Final Results

RNS Number : 1352O

JPMorgan European Grwth & Inc PLC

08 June 2022

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EUROPEAN GROWTH & INCOME PLC

FINAL RESULTS FOR THE YEAR ENDED
31ST MARCH 2022

The Directors of JPMorgan European Growth & Income plc announce the Company's results

for the year ended 31^st March 2022

Legal Entity Identifier: 549300D8SPJFHBDGXS57

Information disclosed in accordance with DTR 4.1

CHAIRMAN'S STATEMENT

Introduction

This has been a significant year for your Company as the shareholder resolutions for the restructuring of the Company's share classes were passed earlier in 2022 and the Company now consists of one portfolio and one share class. This greatly simplifies the structure and generates numerous benefits for shareholders as detailed below.

The restructuring of the Company was implemented during the Company's financial year and therefore a transitional approach has been adopted for the reporting of the Company's performance for year ended 31st March 2022. The Company's performance for the year under review has been calculated on a rebased Growth portfolio as at 31st January 2022 and the merged Growth and Income portfolio as at the year end, both having the same investment objective. A transitional basis has also been adopted for the presentation of the Company's total dividend in respect of the year ended 31st March 2022 and consists of the dividends for the Growth (JETG), Income (JETI) and the new Growth and Income (JEGI) shares.

During the reporting year the markets that the Company invests in have experienced a volatile year with Covid-19 compounded by severe global commodity market turbulence caused by Russia's invasion of Ukraine in February 2022. The Company's Benchmark continued to be the MSCI Europe ex UK Index (in sterling terms) was up 5.5% for the year under review.

Throughout the year, with the ongoing disruption caused by Covid-19, I am pleased to report that the operations and control environment of the Company continued to work well.

Restructuring

As detailed in the Circular sent to shareholders in December 2021, the Directors proposals to restructure the Company were presented to shareholders at meetings on 24th January 2022 and as announced at the time, were approved by shareholders and implemented on 4th February 2022.

The Board believes that the restructuring was in the best interests of the Company and its Shareholders as a whole and is expected to yield the following principal benefits:

Creation of a single share class with net assets of approximately £500 million, which aims to deliver  the critical mass needed to attract additional investors. This should improve liquidity and would reasonably be expected to have an additional positive impact on the discount to NAV at which the Ordinary Shares may trade from time to time;

Predictable dividend income at a level that is consistent and frequent, based on 4% of preceding year NAV payable in July, October, January and March;

Simplification of the Company's capital structure, which was unnecessarily complex, potentially presented a barrier to those looking to invest and is no longer relevant for the tax premise it was first established to address;

Leveraging JPMAM's strength and depth of European investment expertise, while presenting a clearer marketing message designed to encourage renewed interest from investors and thereby creating additional buyers;

A reduction in management fees, providing one of the lowest ongoing charges ratios in the AIC's Europe sector, and a reduction in the Investment Manager's notice period; and

Introduction of a conditional tender offer after five years that will allow Shareholders a potential exit if the Company underperforms against the Benchmark, the presence of which might also improve the discount to NAV at which the Ordinary Shares may trade from time to time given it would operate to provide an exit at NAV less costs.

The restructuring of the Company into a single share class also negates the requirement for the Company to provide a share conversion option.

Performance

Return to shareholders and return on net assets

The total return to shareholders for the Company's Ordinary shares was 7.5% which your Board think was quite an achievement given the very volatile markets during that period. This performance compares well against our peer group and benchmark during the same period.

The total return on net assets for the Company's Ordinary shares was 9.8%. (debt at fair value) 8.7% (debt at par).

The Company's benchmark recorded a return of 5.5%. The main reason for higher performance than the benchmark is stock selection, helped by the improved market sentiment towards the Company's investment style

Dividends

In the period prior to the restructuring, the dividend paid per Growth share was 2.50 pence (2021: 4.45 pence) and on the Income share was 4.20 pence (2021: 6.70 pence). The reduction of the Growth and Income share dividends in the year under review arises because the Growth and Income shares were merged during the restructuring on 4th February 2022, as referred to above.

Following the restructuring in the year under review, the dividend paid on the Company's new per Ordinary share Income share was 1.10 pence.

In their Report on pages 12 to 14 of the Company's annual report and financial statements, the Investment Managers comment in more detail on some of the factors underlying the performance of the Company including performance against the benchmark over the Company's financial year, as well as commenting on the economic and market background.

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 2022 the portfolio was 2.7% geared (2021: 2.2%).

Discounts, Share Issuance and Repurchase

At the forthcoming Annual General Meeting (AGM) on 7th July 2022 as referred to below, the Company will seek to renew its permission to allot new equity in order to manage the balance between the supply of and demand for its shares, subject to the requirements and conditions as detailed in the notice to the AGM on page 89 of the Company's annual report and financial statements. Such allotments benefit all shareholders not least by increasing the liquidity of the Company's shares. The Board has a proactive approach to the use of its share issuance and repurchase powers in normal markets.

The Board remains of the view that it is important to seek to address imbalances in the supply of and demand for the Company's shares and to thereby minimise the volatility and absolute level of the discount to net asset value at which the Company's shares currently trade. The Board does not wish to see the discount widen beyond 10% under normal market conditions (using the cum-income NAV) on an ongoing basis. The precise level and timing of repurchases pursuant to this policy depend upon prevailing market conditions. As markets were so disrupted during this reporting year, active buy back of shares were not used as a tool to control the discount for a number of months as it was felt that this would be ineffective. In the year under review 930,586 Growth shares, 594,928 Income shares and 134,384 Ordinary shares were bought back. From 1st March 2022 to 6^th June 2022 434,384 Ordinary shares were bought back.

The Company's Ordinary share discount as at 31st March 2022 was 13.9%. On 6th June 2022, the Company's Ordinary share discount was 14.0%.

Environmental, Social and Governance Considerations

As detailed in the Investment Managers' report, Environmental, Social and Governance ('ESG') considerations are integrated into the Investment Managers' investment process. The Board shares the Investment Managers' view of the importance of ESG factors when making investments for the long term and of the necessity of continued engagement with investee companies throughout the duration of the investment. Further information on the Manager's ESG process and engagement is set out in the ESG Report on pages 15 to 18.

Board of Directors

In line with the Board's succession plan, during the reporting period Alex Lennard was appointed as director on 8th July 2021 and Karen McKellar was appointed on 24th November 2021. Both appointments were made using the services of an independent search agency and after undergoing a thorough selection and interview process. Stephen Goldman retired at the end of 2021 and we thank him for his valuable contribution to the Company and wish him all the best for the future.

The next step of the Board's Succession Plan will be my retirement in September 2022, having reached the nine year tenure of my appointment. The Board have selected Rita Dhut to succeed me as Chairman of the Board immediately following my retirement.

During the year, the Board evaluation process reviewed Directors, the Chairman, 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.

The Company's Directors fees and that of the Chairman of the Board and the Chairman of the Audit Committee were last increased with effect from 1st April 2018. In order to maintain the fees in line with the increasing demands of time required and relative to its peers, the Board agreed that the current fees should be increased with effect from 1st April 2022. See page 46 of the Company's annual report and financial statements for further details.

Investment Managers

The new single share structure has resulted in a reduction in the number of investment managers involved in the management of the Company's portfolio. Alexander Fitzalan Howard, Zenah Shuhaiber and Timothy Lewis have been retained to manage the portfolio with Matt Jones, Michael Barakos and Thomas Buckingham stepping down, effective from 4th February 2022.

The performance of the Investment Managers is formally evaluated by the Board annually. The evaluation of the Manager was undertaken in January 2022 and based on the data available at that time; the Board concluded that the performance of the Manager had been satisfactory and that their services in the new restructured format should be retained.

Annual General Meeting

After two years of Covid-19 restrictions, I am pleased to announce that the Company's ninety third Annual General Meeting (AGM) will be held at 60 Victoria Embankment, London EC4Y 0JP London at 2.30 p.m. on Thursday, 7th July 2022 as an in-person meeting.

We do, of course, strongly advise all shareholders to consider their own personal circumstances before attending the AGM in person. 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 on the Company's website: www.jpmeuropeangrowthandincome.com or by contacting the Company Secretary at [e-mail]

As is normal practice, all voting on the resolutions will be conducted on 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 proxy.

Shareholders are encouraged to send any questions ahead of the AGM to the Board via the Company Secretary at the email address above. We will endeavor to answer relevant questions at the meeting or via the website. Your Board encourages all shareholders to support the resolutions proposed.

If there are any changes to the above AGM arrangements, the Company will update shareholders through the Company's website and an announcement on the London Stock Exchange.

Outlook

The general market is being influenced by significant issues. Inflationary expectations have increased dramatically in recent months and the European Central Bank, along with counterparts elsewhere in the world, face the very difficult task of trying to manage relatively high levels of inflation without tipping economies into recession. Previously buoyant consumer spending, supported by significant amounts of pent-up savings accumulated during the last two years of the Covid-19 pandemic, is expected to decline in response to the dramatic increase in household energy costs. As a consequence, corporate earnings forecasts, which have been strong in this post-covid recovery period, may be threatened by downward revisions.

The impact and duration of the devastating conflict in Ukraine is likely to dominate financial markets in the coming months. Whilst it is impossible to determine when the conflict may end, even an imminent ceasefire would not resolve the fragile geopolitical situation. Similarly the repercussions for European and global growth expectations created by sanctions and elevated energy and commodity prices are unlikely to dissipate in the immediate term. China's zero Covid-19 policy, which has imposed extended lockdowns on major cities such as Shanghai, has exacerbated these concerns over global growth and supply side constraints.

Nevertheless, your Board has confidence that the structure and objective of the Company is now clear and provides a good basis for shareholders to maintain a core long term holding in European Equities whilst providing an enhanced income. Your board also continue to believe in the ability of the JPMorgan team to navigate these difficult markets and together that provides some assurance to shareholders in these uncertain times.

For and on behalf of the Board

Josephine Dixon

Chairman  7th June 2022

INVESTMENT MANAGERS' REPORT

Market background

Continental European equity markets finished the year to 31st March 2022 up slightly with the MSCI Europe ex UK index advancing 5.5%. However this masks considerable volatility during the year. The Company's financial year started with markets continuing to rally as economies recovered from the Covid -19 slowdown in the previous year. Corporate earnings accelerated sharply and analysts were forced to raise their forecasts repeatedly, particularly on the cyclical side of the market, as the pace of recovery was faster than anticipated.

However by the autumn the market was starting to grapple with the prospect of rising inflation. Energy prices rose sharply with Brent crude hitting a multi-year high and the lack of storage reserves as well as supply constraints pushing gas prices up too. Other commodities, such as copper and aluminium, started to rise as China shut down capacity in the face of power rationing. Coupled with this global supply chains became dislocated with severe disruption becoming apparent, for example, in the delivery of semiconductors. Initially Central Banks portrayed the rise in inflation as transitory although as the year progressed this stance became increasingly untenable.

In tandem with growing inflationary pressures, concerns that the rapid economic recovery would start to slow increased. The emergence of new Covid-19 variants, first Delta and later Omicron, raised the spectre of further lockdowns. China started to become increasingly vocal about perceived issues regarding the technology, education and luxury goods sectors which cast doubt over its contribution to the global recovery. Not surprisingly business confidence started to subside and although economies continued to grow, the rate at which this happened has tailed off.

The combination of rising inflation and slowing economic growth has left Central Banks with a conundrum. If they tighten monetary conditions too quickly this may tip economies into recession but if they are too hesitant markets may become unnerved that they have lost control of the situation. The risk of a policy mistake remains high. Perhaps not surprisingly both equity and bond markets became increasingly volatile as the year progressed which led to rapid sector rotation as sentiment swung around.

Towards the end of the year under review the Russian invasion of Ukraine has overshadowed everything. Aside from the appalling humanitarian disaster unfolding before us the conflict has exacerbated the twin concerns of inflation and economic slowdown mentioned above. Perhaps not surprisingly much of the equity market's gains unwound in the final quarter of the Company's financial year leaving our benchmark index up only modestly for the full year.

Portfolio Positioning

The portfolio began the year with a cyclical positioning, led by the strength in earnings recovery that we were seeing in stocks which had been impacted the most by the pandemic. As supply chain constraints continued, we witnessed many of these stocks demonstrate pricing power and thereby improving margins. This was very much the case in Capital Goods, for instance stocks like Schneider Electric (a structural winner in energy efficiency) and Saint Gobain (a buildings materials manufacturer and beneficiary of renovations). It had also been evident in Autos, such as Volkswagen and Stellantis.

However, as it became more apparent that inflationary pressures were not transient and that growth rates would slow, our investment process led us to reduce positions in more cyclical sectors where volumes were lighter and margins were peaking and to increase exposure to commodity exposed stocks within Energy and Materials. In oil, the stocks were trading on exceptionally low multiples benefiting from a strong recovery in demand and profitability on the back of weak capex investment in recent years . While we remain focused on carbon emissions for this sector, we invested in stocks which have a sound strategy towards renewables and had the balance sheet strength to support that strategy. TotalEnergies has a low cost curve for producing oil and is also one of the furthest along relative to its peers in terms of pivoting their business toward renewables. Equinor is also credible in the renewable space with Norway having unveiled funding for its offshore wind grid project which is being led by the company. In Materials, we added to Boliden, a high quality Swedish copper and zinc producer benefitting from high demand driven by electrification and tight supply conditions. Boliden's metal production has a low carbon intensity in comparison to global peers and has a good reputation in the industry for their strong safety record.

We also took note of the relative derating that had occurred within defensive sectors, in particular large cap pharmaceuticals. As an example, we added to our position in Novartis, a Swiss pharmaceutical, making it an overweight position now. The stock was trading at valuations we considered too cheap in light of a decent pipeline which should materialise in a couple years. Meanwhile, the announcement of the Sandoz business's (generics) strategic review and the sale of the Roche stake has paved the way for the management team to focus on growth, likely through acquisitions, but also possibly via buybacks given the strong balance sheet position. Towards the end of the year we also added exposure to Utilities and Telecom stocks where the valuations were modest and the earnings outlook increasingly attractive relative to the rest of the market.

Overall, we view the portfolio as being more balanced in comparison to the start of the year. We remain overweight insurers given strong capital positions at the likes of ASR Nederland and NN Group. We have maintained our overweight to Energy stocks despite the strong rally as valuations remain attractive given the move in the underlying commodity price. Purchases during the year mean that the fund no longer has significant underweight positions in defensive sectors such as pharmaceuticals, telecom and utilities. Our main underweight sectors are now Healthcare Equipment & Services and Real Estate as the stocks in these sectors are relatively expensive, and retailing where the earnings outlook has deteriorated significantly. The portfolio remains cheaper than the benchmark while exhibiting better quality and momentum characteristics.

Portfolio performance

Year ended 31st March 2022

	%	%
Contributions to total returns
Benchmark return		5.5
Asset allocation	0.7
Stock selection	3.8
Currency	0.1
Gearing/cash	-1.1
Investment manager contribution		3.5
Portfolio return		9.0
Management fee/other expenses	-0.9
Share buyback	0.6
Other effects		-0.3
Return on net assets with debt at par valueA		8.7
Impact of debt at fair value1		1.2
Return on net assets with debt at fair valueA		9.8
Effect of movement in discount		-2.3
Return to shareholdersA		7.5

Source: B-One/JPMAM/AIC/Morningstar.

All figures are on a total return basis. Performance attribution analyses how the portfolio achieved its recorded performance relative to its benchmark.

¹   See note 14 on page 71 for reference to fair value of debt.

^A   Alternative Performance Measure ('APM').

A glossary of terms and APMs is provided on page 93 of the Company's annual report and financial statements.

Portfolio Performance and Attribution

The portfolio outperformed its benchmark index with the NAV rising 8.7%, with most of the excess coming from positive stock selection. Given the strong rise in energy and commodity prices during the year the fund's holding in Equinor, the Norwegian oil and gas company formerly known as Statoil, doubled during the year. Boliden, a Swedish mining company with exposure to copper, appreciated almost 50%. Both companies were trading on low valuations and started to see analysts raising their forecasts as commodity prices soared which is a potent combination.

As the market became increasingly concerned about the sustainability of the economic recovery the fund benefitted from its exposure to the more defensive side of the market. Novo Nordisk, a Danish pharmaceutical company focusing on diabetes therapies and obesity treatments, continued to beat expectations despite some initial problems with the roll out of a new anti-obesity product, Wegovy, in the US. Ahold Delhaize, which is a Dutch food retailer with extensive outlets in both Europe and the US, proved similarly defensive.

Despite the marked underperformance of highly rated growth companies, particularly in the technology sector, as real interest rates started to rise, it was gratifying that some of our positions continued to perform well. ASM International is the global leader in atomic layer deposition, a semiconductor technology that has been a key enabler of Moore's law in the last decade. Capgemini, the largest European IT Services company and SESA, an Italian distributor of IT solutions, contributed again this year, particularly in the first half. In relative terms we also benefitted from not owning some of the large technology stocks such as Prosus which fell 50% during the year.

Market Outlook

Looking forward it is easy to paint a bleak picture. There is little visibility on how, or when, the conflict in Ukraine will end although it is clear that upside pressure on inflation and downward pressure on growth may intensify. Europe's, and particularly Germany's reliance on Russian gas remains a big issue. Likewise the Russian blockade on Ukrainian wheat exports will have global ramifications. Global growth may be threatened by further lockdowns in China if it persists with its zero Covid policy. Central Banks have a delicate path to navigate between reducing inflation and choking off growth completely. The list of concerns could go on.

However, although it is too soon to call the bottom, equities have started to discount at least some of this, particularly on the cyclical side of the market. As the threats start to recede European growth will reaccelerate. Employment remains at record levels. Corporate balance sheets are generally in good shape. Inventories need replenishing. Governments will spend more on infrastructure, and given the Ukrainian situation, the energy conversion to renewables and defence. The Consumer remains nervous in the face of rising household energy and food bills but savings built up during the pandemic and the possibility of further government intervention may cushion the impact. While consumer spending on goods seems to have stalled the pent up demand for services remains strong. At the same time base effects and Central Bank action suggest that the rate of inflation may peak later this year even if it doesn't fall to its previous low levels.

Given this corporate earnings growth may pick up again later in the year and with valuation spreads remaining wide there should be opportunities for stock selection to continue to add value.

Alexander Fitzalan Howard

Zenah Shuhaiber

Tim Lewis

Investment Managers  7th June 2022

PRINCIPAL AND EMERGING RISKS

 The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including climate change and 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 and emerging risks to the Company. Emerging risks include climate change. The key risks fall broadly under the following categories:

Principal Risk	Description	Mitigating Activities
Investment	The Board recognises that performance of the trust'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.	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 22 on pages 76 to 82.
Operational	In common with most investment trusts the Board delegates the operation of the business to third parties, the principal delegate being the Manager JPFM. 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 Corporate Governance report on page 38 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.
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 37 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.
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 Company's Continuation Vote and Tender Offer and Discount Control arrangements, including recent updates, see Key Features at the front of this document.
Strategy	An inappropriate investment strategy, for example asset allocation may lead to 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.
Pandemic Risk	The outbreak and spread of Covid-19 has 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 recent 'Zero Covid' policy in China illustrates the continuing potential for Covid-19 to cause disruption.	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 due to the pandemic. The Company's service providers implemented 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 does not anticipate a fall in the level of service.
Emerging Risks	Description	Mitigating Activities
Climate Change	Climate change, which barely registered with investors a decade ago, has today become one of the most critical issues confronting asset managers and their investors. Investors can no longer ignore the impact that the world's changing climate will have on their portfolios, with the impact of climate change on returns now inevitable.	The Company's investment process integrates considerations of environmental, social and governance factors into decisions on which stocks to buy, hold or sell. This includes the approach investee companies take to recognising and mitigating climate change risks. The Board is also considering the threat posed by the direct impact on climate change on the operations of the Manager and other major service providers. As extreme weather events become more common, the resiliency, business continuity planning and the location strategies of our services providers will come under greater scrutiny.
Geopolitical Tensions	The recent trade tensions between western economies and China and Russia's invasion of Ukraine in February 2022 may cause long term changes to the pre-eminence of the US and western economies in global trade and technology. This may challenge future growth potential and increased frictions in accessing global 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.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

 Details of the management contract are set out in the Directors' Report on page 37 of the Company's annual report and financial statements. The management fee payable to the Manager for the year was £3,343,000 (2021: £2,998,000), of which £nil (2021: £nil) was outstanding at the year end.

During the year £nil (2021: £nil) was payable to the Manager for the administration of savings scheme products, of which £nil (2021: £nil) was outstanding at the year end.

Included in administration expenses in note 6 on page 66 of the Company's annual report and financial statements are safe custody fees amounting to £52,000 (2021: £44,000) payable to JPMorgan Chase Bank N.A. of which £9,000 (2021: £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 £15,000 (2021: £1,000) was payable to JPMorgan Securities Limited for the year of which £nil (2021: £nil) was outstanding at the year end.

The Company holds investments in funds managed by JPMAM. At 31st March 2022 these were valued at £11.3 million (2021: £15.5 million) and represented 2.5% (2021: 5.6%) of the Company's investment portfolio. During the year the Company made £nil purchases of such investments (2021: £nil) and sales with a total value of £3,389,000 (2021: £2,526,000).

Income amounting to £170,000 (2021: £204,000) was receivable from these investments during the year of which £nil (2021: £nil) was outstanding at the year end.

The Company also holds cash in the JPMorgan Euro Liquidity Fund, managed by JPMF. At the year end this was valued at £24.3 million (2021: £20.5 million). Interest amounting to £nil (2021: £nil) was payable during the year of which £nil (2021: £nil) was outstanding at the year end.

Stock lending income amounting to £74,000 (2021: £257,000) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £8,000 (2021: £28,000).

Handling charges on dealing transactions amounting to £34,000 (2021: £71,000) were payable to JPMorgan Chase Bank N.A. during the year of which £6,000 (2021: £17,000) was outstanding at the year end.

At the year end, total cash of £5.4 million (2021: £9.8 million) was held with JPMorgan Chase Bank N.A. A net amount of interest of £2,000 (2021: £2,000) was receivable by the Company during the year from JPMorgan Chase Bank N.A. of which £nil (2021: £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found on page 46 and in note 6 on page 66 of the Company's annual report and financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 The Directors are responsible for preparing the annual report and financial statements 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) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and applicable law. Under Company law the 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 these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and 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;

•   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 annual report and financial statements are published on the jpmeuropeangrowthandincome.com website, which is maintained by the Company's Manager, JPMorgan Funds Limited. 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 annual report and 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 Strategic Report, a Directors' Report and a Directors' Remuneration Report that comply with that law. The Strategic Report and the Directors' report include a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

Each of the Directors, whose names and functions are listed on page 36 of the Company's annual report and financial statements 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.

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

Josephine Dixon

Chairman

7th June 2022

STATEMENT OF COMPREHENSIVE INCOME

 For the year ended 31st March 2022

	2022			2021
	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	-	25,076	25,076	-	115,256	115,256
Foreign exchange losses on liquidity fund	-	(206)	(206)	-	(876)	(876)
Net foreign currency gains	-	332	332	-	502	502
Income from investments	15,568	-	15,568	11,248	-	11,248
Interest receivable and similar income	76	-	76	259	-	259
Gross return	15,644	25,202	40,846	11,507	114,882	126,389
Management fee	(1,170)	(2,173)	(3,343)	(1,007)	(1,991)	(2,998)
Other administrative expenses	(649)	-	(649)	(575)	-	(575)
Net return before finance costs and
taxation	13,825	23,029	36,854	9,925	112,891	122,816
Finance costs	(405)	(751)	(1,156)	(429)	(848)	(1,277)
Net return before taxation	13,420	22,278	35,698	9,496	112,043	121,539
Taxation	(1,636)	-	(1,636)	577	-	577
Net return after taxation	11,784	22,278	34,062	10,073	112,043	122,116
Return per share: Growth & Income share	2.69p	5.08 p	7.77p	n/a	n/a	n/a
Return per share: Growth share	n/a	n/a	n/a	7.66p	101.01p	108.67p
Return per share: Income share	n/a	n/a	n/a	4.95p	41.88p	46.83p

STATEMENT OF CHANGES IN EQUITY

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st March 2020	4,804	127,827	15,613	156,738	11,555	316,537
Repurchase and cancellation of the Company's
own shares	(131)	-	131	(9,127)	-	(9,127)
Share conversions during the year	(6)	3,701	47	(3,742)	-	-
Net return	-	-	-	112,043	10,073	122,116
Dividends paid in the year	-	-	-	-	(9,923)	(9,923)
At 31st March 2021	4,667	131,528	15,791	255,912	11,705	419,603
Repurchase and cancellation of the Company's
own shares	(62)	-	62	(4,314)	-	(4,314)
Project costs in relation to restructure	-	(365)	-	-	-	(365)
Net return	-	-	-	22,278	11,784	34,062
Dividends paid in the year	-	-	-	-	(9,652)	(9,652)
At 31st March 2022	4,605	131,163	15,853	273,876	13,837	439,334

STATEMENT OF FINANCIAL POSITION

 At 31st March 2022

	2022	2021
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	451,154	428,958
Current assets
Derivative financial assets	137	109
Debtors	3,926	4,261
Cash and cash equivalents	29,685	31,032
	33,748	35,402
Current liabilities
Creditors: amounts falling due within one year	(3,334)	(1,973)
Derivative financial liabilities	(142)	(366)
Net current assets	30,272	33,063
Total assets less current liabilities	481,426	462,021
Creditors: amounts falling due after more than one year	(42,092)	(42,418)
Net assets	439,334	419,603
Capital and reserves
Called up share capital	4,605	4,667
Share premium	131,163	131,528
Capital redemption reserve	15,853	15,791
Capital reserves	273,876	255,912
Revenue reserve	13,837	11,705
Total shareholders' funds	439,334	419,603
Net asset value per share: Growth & Income share	100.5p	n/a
Net asset value per share: Growth share	n/a	379.2p
Net asset value per share: Income share	n/a	167.1p

STATEMENT OF CASH FLOWS

For the year ended 31st March 2022

	2022	2021
	£'000	£'000
Net cash outflow from operations before dividends and interest	(4,347)	(3,090)
Dividends received	11,921	9,105
Interest received	2	2
Overseas tax recovered	2,073	883
Net cash inflow from operating activities	9,649	6,900
Purchases of investments	(229,228)	(184,765)
Sales of investments	234,721	192,149
Settlement of future contracts	(874)	(2,390)
Settlement of foreign currency contracts	(338)	(1,109)
Net cash inflow from investing activities	4,281	3,885
Dividends paid	(9,652)	(9,923)
Repayment of bank loans	-	(13,439)
Interest paid	(1,156)	(1,275)
Repurchase and cancellation of the Company's own shares	(4,632)	(8,809)
Project costs in relation to restructure	(365)	-
Net cash outflow from financing activities	(15,805)	(33,446)
Decrease in cash and cash equivalents	(1,875)	(22,661)
Cash and cash equivalents at the start of the year	31,032	54,632
Exchange movements	528	(939)
Cash and cash equivalents at the end of the year	29,685	31,032
Decrease in cash and cash equivalents	(1,875)	(22,661)
Cash and cash equivalents consist of:
Cash and short term deposits	5,402	10,520
JPMorgan Euro Liquidity Fund	24,283	20,512
Total	29,685	31,032

Reconciliation of net debt

	As at			Other	As at
	31st March		Exchange	non-cash	31st March
	2021	Cash flows	movements	changes	2022
	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents
Cash	10,520	(5,145)	27	-	5,402
Cash equivalents	20,512	3,270	501	-	24,283
	31,032	(1,875)	528	-	29,685
Borrowings
Debt due after one year	(42,418)	-	333	(7)	(42,092)
Total	(11,386)	(1,875)	861	(7)	(12,407)

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31st March 2022

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 April 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 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 30th June 2023, 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.

2.  Dividends

(a)  Dividends paid and declared

	2022	2021
	£'000	£'000
Dividends paid
Unclaimed Growth dividends refunded to the Company	(303)	-
Growth second interim dividend of nil (2021: 3.20p) per share	-	2,348
Growth first interim dividend of 2.50p (2021: 1.25p) per share	1,801	928
Income fourth quarterly dividend of nil (2020: 2.50p) per share	-	2,211
Income first quarterly dividend of 1.40p (2021: 1.40p) per share	1,195	1,249
Income second quarterly dividend of 1.40p (2021: 1.40p) per share	1,201	1,249
Income third quarterly dividend of 1.40p (2021: 1.40p) per share	1,199	1,249
Total dividends paid in the year	5,093	9,234
Dividends declared
Growth second interim dividend of nil (2021: 3.20p) per share	-	2,348
Income fourth interim dividend of nil (2021: 2.50p) per share	-	2,211
Growth & Income first interim dividend of 1.10p per share	4,811	-
Total dividends declared1	4,811	4,559

¹   In accordance with the accounting policy of the Company, these dividends will be reflected in the financial statements of the following year.

All dividends paid and declared in the 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 £11,784,000 (2021: £10,073,000).

	2022	2021
	£'000	£'000
Growth first interim dividend of 2.50p (2021: 1.25p) per share	1,801	928
Growth second interim dividend of nil (2021: 3.20p) per share	-	2,348
Income first quarterly dividend of 1.40p (2021: 1.40p) per share	1,195	1,249
Income second quarterly dividend of 1.40p (2021: 1.40p) per share	1,201	1,249
Income third quarterly dividend of 1.40p (2021: 1.40p) per share	1,199	1,249
Income fourth interim dividend of nil (2021: 2.50p) per share	-	2,211
Growth & Income first interim dividend of 1.10p per share	4,811	-
Total	10,207	9,234

3.     Return per share¹

		Growth	Income
		Share	Share
	2022	2021	2021
Return per share is based on the following:
Revenue return (£'000)	11,784	5,672	4,401
Capital return (£'000)	22,278	74,816	37,227
Total return (£'000)	34,062	80,488	41,628
Weighted average number of shares in issue	438,868,316	74,068,960	88,892,127
Revenue return per share	2.69p	7.66p	4.95p
Capital loss per share	5.08p	101.01p	41.88p
Total return per share	7.77p	108.67p	46.83p

¹   A transitional basis has been adopted for the calculation of the Return per share for the year ended 31st March 2022.

4.  Net asset value per share

		Growth	Income
		Share	Share
	2022	2021	2021
 Ordinary shareholders' funds (£'000)	439,334	275,858	143,745
Number of shares in issue	437,286,529	72,741,224	86,020,045
Net asset value per share	100.5p	379.2p	167.1p

2021 Financial Information

The figures and financial information for 2021 are extracted from the published Annual Report and Financial Statements for the year ended 31st March 2021 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.

2022 Financial Information

The figures and financial information for 2022 are extracted from the Annual Report and Financial Statements for the year ended 31st March 2022 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 on or around 10th June 2022 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

8th June 2022 

 

END

 

 

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