TIDMJEDT
RNS Number : 8923O
JPMorgan European Discovery Trust
15 June 2022
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN DISCOVERY TRUST PLC
FINAL RESULTS FOR THE YEARED
31st MARCH 2022
Legal Entity Identifier: 54930049CEWDI46Y3U28
Information disclosed in accordance with DTR 4.1.3
CHAIRMAN'S STATEMENT
I am pleased to present the Company's results for the year ended
31st March 2022.
Investment Performance
It has been a challenging year as the world slowly came out of
the pandemic only to be faced with increasingly embedded inflation
and rising interest rates. The Company's total return on net
assets, over the year to 31st March 2022, was 0.3%, while the
Company's benchmark index, the MSCI Europe ex UK Small Cap Index,
returned 3.8% over the same period. The total return to
shareholders was -1.3%, reflecting a slight widening of the
discount at which the Company's shares trade from 12.9% to 14.5%
over the year. The Company's longer-term performance remains
strong, with the 5 year and 10 year total return on net assets
rising 45.3% and 253.2%, respectively, whilst the benchmark total
return rose 51.7% and 219.5%. The basis for this under performance
up to March 2022, is explained in the Investment Managers' report
on pages 8 to 14 of the Annual Report, which provides a detailed
commentary on the portfolio positioning and the outlook for
investing.
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 125m revolving credit facility, of which EUR 90m
was drawn down at the year end. During the year gearing varied
between 8.7 geared and 1.4 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.
Net revenue return was higher for the year at GBP11.1m (2020:
GBP7.1m). An interim dividend of 1.2 pence per share was paid on
28th January 2022, 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 5.5 pence per share will be
paid on 29th July 2022 to shareholders on the register as at the
close of business on 24th June 2022 (ex-dividend date 23rd June
2022).
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 12.9% as
at the end of March 2021 to 14.5% as at 31st March 2022, with an
average discount over the 12 months of 13.1%. As at 10th June 2022,
the discount was 16.9%. The Board continues to monitor the level of
the discount carefully and seeks to use its ability to repurchase
shares to minimise the short-term volatility and the absolute level
of the discount when appropriate. During the financial year, the
Company repurchased 992,954 shares. Since the year end, it has
repurchased additional shares of 995,000, for GBP4.2m.
Manager Evaluation
During the year, the Management Engagement Committee undertook a
formal review of the Manager, 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. 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. While the
investment managers have always considered environmental, social
and governance ('ESG') issues in their investment process, it is
now rigorously integrated into their investment processes so that
ESG issues 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 21 to 23 of the Annual Report with stock specific examples
included in the Investment Managers' Report on pages 8 to 14 of the
Annual Report.
The Board
As highlighted in the half year report 2021, the Board
progressed its succession plans during the year resulting in the
decision to appoint Sarah Watters as an independent non-executive
director with effect from 1st July 2021. As planned and announced
previously, Stephen White retired from the Board on 31st October
2021, having served as a Director for more than nine years.
Further, as announced on 8th September 2021, due to external time
commitments, Tanya Cordrey also stepped down from the Board, on
26th November 2021.
During the year, the Board undertook a search exercise to
identify a new Director. Following successful conclusion of the
search exercise and as announced on 4th February 2022, Suzy Ross
joined the Board with effect from 1st March 2022. Suzy is currently
working as a member of the leadership team of Google Cloud where
she is Director - Strategic Customer Partnerships. Her recent roles
include Senior Retail Adviser to Accenture, Acting Chief Customer
Officer at Jaeger and Global Chief Marketing Officer at
SpaceNK.
In line with the Board's succession planning, the intention had
been for Ashok Gupta to stand down at this year's AGM, having
served on the Board for nine years. However, in light of some of
the recent changes in the Board composition, the Board agreed that
it would be appropriate for the Company to continue to benefit from
Ashok's extensive industry experience for a further few months.
Therefore, subject to re-appointment by the shareholders at the
upcoming AGM, he will continue as a director till the later part of
the year.
Annual General Meeting
The Company's Annual General Meeting will be held on Monday,
18th July 2022 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 meeting will be followed 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 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. 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. Shareholders who
are unable to attend the AGM are encouraged to use their proxy
votes.
Outlook
Predicting the outlook in these uncertain times remains very
challenging. The last few months have been difficult for global
markets, with considerable uncertainty surrounding the implications
of the re-emergence of inflation and the impact of Russia's
invasion of Ukraine. However, the Board remains confident in the
robust investment process and careful approach to risk management
followed by the Investment Managers and believes that investing in
European smaller companies will continue to deliver attractive
long-term returns for shareholders.
Marc van Gelder
Chairman
INVESTMENT MANAGERS' REPORT
Investment Scope and Process
The objective of the Company is to achieve capital growth from a
portfolio of quoted smaller European companies, excluding the
United Kingdom. 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 2022, the benchmark index consisted of
778 companies with a free float adjusted market capitalisation
range of GBP 45m to GBP 7.1 billion. This universe of potential
investments is screened using a proprietary multi-factor model; we
then apply fundamental analysis to the results of the screening
process.
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 or
the market capitalisation has significantly outgrown the benchmark
index. The Board has set a liquidity range of between 20 per cent
cash and 20 per cent gearing within which the Managers may operate.
The policy is not to hedge the currency exposure of the portfolio's
assets.
Market Review
The twelve-month period to 31st March 2022 saw a continued
economic recovery from the global Covid-19 pandemic as the rapid
response by governments and central banks succeeded in mitigating
the detrimental impact to the economy.
However, the speed of the recovery resulted in extreme supply
chain stress. This led to a substantial acceleration in inflation,
which reached levels not seen in the past 30 years. This trend
accelerated further following the Russian invasion of Ukraine in
early 2022. Energy and other commodity prices increased rapidly due
to the sanctions imposed on Russia and the disruption to Ukrainian
exports. In March 2022, inflation reached 8.5% in the US and 7.4%
in the Euro area. In the first quarter of 2022, central banks
responded by turning more hawkish, resulting in an abrupt repricing
of growth stocks. At the same time, continued supply chain
disruptions and high inflation have had significantly detrimental
impacts on measures of business optimism and consumer
sentiment.
As a result of higher interest rates and increased economic
uncertainty, the MSCI Europe ex UK Small Cap Index fell 7.9% in the
first 3 months of 2022, although it was still up 3.8% over the
twelve-month period to 31st March 2022.
Portfolio Performance
Due to our overweight in growth stocks, over the financial year
the net asset value of the Trust rose by 0.3 per cent,
underperforming its benchmark by 3.5 per cent.
Top performers over the period include Italian luxury yacht
manufacturer Sanlorenzo, which continued to see very strong demand;
D'Ieteren, the Belgian holding company, which announced a minority
stake deal with private equity funds for its main asset, Belron, at
a much higher valuation than expected by the market; Alten, the
French R&D consulting company, which is benefitting from the
gradual recovery in the automotive and aerospace markets; Ipsos,
the French market research company, which has seen increased demand
for research and insights as companies and public entities need to
adapt to a post-Covid world; and Reply, the Italian IT consulting
company, as demand for digital solutions including cybersecurity
and cloud infrastructure has only been accelerated by the Covid
crisis.
Stock detractors from performance included the Swiss software
reseller, SoftwareOne, as their margins went under pressure
following accelerated recruitment to build its services team;
Aramis Group, the French used cars online platform, which suffered
from shortages in the supply of cars and increased competition; and
Tecan, the Swiss medical lab automation company, as investors took
profit after a period where the company benefitted from strong
Covid tailwinds. Our underweight to Rheinmetall, the German defence
company, also detracted after Germany announced a substantial
increase in their military budget.
PERFORMANCE ATTRIBUTION
YEARED 31ST MARCH 2022
% %
----------------------------------------- ----- -----
Contributions to total returns
----------------------------------------- ----- -----
Benchmark return 3.8
----------------------------------------- ----- -----
Asset allocation -4.3
----------------------------------------- ----- -----
Stock selection 2.3
----------------------------------------- ----- -----
Gearing/cash effect -0.6
----------------------------------------- ----- -----
Currency effect -0.1
----------------------------------------- ----- -----
Investment Managers' added contribution -2.7
----------------------------------------- ----- -----
Portfolio return 1.1
----------------------------------------- ----- -----
Management fee/other expenses -0.8
----------------------------------------- ----- -----
Other effects -0.8
----------------------------------------- ----- -----
Return on net assets(A) 0.3
----------------------------------------- ----- -----
Return to shareholders(A) -1.3
----------------------------------------- ----- -----
Source: Datastream/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 main sector overweight during the
period. In particular we increased our exposure to capital goods as
we believe investments into energy efficiency and electrification
have structurally accelerated. We therefore own companies that are
enabling this transition such as the high voltage cable
manufacturers Nexans, NKT and Prysmian. We also added to companies
that are enabling buildings to be more energy efficient such as
Belimo, which manufactures devices for HVAC in non-residential
buildings; Signify, the Dutch manufacturer of energy-efficient
lighting solutions; and Aalberts, the Dutch manufacturer of piping
systems for buildings.
We reduced our overweight to Consumer Discretionary to a slight
underweight over the period. We sold our positions in leisure
companies Dometic, the Swedish manufacturer of accessories for
recreational vehicles; Trigano, the French manufacturer of
motorhomes and caravans; and Technogym, the Italian manufacturer of
high-end fitness equipment. These companies have benefitted from
exceptionally high demand over the last two years, which could
become a headwind going forward as consumer confidence weakens.
We significantly reduced our underweight to Financials by
increasing our exposure to the Insurance sector. The companies we
have invested in are attractively valued, positively exposed to
rising interest rates and have defensive business models.
During the period France grew to be the Trust's largest country
overweight. We added Rexel, a distributor of electrical products,
which benefits from increased investment in building renovation and
energy efficiency.
Belgium became the fourth largest country overweight through the
addition of reopening beneficiaries such as Kinepolis, which
operates cinemas in Europe and North America. We also added to high
quality logistics real estate such as Warehouses de Pauw and
VGP.
Germany became the largest underweight. We had a position in
Hella, a German manufacturer of electronics for automotive, which
was taken over by Faurecia. We also reduced our position in Eckert
& Ziegler, the manufacturer of generators to produce nuclear
isotopes for medical use, as we felt the stock's stretched
valuation could become a headwind to future performance.
Sweden became the fourth largest underweight, having been the
third largest overweigh at the start of the period, as we took
profits in high-growth companies, such as IVF equipment supplier
Vitrolife and accounting software developer Lime. We also sold
Dometic, the manufacturer of accessories for recreational vehicles,
which benefitted from exceptional demand during the Covid-related
travel bans.
By the end of the financial year, we were 0.04 per cent
geared.
Outlook
We started the year believing like many market participants and
policymakers that inflation would prove to be transient. The sad
events in the Ukraine and more recently the lockdowns in China make
it highly unlikely that rises in prices will be temporary. The
positive aspect of equities unlike bonds is that there are
companies and sectors that can still perform in inflationary
environments and those are the companies which we have been
increasingly investing in. Companies with high barriers to entry
should be able to pass on inflation. Certain areas of insurance are
positively correlated with rising bond yields. Prime property
companies in areas where there is limited capacity such as
logistics should also have pricing power. So, in the short term, we
have adapted the portfolio to be better insulated from
inflation.
It is difficult to predict when the current inflationary spiral
will end. Historically, European smaller companies have been one of
the best asset classes in the world, and we do not see the
fundamentals that brought this about, changing. Innovation has
powered smaller companies and will continue to do so long into the
future. As always it is our job to find these opportunities.
Francesco Conte
Edward Greaves
Investment Managers
Full Investment Management Report can be found in the Annual
Report on pages 8 to 14.
PRINCIPAL 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. 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 riskier and more 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 24 of the Annual Report. 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 41 of the
Annual Report.
-- 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 pages 38 and
39.
-- 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).
There is an ongoing risk that new Covid strains may not respond to
current vaccines.
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 even in 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.
EMERGING RISKS
-- Geopolitical:
There is an increasing risk to market stability and investment
opportunities from geo-political 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. This with inflation,
recession, potential stagflation and the consequences of the war in
Ukraine, could lead 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 36 of the Annual Report. The management fee payable
to the Manager for the year was GBP7,867,000 (2021: GBP6,092,000)
of which GBPnil (2021: GBPnil) was outstanding at the year end.
During the year GBPnil (2021: GBPnil), including VAT, was
payable to JPMAM for the marketing and administration of savings
scheme products, of which GBPnil (2021: GBPnil) was outstanding at
the year end.
Included in administration expenses in note 6 on page 68 of the
Annual Report are safe custody fees payable to JPMorgan Chase
amounting to GBP122,000 (2021: GBP98,000) excluding VAT of which
GBP20,000 (2021: GBP37,000) 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 GBPnil (2021: GBPnil) of which GBPnil (2021:
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
GBP74.9 million (2021: GBP1.1 million). Interest amounting to
GBPnil were payable (2021: GBPnil) during the year of which GBPnil
(2021: GBPnil) was outstanding at the year end.
Securities lending income amounting to GBP136,000 (2021:
GBP469,000) were receivable by the Company during the year. JPMAM
commissions in respect of such transactions amounted to GBP15,000
(2021: GBP52,000).
Handling charges on dealing transactions amounting to GBP33,000
(2021: GBP47,000) were payable to JPMorgan Chase during the year of
which GBP6,000 (2021: GBP15,000) was outstanding at the year
end.
At the year end, a bank balance of GBP430,000 (2021: GBP268,000)
was held with JPMorgan Chase Bank N.A. A net amount of interest of
GBP2,000 (2021: GBP2,000) was receivable by the Company during the
year from JPMorgan Chase of which GBP1,000 (2021: GBPnil) was
outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be
found on page 48 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 [--]
confirm that, to the best of their knowledge:
-- the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law),
give a true and fair view of the assets, liabilities, financial
position and return or loss of the Company; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
The Board confirms that it is satisfied that the Annual Report
and Financial Statements taken as a whole are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the strategy and business model of the
Company.
For and on behalf of the Board
Marc Van Gelder
Chairman
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31ST MARCH 2022
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- -------- -------- --------
Gains/(losses) on investments
held at
fair value through
profit or loss - (1,046) (1,046) - 334,333 334,333
Foreign exchange (losses)/gains
on liquidity fund - (860) (860) - (402) (402)
Net foreign currency
(losses)/gains - (253) (253) - 3,689 3,689
Income from investments 16,360 - 16,360 9,154 - 9,154
Interest receivable
and similar income 138 - 138 471 - 471
--------------------------------- -------- -------- -------- -------- -------- --------
Gross return/(loss) 16,498 (2,159) 14,339 9,625 337,620 347,245
Management fee (2,360) (5,507) (7,867) (1,828) (4,264) (6,092)
Other administrative
expenses (719) - (719) (675) - (675)
--------------------------------- -------- -------- -------- -------- -------- --------
Net return/(loss) before
finance costs
and taxation 13,419 (7,666) 5,753 7,122 333,356 340,478
Finance costs (271) (633) (904) (288) (672) (960)
--------------------------------- -------- -------- -------- -------- -------- --------
Net return/(loss) before
taxation 13,148 (8,299) 4,849 6,834 332,684 339,518
Taxation (1,994) - (1,994) 217 - 217
--------------------------------- -------- -------- -------- -------- -------- --------
Net return/(loss) after
taxation 11,154 (8,299) 2,855 7,051 332,684 339,735
--------------------------------- -------- -------- -------- -------- -------- --------
Return/(loss) per share
(note 2) 7.00p (5.21)p 1.79p 4.42p 208.63p 213.05p
STATEMENT OF CHANGES IN EQUITY
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 2020 7,974 1,312 7,662 487,512 12,793 517,253
Net return on ordinary
activities - - - 332,684 7,051 339,735
Dividends paid in
the year (note 3) - - - - (10,684) (10,684)
---------------------------- -------- -------- ----------- ------------ ----------- ---------
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 (loss)/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
---------------------------- -------- -------- ----------- ------------ ----------- ---------
(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 was split
between revenue reserve and capital reserve as the revenue reserve
opening balance was entirely exhausted.
STATEMENT OF FINANCIAL POSITION
AT 31ST MARCH 2022
2022 2021
GBP'000 GBP'000
---------------------------------------- --------- ---------
Fixed assets
Investments held at fair value through
profit or loss 834,018 921,200
---------------------------------------- --------- ---------
Current assets
Derivative financial instruments 2 -
Debtors 2,266 1,160
Cash and cash equivalent 75,318 1,407
---------------------------------------- --------- ---------
77,586 2,567
Current liabilities
Creditors: amounts falling due within
one year (77,885) (796)
---------------------------------------- --------- ---------
Net current assets (299) 1,771
---------------------------------------- --------- ---------
Total assets less current liabilities 833,719 922,971
---------------------------------------- --------- ---------
Creditors: amounts falling due after
more than one year - (76,667)
---------------------------------------- --------- ---------
Net assets 833,719 846,304
---------------------------------------- --------- ---------
Capital and reserves
Called up share capital 7,924 7,974
Share premium 1,312 1,312
Capital redemption reserve 7,712 7,662
Capital reserves 805,617 820,196
Revenue reserve 11,154 9,160
---------------------------------------- --------- ---------
Total shareholders' funds 833,719 846,304
---------------------------------------- --------- ---------
Net asset value per share (note
4) 526.1p 530.7p
STATEMENT OF CASH FLOWS
FOR THE YEARED 31ST MARCH 2022
2022 2021
GBP'000 GBP'000
------------------------------------------ --------- ----------
Net cash outflow from operations
before dividends and interest (10,675) (5,524)
Dividends received 13,119 7,492
Interest received 1 2
Overseas tax recovered 215 1,089
Interest paid (919) (1,001)
------------------------------------------ --------- ----------
Net cash inflow from operating
activities 1,741 2,058
------------------------------------------ --------- ----------
Purchases of investments and derivatives (620,647) (810,999)
Sales of investments and derivatives 707,608 746,221
Settlement of forward currency contracts 118 120
------------------------------------------ --------- ----------
Net cash inflow/(outflow) from investing
activities 87,079 (64,658)
------------------------------------------ --------- ----------
Dividends paid (10,680) (10,684)
Repurchase and cancellation of the
Company's own shares (4,602) -
Repayment of bank loans - (30,510)
------------------------------------------ --------- ----------
Net cash outflow from financing
activities (15,282) (41,194)
------------------------------------------ --------- ----------
Increase/(decrease) in cash and
cash equivalents 73,538 (103,794)
------------------------------------------ --------- ----------
Cash and cash equivalents at start
of year 1,407 106,257
Exchange movements 373 (1,056)
Cash and cash equivalents at end
of year 75,318 1,407
------------------------------------------ --------- ----------
Increase/(decrease) in cash and
cash equivalents 73,538 (103,794)
------------------------------------------ --------- ----------
Cash and cash equivalents consist
of:
Cash and short term deposits 430 268
Cash held in JPMorgan Euro Liquidity
Fund 74,888 1,139
------------------------------------------ --------- ----------
Total 75,318 1,407
------------------------------------------ --------- ----------
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 April 2021. In preparing
these financial statements the directors have considered the impact
of climate change risk as a principal risk as set out on page 30
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 as at 31 March 2022 and therefore
reflect market participants view of climate change risk.
The Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. The Directors have considered any potential impact of
Covid-19 pandemic on the going concern and viability of the
company. They have considered the potential impact of the Covid-19
and the mitigation measures which key service providers including
Managers, have in place to maintain operational resilience
particularly in light of Covid-19. The Directors have reviewed
income and expense projections to 30th June 2023 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
2022 2021
GBP'000 GBP'000
--------------------------------------------------- ------------ -------------
Revenue return 11,154 7,051
Capital (loss)/return (8,299) 332,684
--------------------------------------------------- ------------ -------------
Total return/(loss) 2,855 339,735
--------------------------------------------------- ------------ -------------
Weighted average number of shares in issue during
the year 159,257,259 159,462,885
Revenue return per share 7.00p 4.42p
Capital (loss)/return per share (5.21)p 208.63p
--------------------------------------------------- ------------ -------------
Total return/(loss) per share 1.79p 213.05p
--------------------------------------------------- ------------ -------------
3. Dividends
(a) Dividends paid and proposed
2022 2021
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Dividends paid
2020 final dividend of 5.5p (2019: 5.5p) per share 8,770 8,770
2021 interim dividend of 1.2p (2020: 1.2p) per share 1,910 1,914
------------------------------------------------------ -------- --------
Total dividends paid in the year 10,680 10,684
------------------------------------------------------ -------- --------
Dividend proposed
2022 final dividend of 5.5p (2021: 5.5p) per share 8,716 8,770
------------------------------------------------------ -------- --------
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 2022 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 2023.
(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 GBP9,160,000 (2021: GBP7,051,000). The revenue reserve
after payment of the final dividend will amount to GBP2,438,000
(2021: GBP390,000).
2022 2021
GBP'000 GBP'000
------------------------------------------------- -------- --------
Interim dividend of 1.2p (2021: 1.2p) per share 1,910 1,914
Final dividend of 5.5p (2021: 5.5p) per share 8,776 8,770
------------------------------------------------- -------- --------
1,910 10,684
------------------------------------------------- -------- --------
4. Net asset value per share
2022 2021
--------------------------- ------------ ------------
Net assets (GBP'000) 833,719 846,304
Number of shares in issue 158,469,931 159,462,885
--------------------------- ------------ ------------
Net asset value per share 526.1p 530.7p
--------------------------- ------------ ------------
JPMORGAN FUNDS LIMITED
15th June 2022
For further information:
Priyanka Vijay Anand
JPMorgan Funds Limited
ENDS
A copy of the 2022 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
The 2022 Annual Report will also be available on the Company's
website at www.jpmeuropeandiscovery.co.uk where up-to-date
information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
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(or any other website) is incorporated into, or forms part of, this
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