling the transition
to a low carbon economy such as the high voltage cable
manufacturer, Prysmian, technical installation and services
company, Bravida, which has a key role in refurbishing buildings to
meet higher energy standards, and Aalberts, the Dutch manufacturer
of piping systems for buildings which are pioneering increasingly
energy efficient solutions.
The Consumer Discretionary sector became the second largest
overweight. This increase occurred through the purchase of
positions in the French household appliance maker, SEB, the Italian
gym equipment manufacturer, Technogym, and the
German fashion brand Hugo Boss, as the reopening Chinese economy
has started to release a considerable amount of consumer
spending.
Health Care and Real Estate were the most underweight sectors.
Healthcare is impacted by the disruptions caused by the Covid-19
pandemic and Real Estate faces headwinds from both rising financing
costs and pressure on valuations due to high bond yields.
During the period Italy grew to be the Company's largest country
overweight. This was achieved through the addition of Brembo, the
manufacturer of premium automotive brake discs and callipers, and
Technogym, both of which we believe will benefit as economies
around the world continue to reopen and supply chain disruptions
normalise.
After being the largest underweight at the end of the previous
financial year, the Company's allocation to German companies rose
due to the purchase of companies involved in the automotive supply
chain. These companies who should benefit from automotive volumes
recovering to pre-Covid 19 levels. They include Stabilus, the
manufacture of gas spring and power rise solutions, Fuchs Petrolub,
the producer of automotive lubricants, and Elmos Semiconductor, an
automotive semiconductor manufacture supplier.
Switzerland dropped to become the Company's second largest
underweight as we reduced exposure to local names with defensive
business profiles such as the insurance companies Baloise and
Helvetia, where we saw their valuations as less attractive
following outperformance. We also reduced exposure to PSP, a Swiss
focused property company with prime location only office exposure,
on worries around general real estate valuations.
Due to our increase in German exposure, Norway dropped to become
the Company's largest underweight, despite a small increase in the
Company's exposure to the country over the period.
At the end of the financial year, the Company was 6.9 per cent
geared.
Outlook
We began 2022 believing that inflation would prove to be
transient. However, the tragic events in the Ukraine followed by
Covid-19 lockdowns in China resulted in the risk of more persistent
inflation. As a result, we transitioned the portfolio towards
companies that can continue to perform well in such an inflationary
environment. We focused on companies with high barriers to entry
and pricing power. We also added to Insurance and Banks which are
positively correlated with rising bond yields.
More recently there have been signs that we have passed peak
inflation, although inflation could stay elevated above Central
Bank targets for some time. Markets feel much more optimistic than
at any time since inflation began increasing mid-way through 2021.
Sentiment is supported by falling energy prices and China reopening
paving the way for a boost to European manufacturing exporters.
Nevertheless, the economic outlook is uncertain. Some leading
economic indicators are under pressure and the US yield curve
remains inverted which has historically led recessions, albeit with
an unpredictable delay. There is a risk that earnings downgrades
are coming for more cyclically exposed companies although there are
no signs of this yet in order books. As a result, active management
and thorough fundamental research will be paramount, and quality -
of both management and balance sheets - will be imperative in a
more uncertain environment.
2022 was a difficult year in absolute and relative performance.
However, 2023 looks much more encouraging. While the last decade
has been all about the US and technology, Europe looks extremely
attractive in this new cycle as it starts with compelling
valuations and, unlike China which also looks cheap, seems to be in
a period of relatively harmonious internal politics, although
Russia remains a wildcard.
Another uncertainty is how Artificial Intelligence ("AI") will
impact companies and sectors in the future. Just like the internet,
AI will have a profound impact. But, like the internet it is
difficult to predict the exact consequences. Nevertheless, it is
likely that AI will have an overall positive impact on economies
and equity markets due to efficiency gains. Companies will need to
adapt; those that do not, risk being fatally disrupted. However,
companies that take advantage of AI will reap the rewards.
Understanding these consequences will be an important focus for the
Investment Managers.
In relative terms, 2022 was very macro driven - such periods do
not last forever and eventually bottom-up fundamentals reassert
themselves. We expect this to be the case in 2023 and so we are
optimistic that 2023 will be a good year for the Company.
Francesco Conte
Edward Greaves
Investment Managers 15th June 2023
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they have carried out a robust
assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. With the assistance of the
Manager, the Board has drawn up a risk matrix, which identifies the
key risks to the Company, as well as emerging risks. In assessing
the risks and how they can be mitigated, the Board has given
particular attention to those risks that might threaten the
viability of the Company. The AIC Code of Corporate Governance
requires the Audit Committee to put in place procedures to identify
emerging risks. The Committee
has looked at this area and has conducted horizon scanning. It
does not believe that currently there are any emerging risks facing
the Company . These key risks fall broadly under the following
categories:
-- Underperformance and inappropriate Strategy
An inappropriate investment strategy, or poor implementation of
the strategy, for example excessive concentration of investments,
asset allocation, the level of gearing or the degree of portfolio
risk, may lead to underperformance against the Company's benchmark
index and peer companies.
The Board manages these risks by diversification of investments
and through its investment restrictions and guidelines which are
monitored and reported on by the Manager. JPMF provides the
Directors with timely and accurate management information. The
Board monitors the implementation and results of the investment
process with the Investment Managers, who attend all Board
meetings, and reviews data which show statistical measures of the
Company's risk profile. The Board sets strategic guidelines for
gearing as well as investments; decisions on levels of gearing are
delegated to the investment managers, whose decisions are subject
to challenge by the Board. The Board holds a separate meeting
devoted to strategy each year.
-- Loss of Manager:
Investment performance could be adversely affected by the loss
of one or more of the investment management team.
To reduce the likelihood of such an event, the Manager ensures
appropriate succession planning and adopts a team-based approach as
well as efforts to retain key personnel.
-- Market and Currency:
Market risk arises from uncertainty about the future prices of
the Company's investments which may reflect underlying
uncertainties arising from economic, social, fiscal, climate,
inflationary and regulatory changes. It represents the potential
loss that the Company might suffer through holding investments in
the face of negative market movements. Investing in smaller
companies is inherently more risky and volatile, partly due to the
potential lack of liquidity in some shares.
The majority of the Company's assets, liabilities and income are
denominated in Euros rather than in the Company's functional
currency of Sterling (in which it reports). As a result, movements
in the Euro: Sterling exchange rate may affect the sterling value
of those items. Therefore, there is an inherent risk from these
exchange rate movements.
The Board manages these risks by diversification of investments
and monitoring of the implementation and results of the investment
process with the investment manager. The Board includes an
assessment of these risk factors at Board meetings and has placed
investment restrictions and guidelines to limit these risks.
The Company borrows in Euros in order to hedge the currency risk
in respect of the geared portion of the portfolio. The Company does
not hedge the foreign currency exposure of the remainder of the
portfolio.
-- Discount Control Risk:
Investment trust shares often trade at discounts to their
underlying NAVs, although they can also trade at a premium.
Discounts and premiums can fluctuate considerably leading to
volatile returns for shareholders.
The Board continues to monitor the level of the discount
carefully and seeks to use its ability to repurchase shares to
minimise the short term volatility and the absolute level of the
discount, when appropriate.
-- Accounting, Legal and Regulatory Market and Currency:
In order to qualify as an investment trust, the Company must
comply with Section 1158 of the Corporation Tax Act 2010 ('Section
1158'). Details of the Company's approval are given under 'Business
of the Company' on page 27. Were the Company to breach Section
1158, it may lose investment trust status and, as a consequence,
gains within the Company's portfolio would be subject to capital
gains tax. In addition, changes to relevant regulations and
legislation, such as financial or tax legislation, may have a
negative impact on the Company.
The Section 1158 qualification criteria are continually
monitored by JPMF and the results reported to the Board each month.
The Board relies on the support of the services of its Company
Secretary, the Manager and its professional advisers to ensure
compliance with the Companies Act, the FCA Listing Rules, the
Market Abuse Regulations ('MAR'), Disclosure Guidance and
Transparency Rules ('DTRs'), the Alternative Investment Fund
Managers Directive ('AIFMD') and all other relevant legislation.
The Manager takes specialist advice, where necessary, to review the
impact of new legislation on the Company.
-- Operational:
Disruption to, or failure of, the Manager's accounting, dealing
or payments systems or the Depositary or Custodian's records may
prevent accurate reporting and monitoring of the Company's
financial position. The risk of fraud or other control failures or
weaknesses within the Manager or other service providers could
result in losses to the Company.
The Audit Committee receives independently audited reports on
the Managers and other service providers' internal controls, as
well as a report from the Manager's Compliance function. The
Company's management agreement obliges the Manager to report on the
detection of fraud relating to the Company's investments and the
Company is afforded protection through its various contracts with
suppliers, of which one of the key protections is the Depositary's
indemnification for loss or misappropriation of the Company's
assets held in custody. Details of how the Board monitors the
services provided by JPMF and its associates and the key elements
designed to provide effective risk management and internal control
are included within the Risk Management and Internal Control
section of the Corporate Governance Statement on page 45.
-- Cyber Crime:
The threat of cyber-attack, in all its guises, is regarded as at
least as important as more traditional physical threats to business
continuity and security.
The Board has received the cyber security policies for 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 security of
its trading applications are tested and reported on every six
months against the AAF Standard.
-- Corporate Governance and Shareholder Relations:
The Board considers failure to communicate effectively with
investors and inappropriate sales and marketing strategy to be a
risk to the Company.
The Board relies on the Manager to arrange regular meetings with
major institutional holders and effective communication. Marketing
Strategy and practices are regularly reviewed by the Board. Details
of the Company's compliance with corporate governance best
practice, including information on relations with shareholders, are
set out in the Corporate Governance Statement on page 42.
-- Pandemic Risk:
The global reach and disruption to markets caused by Covid-19
highlighted the speed and extent of economic damage that can arise
from a pandemic, both on global stock markets and more widely. It
also introduced risks, particularly in terms of controls, resulting
from changes to works practices (including working from home).
The Board regularly reviews the mitigation measures and business
continuity plans which JPMorgan Asset Management and other key
service providers have in place to maintain operational resilience.
It is satisfied that these are appropriate as demonstrated even
during the worst extremes of the Covid-19 pandemic.
-- Climate Change:
Climate change has become a critical issue confronting portfolio
companies and their investors. Climate change can have a
significant impact on the business models, sustainability and even
viability of individual companies, sectors and asset classes.
The Board receives ESG reports from the Manager on the portfolio
and the way ESG considerations are integrated into the investment
decisions making so as to mitigate risk at the level of stock
selection and portfolio construction. 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.
-- Artificial Intelligence (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 volatility and
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.
-- Geopolitical:
There is an increasing risk to market stability and investment
opportunities from geopolitical conflicts, such as between Russian
and Ukraine, and China and Taiwan.
The Company discusses global developments with the Manager and
will continue to monitor these issues.
-- Global recession:
Government/Central Banks fiscal or monetary responses to the
debt burden from Covid-19 stimulus packages results in inflation
and/or stagflation. These, together with the consequences of the
war in Ukraine, could result in regional and/or global recession
leading to material adverse movements in asset prices.
The Manager's market strategists are available to the Board and
can discuss market trends. The Board can, with shareholder
approval, look to amend the investment policy and objectives of the
Company, if required, to enable investment in companies or assets
which offer more appealing risk/return characteristics in
prevailing economic conditions.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors'
Report on page 39. The management fee payable to the Manager for
the year was GBP6,416,000 (2022: GBP7,867,000) of which GBPnil
(2022: GBPnil) was outstanding at the year end.
Included in administration expenses in note 6 on page 70 are
safe custody fees payable to JPMorgan Chase amounting to GBP86,000
(2022: GBP122,000) excluding VAT of which GBP30,000 (2022:
GBP20,000) 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 GBP67,000 (2022: GBPnil) of which GBPnil (2022:
GBPnil) was outstanding at the year end.
The Company also holds cash in JPMorgan Euro Liquidity Fund,
which is managed by JPMF. At the year end, this was valued at
GBP46.6 million (2022: GBP74.9 million). Interest amounting to
GBPnil were payable (2022: GBPnil) during the year of which GBPnil
(2022: GBPnil) was outstanding at the year end.
Securities lending income amounting to GBP113,000 (2022:
GBP136,000) were receivable by the Company during the year. JPMAM
commissions in respect of such transactions amounted to GBP13,000
(2022: GBP15,000).
Handling charges on dealing transactions amounting to GBP59,000
(2022: GBP33,000) were payable to JPMorgan Chase during the year of
which GBP29,000 (2022: GBP6,000) was outstanding at the year
end.
At the year end, a bank balance of GBP447,000 (2022: GBP430,000)
was held with JPMorgan Chase Bank N.A. A net amount of interest of
GBPnil (2022: GBP2,000) was receivable by the Company during the
year from JPMorgan Chase of which GBPnil (2022: GBP1,000) was
outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be
found on page 51 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 38
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
15th June 2023
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31ST MARCH 2023
2023 2022
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments
held at fair value
through profit or loss - (45,535) (45,535) - (1,046) (1,046)
Foreign exchange gains/(losses)
on
liquidity fund - 2,265 2,265 - (860) (860)
Net foreign currency losses - (2,366) (2,366) - (253) (253)
Income from investments 22,389 - 22,389 16,360 - 16,360
Interest receivable and
similar income 113 - 113 138 - 138
---------------------------------------- -------- --------- --------- -------- -------- --------
Gross return/(loss) 22,502 (45,636) (23,134) 16,498 (2,159) 14,339
Management fee (1,925) (4,491) (6,416) (2,360) (5,507) (7,867)
Other administrative expenses (690) - (690) (719) - (719)
---------------------------------------- -------- --------- --------- -------- -------- --------
Net return/(loss) before
finance costs
and taxation 19,887 (50,127) (30,240) 13,419 (7,666) 5,753
Finance costs (530) (1,237) (1,767) (271) (633) (904)
---------------------------------------- -------- --------- --------- -------- -------- --------
Net return/(loss) before
taxation 19,357 (51,364) (32,007) 13,148 (8,299) 4,849
Taxation (1,845) - (1,845) (1,994) - (1,994)
---------------------------------------- -------- --------- --------- -------- -------- --------
Net return/(loss) after
taxation 17,512 (51,364) (33,852) 11,154 (8,299) 2,855
---------------------------------------- -------- --------- --------- -------- -------- --------
Return/(loss) per share 2 11.11p (32.60)p (21.49)p 7.00p (5.21)p 1.79p
-------------------------------- ------ -------- --------- --------- -------- -------- --------
A final dividend of 7.8p per share (2022: 5.5p per share) is
proposed in respect of the year ended 31st March 2023, costing
GBP12,283,000 (2022: 8,716,000). More details can be found in note
10(a) on page 72 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
In-come.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31ST MARCH 2023
Called
up Capital
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- ----------- ------------ ----------- ---------
At 31st March 2021 7,974 1,312 7,662 820,196 9,160 846,304
Repurchase and cancellation
of the
Company's own shares (50) - 50 (4,760) - (4,760)
Net return on ordinary
activities - - - (8,299) 11,154 2,855
Dividends paid in the year
(note 3) - - - (1,520) (9,160) (10,680)
---------------------------- -------- -------- ----------- ------------ ----------- ---------
At 31st March 2022 7,924 1,312 7,712 805,617 11,154 833,719
Repurchase and cancellation
of the
Company's own shares (50) - 50 (4,254) - (4,254)
Net return on ordinary
activities - - - (51,364) 17,512 (33,852)
Dividends paid in the year
(note 3) - - - - (10,551) (10,551)
At 31st March 2023 7,874 1,312 7,762 749,999 18,115 785,062
---------------------------- -------- -------- ----------- ------------ ----------- ---------
(1) These reserves form the distributable reserves of the
Company and may be used to fund distribution of profits to
investors via dividend payments. The dividend payment for the year
ended 31st March 2022 was split between revenue reserve and capital
reserve as the revenue reserve opening balance was entirely
exhausted.
STATEMENT OF FINANCIAL POSITION
AT 31ST MARCH 2023
2023 2022
Notes GBP'000 GBP'000
---------------------------------------- ---------- ---------
Fixed assets
--------------------------------------- ---------- ---------
Investments held at fair value through
profit or loss 839,582 834,018
---------------------------------------- ---------- ---------
Current assets
Derivative financial instruments - 2
Debtors 16,100 2,266
Cash and cash equivalents 47,000 75,318
---------------------------------------- ---------- ---------
63,100 77,586
--------------------------------------- ---------- ---------
Current liabilities
Creditors: amounts falling due within
one year (117,620) (77,885)
---------------------------------------- ---------- ---------
Net current liabilities (54,520) (299)
---------------------------------------- ---------- ---------
Total assets less current liabilities 785,062 833,719
---------------------------------------- ---------- ---------
Net assets 785,062 833,719
---------------------------------------- ---------- ---------
Capital and reserves
Called up share capital 7,874 7,924
Share premium 1,312 1,312
Capital redemption reserve 7,762 7,712
Capital reserves 749,999 805,617
Revenue reserve 18,115 11,154
---------------------------------------- ---------- ---------
Total shareholders' funds 785,062 833,719
---------------------------------------- ---------- ---------
Net asset value per share 498.5p 526.1p
---------------------------------------- ---------- ---------
STATEMENT OF CASH FLOWS
FOR THE YEARED 31ST MARCH 2023
2023 2022(1)
GBP'000 GBP'000
------------------------------------------------------- ---------- ------------
Cash flows from operating activities
Net (loss)/return before finance costs and taxation (30,240) 5,753
Adjustment for:
Net loss on investments held at fair value through
profit or loss 45,535 1,046
Foreign exchange (gains)/losses on liquidity fund (2,265) 860
Net foreign currency losses 2,366 253
Dividend income (22,201) (16,360)
Scrip Dividends received as income (188) -
Realised loss on foreign exchange transactions (567) (804)
Realised exchange losses/(gains) on Liquidity 2,897 (1,413)
Increase in accrued income and other debtors (40) (9)
Increase/(decrease) in accrued expenses 17 (1)
------------------------------------------------------- ---------- ------------
(4,686) (10,675)
------------------------------------------------------- ---------- ------------
Dividends received 21,467 13,119
Interest received 1 1
Overseas withholding tax recovered (2,841) 215
------------------------------------------------------- ---------- ------------
Net cash inflow from operating activities 13,941 2,660
------------------------------------------------------- ---------- ------------
Purchases of investments and derivatives (733,345) (620,647)
Sales of investments and derivatives 675,882 707,608
Settlement of forward currency contracts 2 118
------------------------------------------------------- ---------- ------------
Net cash outflow/(inflow) from investing activities (57,461) 87,079
------------------------------------------------------- ---------- ------------
Equity dividends paid (10,551) (10,680)
Repurchase and cancellation of the Company's own
shares (4,412) (4,602)
Repayment of bank loans (42,528) -
Drawdown of bank loans 74,509 -
Interest paid (1,184) (919)
------------------------------------------------------- ---------- ------------
Net cash inflow/(outflow) from financing activities 15,834 (16,201)
------------------------------------------------------- ---------- ------------
(Decrease)/increase in cash and cash equivalents (27,686) 73,538
------------------------------------------------------- ---------- ------------
Cash and cash equivalents at start of year 75,318 1,407
Exchange movements (632) 373
------------------------------------------------------- ---------- ------------
Cash and cash equivalents at end of year 47,000 75,318
------------------------------------------------------- ---------- ------------
Cash and cash equivalents consist of:
Cash and short term deposits 447 430
Cash held in JPMorgan Euro Liquidity Fund 46,553 74,888
------------------------------------------------------- ---------- ------------
Total 47,000 75,318
------------------------------------------------------- ---------- ------------
Reconciliation of net debt
As at As at
31st March Other 31st March
2022 Cash flows non-cash charges 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ---------- ----------------- -----------
Cash and cash equivalents:
Cash 430 17 - 447
Cash equivalents 74,888 (27,703) (632) 46,553
--------------------------- ----------- ---------- ----------------- -----------
75,318 (27,686) (632) 47,000
--------------------------- ----------- ---------- ----------------- -----------
Borrowings
Debt due within one
year (76,056) (31,981) (1,799) (109,836)
--------------------------- ----------- ---------- ----------------- -----------
Net debt (738) (59,667) (2,431) (62,836)
--------------------------- ----------- ---------- ----------------- -----------
(1) The presentation of the Cash Flow Statement, as permitted
under FRS 102, has been changed so as to present the reconciliation
of 'net (loss)/return before finance costs and taxation' to 'net
cashflow from operating activities' on the face of the Cash Flow
Statement. Previously, this was shown by way of note. Other than
consequential changes in the presentation of the certain cash flow
items, there is no change to the cash flows as presented in
previous periods.
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
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 32,
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 31 March 2023 and therefore
reflect market participants view of climate change risk.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. The Board has, in particular, considered the impact of
market volatility with the ongoing conflict between Ukraine and
Russia, rising tension in China and the after effects of Covid-19
outbreak, 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 particularly in
light of a pandemic. The Directors have reviewed income and expense
projections to 30th June 2024 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. Return/(loss) per share
2023 2022
GBP'000 GBP'000
--------------------------------------------------- ------------ -------------
Revenue return 17,512 11,154
Capital (loss)/return (51,364) (8,299)
--------------------------------------------------- ------------ -------------
Total return/(loss) (33,852) 2,855
--------------------------------------------------- ------------ -------------
Weighted average number of shares in issue during
the year 157,569,054 159,257,259
Revenue return per share 11.11p 7.00p
Capital loss per share (32.60)p (5.21)p
--------------------------------------------------- ------------ -------------
Total (loss)/return per share (21.49)p 1.79p
--------------------------------------------------- ------------ -------------
3. Dividends
(a) Dividends paid and proposed
2023 2022
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Dividends paid
2022 final dividend of 5.5p (2021: 5.5p) per share 8,661 8,770
2023 Interim dividend of 1.2p (2022: 1.2p) per share 1,890 1,910
------------------------------------------------------ -------- --------
Total dividends paid in the year 10,551 10,680
------------------------------------------------------ -------- --------
Dividend proposed
2023 final dividend of 7.8p (2022: 5.5p) per share 12,283 8,716
------------------------------------------------------ -------- --------
All dividends paid and declared in the period have been funded
from the revenue reserve.
The final dividend has been proposed in respect of the year
ended 31st March 2023 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 2024.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of
dividends declared in respect of the financial year, shown below.
The revenue available for distribution by way of dividend for the
year is GBP17,512,000 (2022: GBP9,160,000). The revenue reserve
after payment of the final dividend will amount to GBP5,832,000
(2022: GBP2,438,000).
2023 2022
GBP'000 GBP'000
------------------------------------------------- -------- --------
Interim dividend of 1.2p (2022: 1.2p) per share 1,890 1,910
Final dividend of 7.8p (2022: 5.5p) per share 12,283 8,716
------------------------------------------------- -------- --------
14,173 10,626
------------------------------------------------- -------- --------
4. Net asset value per share
2023 2022
GBP'000 GBP'000
--------------------------- ------------ ------------
Net assets (GBP'000) 785,062 833,719
Number of shares in issue 157,474,931 158,469,931
--------------------------- ------------ ------------
Net asset value per share 498.5p 526.1p
--------------------------- ------------ ------------
Status of results announcement
2021 Financial Information
The figures and financial information for 2021 are extracted
from the Annual Report and Financial Statements for the year ended
31st March 2021 and do not constitute the statutory accounts for
the year. 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.
2022 Financial Information
The figures and financial information for 2022 are extracted
from the published Annual Report and Financial Statements for the
year ended 31st March 2022 and do not constitute the statutory
accounts for that year. The Annual Report and Accounts 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. The Annual Report and Financial
Statements will be delivered to the Register 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.
For further information, please contact:
Priyanka Vijay Anand
For and on behalf of JPMorgan Funds Limited,
Company Secretary
020 7742 4000
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.
JPMORGAN FUNDS LIMITED
S
A copy of the annual report will be submitted to the FCA's
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
The annual report will shortly be available on the Company's
website at www.jpmindian.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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