12 Jun 2017 16:59
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED31ST MARCH 2017
CHAIRMAN'S STATEMENT
Performance
The improvement in European markets and corporate earnings growth was reflected in the Company's positive performance for the year to 31st March 2017. The Company experienced increases in its Growth and Income share prices of 23.6% and 18.5% respectively (see pages 10 and 20 of the Company's Annual Report and Accounts). With net dividends re-invested, the total returns to the Company's Growth and Income shareholders were 27.1% and 23.2% respectively (see pages 2 and 3 of the Company's Annual Report and Accounts).
The return to shareholders on the Company's Growth shares of 27.1% was 0.5% more than the return on net assets of 26.6%, reflecting a slight narrowing of the discount on the Growth shares. In contrast, the difference between the return to shareholders of 23.2% and return on net assets of 28.2% on the Income shares was -5.0%, reflecting a widening discount on the Income shares. This can be explained largely by the general trend of increasing discounts in the investment trust sector and investors issues over the political uncertainty in Europe. Although, in recent months the political concerns in Europe have subsided to some degree following the victory of Emmanuel Macron in the French presidential election and the positive regional state elections for Chancellor Merkel in Germany.
In their report on pages 7 and 9 of the Company's Annual Report and Accounts, the Investment Managers comment on some of the factors underlying the performance of the two portfolios including performance against the benchmark (the MSCI Europe ex UK Index in sterling) over the Company's financial year, as well as commenting on the economic and market background.
Revenue and Dividends
On the Growth shares the Board's aim is that annual dividend payments continue to be broadly in line with revenues received on the underlying portfolio.
Revenue per share on the Growth portfolio for the year to 31st March 2017 (calculated by reference to the average number of shares in issue over the period) amounted to 6.75 pence per share (2016: 5.37 pence per share). On the year-end share price of 285.0p (2016: 230.5p), this represents a yield of 2.4% (2016: 2.5%).
As regards the Income shares, the Board's aim is to provide a regular stream of dividend income on a quarterly basis, subject to the availability of distributable reserves.
Revenue per share on the Income portfolio for the year (again, calculated by reference to the average number of shares in issue over the period) amounted to 5.94 pence per share (2016: 4.67 pence per share). On the year-end share price of 150.5p (2016: 127.0p) this represents an increased dividend yield of 3.9% (2016: 3.7%).
The timing of the dividend payments for both share classes are expected to be maintained with Growth shares dividends paid bi-annually in April and October and Income shares paid quarterly in April, July, October and January.
Gearing
There has been no change in the Investment Manager's permitted gearing range, as previously set by the Board, of 10% net cash to 20% geared. At 31st March 2017 the Growth portfolio was 5.9% geared and the Income portfolio was 8.2% geared.
Conversions
The Company's annual share conversion on the 15th March 2017 resulted in a very small net decrease in the Growth issued share capital of 39,106 shares and a small increase in the Income share issued share capital of 70,451 shares.
Share Repurchase
At the forthcoming Annual General Meeting on the 17th July 2017 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 and demand for its shares, subject to the requirements and conditions as detailed in the Notice to the Annual General Meeting on page 86 of the Company's Annual Report and Accounts. 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 repurchase powers. It 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 minimise thereby the volatility and absolute level of the discount to net asset value at which the Company's shares trade. The Board do not wish to see the discounts widen beyond 10% on an ongoing basis. The precise level and timing of repurchases pursuant to this policy depend upon prevailing market conditions. Over the year under review the discount levels have averaged 10.7% for the Growth shares and 10.7% for Income Shares (at fair value). During the year, the Board was active in implementing its buyback policy and purchased a total of 574,212 Growth shares and 185,748 Income shares. Since the year end 30,116 Growth shares have been repurchased. On the 9th June 2017 the discount on the Growth and Income Shares was 11.0% and 7.3% respectively (at fair value).
Board of Directors
Throughout the period the Board consisted of five Directors with currently no plans to change the composition of the Board.
During the year, the Board carried out its customary evaluation of the 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 offer themselves for re-election.
There has been no increase in the Directors remuneration since the increase effective on 1st April 2016. Detail of this increase was included in my Chairman's Statement for the Company's Annual Report and Accounts to 31st March 2016.
Investment Managers
As referred to my Chairman's Statement for the Company's Half year Report and Accounts to 30th September 2016, Thomas Buckingham, a Portfolio Manager in the J.P. Morgan Asset Management European Equity Team, is now identified as an Investment Manager in the Company's Report and Accounts. This is in order to reflect the importance of the role that Thomas undertakes and illustrate the depth of support provided to the Company by the Manager.
Adoption of New Articles of Association
The Company proposes to adopt new articles of association (the 'New Articles'). The principal changes proposed to be introduced in the New Articles and their effects are set out below.
Your Board is recommending an amendment to the Company's current Articles of Association (the 'Existing Articles') in order to give the Board the power to transfer revenue reserves from the Growth pool (JETG) to the Income pool (JETI) in exchange for an equivalent amount of capital reserves transferring from JETI to JETG (the Proposals). The brought forward revenue reserve that accrues in JETG's balance sheet is not required in order to maintain JETG's dividend since JETG's investment objective is to provide capital appreciation and the level of dividend in any year simply reflects the net income earned in that year. This results in fluctuating levels of dividend pay-outs to shareholders, which is what investors expect. Therefore, the revenue reserve in JETG does little to add value to shareholders of JETG since it is never distributed. Conversely, JETI's approach is to pay-out a constant, ideally growing, dividend. Thus, revenue reserves are significantly more useful to JETI as they can be drawn from in order to maintain dividend levels in years when dividend receipts fall. If shareholders approve the special resolutions required to give effect to the Proposals, as set out below, it would be the Board's intention to transfer retained revenue reserves of £2.925 million (at 31st March 2017 see page 57 of the Company's Annual Report and Accounts) standing to the account of JETG (which have been accumulated over preceding years) to JETI and to make a corresponding transfer of capital reserves standing to the account of JETI to JETG. Further, it is the Board's intention on an ongoing basis to effect similar transfers between JETI and JETG for the reasons set out above
The Proposals require approval by the Company's shareholders by way of a special resolution in a general meeting of the Company, which will be subject to the passing of special resolutions at separate class meetings of both the JETG and JETI shareholders. The special resolution required to be passed in a general meeting of the Company will be put to shareholders at the Company's forthcoming Annual General Meeting (AGM) (see below for details of the venue, date and time of the AGM). The separate class meetings of the JETG and JETI shareholders to approve their respective special resolutions will be at the same venue and date as the AGM and follow immediately after the conclusion of the AGM. Notices of the AGM and the separate class meetings are included in this Annual Report and Accounts.
It is proposed that whilst undertaking the above exercise, the opportunity be taken to amend the Existing Articles with some updates as detailed on page 40 and in the Appendix on page 93 of the Company's Annual Report and Accounts.
Annual General Meeting
The Company's eighty eighth AGM will take place at J.P. Morgan's offices at 60 Victoria Embankment, London EC4Y 0JP on Monday, 17th July 2017 at 2.30 p.m. In addition to the formal proceedings there will, as usual, be a presentation by the Investment Managers, followed by tea when shareholders, who are always most welcome, can meet the Directors and the Investment Managers for more informal discussions.
It would be helpful if shareholders seeking answers to detailed questions put them in writing beforehand, addressed to the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP. Alternatively, questions may be submitted via the Company's website (www.jpmeuropean.co.uk).
Outlook
Our Investment Managers will continue to pursue their current strategy and use their stock selection skills and management of gearing to best manage the portfolio. While remaining aware of the ever-present uncertainties, your Board is confident that the portfolio is well positioned to negotiate the current variable market conditions.
For and on behalf of the Board
Andrew Adcock
Chairman 12th June 2017
INVESTMENT MANAGERS' REPORT
The year under review was dominated by political events, which rather overshadowed the steady underlying improvement in the European economy as it continues its recovery from the 2008 Financial Crisis and its aftermath. The most important political event from the perspective of the fund was the UK's decision to vote in a referendum to leave the European Union. In the short term this was the catalyst for a dramatic fall in the value of Sterling against the Euro and other European currencies, which meant that the return for shareholders in the fund was boosted by just under 10%. In the medium term it will mean a recasting of the UK's trade relationship with the EU, the details of which will have to be thrashed out over negotiations which will start after the forthcoming general election. Our base expectation is that an agreement will be arrived at for goods, but not for services. We also expect that, as is normally the case with EU negotiations, the path to an agreement will be volatile, with plenty of flashpoints along the way. Nonetheless we also expect that the impact on European financial markets and on the Euro will be less than on UK financial markets and on Sterling, not least because UK exports to the EU account for around 14% of UK GDP, whereas EU exports to the UK account for around 4% of EU GDP.
At an underlying economic level the year in review was an encouraging one for Europe. The completion of the banking union in 2014 was the catalyst for a recovery in credit, which is a good indicator of underlying health in the economy. Real GDP growth is recovering, although the rate of growth is pedestrian. Scares about deflation became particularly acute when a fall in the oil price in early 2016 took headline inflation into negative territory, and a large proportion of European government bonds saw yields fall into negative territory, propelled there both by fears of deflation and also by large-scale bond buying by the European Central Bank1. The bounce in the oil price in the second and third quarter dispelled many of those fears, and we saw a fairly dramatic change in the behaviour of bond markets in the second half of calendar 2016 as yield curves steepened on both sides of the Atlantic. We pay a lot of attention to yield curves as an indicator of economic health, because they have a good track record in signalling turning points. The theory is that lenders should expect to pay an increasing term premium as they lend for longer periods, given the uncertainty about future prospects. If this term premium is negative (in other words if the yield curve inverts), it is often a sign that lenders see trouble ahead. Steepening yield curves are therefore a sign that investors are gaining confidence about the future, and in the year under review this sparked a reflation trade, in which investors started to move back towards the more cyclically-sensitive areas of the market, and to move away from interest-rate sensitive sectors.
This meant a dramatic difference in sector performance, with Materials, for instance, which had been under huge pressure when commodities prices were falling in 2015, transformed to become the highest-performing sector in Europe, whereas Real Estate, which had prospered in the era of falling or very low interest rates, lagged the market and saw prices barely change over the year. This theme of rotation was very consistent across sectors, with the other four under-performing areas also being interest-rate sensitives - Telecoms, Healthcare, Consumer Staples, and Utilities. Out-performing sectors apart from Materials were Energy, Consumer Discretionary (including Autos), Financials, Industrials, and Information Technology.
To our mind the logic behind this recovery in confidence was the inverse of what we had seen in previous years. European corporate earnings have been under huge pressure since the crisis - indeed 2017 is forecast to be the first year to see a significant rise in earnings since 2010. This serial disappointment, though, was not as much to do with domestic European issues as it was to do with more global problems. Initially, bank earnings had come under huge pressure as banks attempted to clean up their loan books ahead of banking union. In 2015 and 2016, though, downward pressure on earnings had come from Materials and Energy, and there was a further negative impact that accrued from these price falls on the economies of emerging markets, many of which are commodity-intensive. Pressure on emerging market currencies reduced purchasing power, and in sectors as diverse as Luxury Goods and Food & Beverages we saw consequent pressure on margins. In the second half of 2016 a lot of these factors went into reverse, and this has led to a lot of optimism about 2017 and 2018 earnings - optimism which we would fully endorse.
Conversations with companies indicated that there was sound fundamental backing for this increased confidence in the strength of the cycle, with dramatic increases in earnings expected in the Materials and Energy sectors. We are also seeing the magic of operating leverage working to the benefit of European companies: after years of fighting to contain costs and defend margins we are seeing an increase in revenues flow through to much better profits.
At the tail end of 2016 there was a great deal of nervousness among global investors about the significant elections in Europe in 2017: the Netherlands, France, and Germany were all due to have elections in the year, and populist parties were making a good showing in opinion polls. We always thought, however, that it would be a very tall order for populist parties to break through, and so far in France and the Netherlands our confidence has proven well-founded. We also see the election in Germany as returning a market-friendly outcome in November, and we believe that this reassessment of political risk will reassure foreign investors who have either shunned Europe in recent years or actively removed investments.
GROWTH PERFORMANCE ATTRIBUTION FOR THE YEAR ENDED 31ST MARCH 2017
% | % | |
Contributions to total returns | ||
Benchmark total return | 27.2 | |
Asset allocation | -0.5 | |
Stock selection | 1.5 | |
Gearing/cash | -0.5 | |
Currency | -0.2 | |
Investment manager contribution | 0.3 | |
Portfolio total return | 27.5 | |
Management fee/other expenses | -1.0 | |
Share buyback | 0.1 | |
Other effects | -0.9 | |
Net asset value total return | 26.6 | |
Share price total return | 27.1 |
Source: B-One/JPMAM/AIC/Morningstar.
All figures are on a total return basis. Performance attribution analyses how the Growth portfolio achieved its recorded performance relative to its benchmark.
A glossary of terms and definitions is provided on page 95 of the Company's Annual Report and Accounts.
Valuations do not look like a significant obstacle: earnings multiples look in line with long run averages, with the following wind of rising earnings. Dividend yield looks fairly attractive in outright terms, but compared to bonds or cash appears very tempting, and as with earnings we are expecting growth in dividends both this year and next.
INCOME PERFORMANCE ATTRIBUTION FOR THE YEAR ENDED 31ST MARCH 2017
% | % | |
Contributions to total returns | ||
Benchmark total return | 27.2 | |
Asset allocation | 0.9 | |
Stock selection | 0.5 | |
Gearing/cash | 0.8 | |
Currency | -0.1 | |
Investment manager contribution | 2.1 | |
Portfolio total return | 29.3 | |
Management fee/other expenses | -1.1 | |
Other effects | -1.1 | |
Net asset value total return | 28.2 | |
Share price total return | 23.2 |
Source: B-One/JPMAM/AIC/Morningstar.
All figures are on a total return basis. Performance attribution analyses how the Income portfolio achieved its recorded performance relative to its benchmark.
A glossary of terms and definitions is provided on page 95 of the Company's Annual Report and Accounts.
All in all the picture looks fairly compelling in our view, and we expect that our disciplined approach to investing in both the Growth and the Income share classes will repay investors.
Stephen Macklow-Smith
Alexander Fitzalan Howard
Michael Barakos
Thomas Buckingham
Investment Managers 12th June 2017
PRINCIPAL RISKS
The Directors have carried out a robust assessment of the principal risks facing the Company. With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company These key risks fall broadly under the following categories:
Investment
The Board recognises that performance of the trust's investment portfolio is fundamental to the success of the Company. 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 effecting the business. Further details are disclosed in note 22 on pages 74 to 79 of the Company's Annual Report and Accounts.
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. 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.
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. 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 40 of the Company's Annual Report and Accounts.
Regulatory
The Company operates in an environment with significant regulation including UKLA Listing Rules, The UK Companies Act, the Corporation Taxes Act, Market Abuse Regulation, Disclosure 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.
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. For further details of the Company's action in addressing this risk and its buyback activity and discount, please see the Share Repurchase section of the Chairman's Statement on page 4 of the Company's Annual Report and Accounts.
Strategy
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 and include consideration of whether the Company's objectives and structures are appropriate for the long term interests of shareholders. Please see the Outlook section of the Chairman's Statement on page 4 of the Company's Annual Report and Accounts for further details.
RELATED PARTY TRANSACTIONS
Details of the management contract are set out in the Directors' Report on page 40 of the Company's Annual Report and Accounts. The management fee payable to the Manager for the year was £2,994,000 (2016: £2,684,000), of which £nil (2016: £nil) was outstanding at the year end.
During the year £156,000 (2016: £174,000) was payable to the Manager for the marketing and administration of savings scheme products, of which £16,000 (2016: £nil) was outstanding at the year end.
Included in administration expenses in note 6 on page 63 of the Company's Annual Report and Accounts are safe custody fees amounting to £47,000 (2016: £46,000) payable to JPMorgan Chase of which £9,000 (2016: £8,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. Commission amounting to £35,000 (2016: £62,000) was payable to JPMorgan Securities Limited for the year of which £nil (2016: £nil) was outstanding at the year end.
The Company holds investments in funds managed by JPMAM. At 31st March 2017 these were valued at £14.2 million (2016: £15.0 million) and represented 3.3% (2016: 4.1%) of the Company's investment portfolio. During the year the Company made £nil purchases of such investments (2016: £nil) and sales with a total value of £3.3 million (2016: £nil). Income amounting to £168,000 (2016: £178,000) was receivable from these investments during the year of which £nil (2016: £nil) was outstanding at the year end.
The Company also holds cash in the JPMorgan Euro Liquidity Fund, managed by JPMAM. At the year end this was valued at £20.0 million (2016: £12.3 million). Interest amounting to £66,000 (2016: £13,000) was payable during the year of which £nil (2016: £nil) was outstanding at the year end.
Stock lending income amounting to £101,000 (2016: £146,000) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £18,000 (2016: £26,000).
Handling charges on dealing transactions amounting to £73,000 (2016: £52,000) were payable to JPMorgan Chase during the year of which £12,000 (2016: £6,000) was outstanding at the year end.
At the year end, total cash of £6.0 million (2016: £4.2 million) was held with JPMorgan Chase. A net amount of interest of £2,000 (2016: £1,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2016: £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 63 of the Company's Annual Report and Accounts.
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) 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 accounts are published on the www.jpmeuropean.co.uk 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 accounts since they were initially presented on the website. The accounts 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 pages 36 and 37 of the Company's Annual Report and Accounts 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 accounts 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
Andrew Adcock
Chairman
12th June 2017
GROWTH SHARES
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE YEAR ENDED 31ST MARCH 2017
2017 | 2016 |
| |||||
Revenue | Capital | Total | Revenue | Capital | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Gains/(losses) on investments and derivatives | |||||||
held at fair value through profit or loss | - | 49,029 | 49,029 | - | (5,728) | (5,728) | |
Net foreign currency gains/(losses) | - | 224 | 224 | - | (1,810) | (1,810) | |
Income from investments | 7,626 | - | 7,626 | 6,407 | - | 6,407 | |
Interest receivable and similar income | 52 | - | 52 | 77 | - | 77 | |
Gross return/(loss) | 7,678 | 49,253 | 56,931 | 6,484 | (7,538) | (1,054) | |
Management fee | (538) | (1,255) | (1,793) | (530) | (1,237) | (1,767) | |
Other administrative expenses | (506) | - | (506) | (547) | - | (547) | |
Net return/(loss) on ordinary activities before | |||||||
finance costs and taxation | 6,634 | 47,998 | 54,632 | 5,407 | (8,775) | (3,368) | |
Finance costs | (255) | (595) | (850) | (157) | (366) | (523) | |
Net return/(loss) on ordinary activities before | |||||||
taxation | 6,379 | 47,403 | 53,782 | 5,250 | (9,141) | (3,891) | |
Taxation | (1,137) | - | (1,137) | (689) | - | (689) | |
Net return/(loss) on ordinary activities | |||||||
after taxation | 5,242 | 47,403 | 52,645 | 4,561 | (9,141) | (4,580) | |
Return/(loss) per Growth share | 6.75p | 61.08p | 67.83p | 5.37p | (10.77)p | (5.40)p | |
STATEMENT OF FINANCIAL POSITION (UNAUDITED) AT 31ST MARCH 2017
2017 | 2016 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 263,321 | 224,449 |
Current assets | ||
Derivative financial assets | 56 | 487 |
Debtors | 764 | 863 |
Cash and cash equivalents | 18,765 | 11,038 |
19,585 | 12,388 | |
Current liabilities | ||
Creditors: amounts falling due within one year | (8,279) | (8,082) |
Derivative financial liabilities | (12) | (298) |
Net current assets | 11,294 | 4,008 |
Total assets less current liabilities | 274,615 | 228,457 |
Creditors: amounts falling due after more than one year | (26,014) | (26,292) |
Net assets | 248,601 | 202,165 |
Net asset value per Growth share | 321.9p | 259.7p |
INCOME SHARES
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE YEAR ENDED 31ST MARCH 2017
2017 | 2016 |
| |||||
Revenue | Capital | Total | Revenue | Capital | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Gains/(losses) on investments and derivatives | |||||||
held at fair value through profit or loss | - | 30,765 | 30,765 | - | (3,049) | (3,049) | |
Net foreign currency losses | - | (275) | (275) | - | (609) | (609) | |
Income from investments | 7,207 | - | 7,207 | 4,812 | - | 4,812 | |
Interest receivable and similar income | 51 | - | 51 | 70 | - | 70 | |
Gross return/(loss) | 7,258 | 30,490 | 37,748 | 4,882 | (3,658) | 1,224 | |
Management fee | (480) | (721) | (1,201) | (367) | (550) | (917) | |
Other administrative expenses | (308) | - | (308) | (261) | - | (261) | |
Net return/(loss) on ordinary activities before | |||||||
finance costs and taxation | 6,470 | 29,769 | 36,239 | 4,254 | (4,208) | 46 | |
Finance costs | (201) | (301) | (502) | (102) | (153) | (255) | |
Net return/(loss) on ordinary activities | |||||||
before taxation | 6,269 | 29,468 | 35,737 | 4,152 | (4,361) | (209) | |
Taxation | (696) | - | (696) | (395) | - | (395) | |
Net return/(loss) on ordinary activities | |||||||
after taxation | 5,573 | 29,468 | 35,041 | 3,757 | (4,361) | (604) | |
Return/(loss) per Income share | 5.94p | 31.40p | 37.34p | 4.67p | (5.42)p | (0.75)p | |
STATEMENT OF FINANCIAL POSITION (UNAUDITED) AT 31ST MARCH 2017
2017 | 2016 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 172,493 | 139,182 |
Current assets | ||
Derivative financial assets | 338 | 256 |
Debtors | 1,046 | 1,223 |
Cash and cash equivalents | 7,155 | 5,545 |
8,539 | 7,024 | |
Current liabilities | ||
Creditors: amounts falling due within one year | (5,142) | (4,101) |
Derivative financial liabilities | (6) | (271) |
Net current assets | 3,391 | 2,652 |
Total assets less current liabilities | 175,884 | 141,834 |
Creditors: amounts falling due after more than one year | (16,530) | (13,132) |
Net assets | 159,354 | 128,702 |
Net asset value per Income share | 169.9p | 137.1p |
THE COMPANY
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST MARCH 2017
2017 | 2016 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Gains/(losses) on investments and | ||||||
derivatives held at fair value | ||||||
through profit or loss | - | 79,794 | 79,794 | - | (8,777) | (8,777) |
Net foreign currency losses | - | (51) | (51) | - | (2,419) | (2,419) |
Income from investments | 14,833 | - | 14,833 | 11,219 | - | 11,219 |
Interest receivable and similar income | 103 | - | 103 | 147 | - | 147 |
Gross return/(loss) | 14,936 | 79,743 | 94,679 | 11,366 | (11,196) | 170 |
Management fee | (1,018) | (1,976) | (2,994) | (897) | (1,787) | (2,684) |
Other administrative expenses | (814) | - | (814) | (808) | - | (808) |
Net return/(loss) on ordinary activities | ||||||
before finance costs and taxation | 13,104 | 77,767 | 90,871 | 9,661 | (12,983) | (3,322) |
Finance costs | (456) | (896) | (1,352) | (259) | (519) | (778) |
Net return/(loss) on ordinary activities | ||||||
before taxation | 12,648 | 76,871 | 89,519 | 9,402 | (13,502) | (4,100) |
Taxation | (1,833) | - | (1,833) | (1,084) | - | (1,084) |
Net return/(loss) on ordinary activities | ||||||
after taxation | 10,815 | 76,871 | 87,686 | 8,318 | (13,502) | (5,184) |
Return/(loss) per share: | ||||||
Growth share | 6.75p | 61.08p | 67.83p | 5.37p | (10.77)p | (5.40)p |
Income share | 5.94p | 31.40p | 37.34p | 4.67p | (5.42)p | (0.75)p |
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST MARCH 2017
Called up | Capital | |||||
share | Share | redemption | Capital | Revenue | ||
capital | premium | reserve | Reserves1 | Reserve 1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 31st March 2015 | 6,280 | 63,686 | 13,279 | 257,206 | 4,555 | 345,006 |
Share conversions during the year | (1) | 19,087 | 312 | (19,398) | - | - |
Expense in relation to new shares | - | (12) | - | - | - | (12) |
Net (loss)/return on ordinary activities | - | - | - | (13,502) | 8,318 | (5,184) |
Dividends paid in the year | - | - | - | - | (8,943) | (8,943) |
At 31st March 2016 | 6,279 | 82,761 | 13,591 | 224,306 | 3,930 | 330,867 |
Repurchase and cancellation of the Company's | ||||||
own shares | (34) | - | 34 | (1,724) | - | (1,724) |
Share conversions during the year | - | 1,353 | 18 | (1,371) | - | - |
Adjustment on repurchase of deferred shares | ||||||
issued arising from share conversion | (1,221) | - | 1,221 | - | - | - |
Net return on ordinary activities | - | - | - | 76,871 | 10,815 | 87,686 |
Dividends paid in the year | - | - | - | - | (8,874) | (8,874) |
At 31st March 2017 | 5,024 | 84,114 | 14,864 | 298,082 | 5,871 | 407,955 |
1 These reserves form the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.
STATEMENT OF FINANCIAL POSITION AT 31ST MARCH 2017
2017 | ||||
Growth | Income | 2016 | ||
(unaudited) | (unaudited) | Total | Total | |
£'000 | £'000 | £'000 | £'000 | |
Fixed assets | ||||
Investments held at fair value through profit or loss | 263,321 | 172,493 | 435,814 | 363,631 |
Current assets | ||||
Derivative financial assets | 56 | 338 | 394 | 743 |
Debtors | 764 | 1,046 | 1,810 | 2,086 |
Cash and cash equivalents | 18,765 | 7,155 | 25,920 | 16,583 |
19,585 | 8,539 | 28,124 | 19,412 | |
Current liabilities | ||||
Creditors: amounts falling due within one year | (8,279) | (5,142) | (13,421) | (12,183) |
Derivative financial liabilities | (12) | (6) | (18) | (569) |
Net current assets | 11,294 | 3,391 | 14,685 | 6,660 |
Total assets less current liabilities | 274,615 | 175,884 | 450,499 | 370,291 |
Creditors: amounts falling due after more than one year | (26,014) | (16,530) | (42,544) | (39,424) |
Net assets | 248,601 | 159,354 | 407,955 | 330,867 |
Capital and reserves | ||||
Called up share capital | 3,066 | 1,958 | 5,024 | 6,279 |
Share premium | 11,448 | 72,666 | 84,114 | 82,761 |
Capital redemption reserve | 13,499 | 1,365 | 14,864 | 13,591 |
Capital reserves | 217,663 | 80,419 | 298,082 | 224,306 |
Revenue reserve | 2,925 | 2,946 | 5,871 | 3,930 |
Total equity shareholders' funds | 248,601 | 159,354 | 407,955 | 330,867 |
Net asset values | ||||
Net asset value per Growth share | 321.9p | 259.7p | ||
Net asset value per Income share | 169.9p | 137.1p | ||
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31ST MARCH 2017
2017 | 2016 | |
£'000 | £'000 | |
Net cash inflow/(outflow) from operations before dividends and interest | 222 | (1,608) |
Dividends received | 11,612 | 9,827 |
Interest (paid)/received on cash and cash equivalents | 2 | 104 |
Overseas tax recovered | 524 | 818 |
Net cash inflow from operating activities | 12,360 | 9,141 |
Purchases of investments | (289,356) | (212,728) |
Sales of investments | 297,400 | 209,341 |
Settlement of futures contracts | 1,014 | (822) |
Settlement of foreign currency contracts | (384) | 645 |
Net cash inflow/(outflow) from investing activities | 8,674 | (3,564) |
Dividends paid | (8,874) | (8,943) |
Repayment of bank loans | - | (22,145) |
Drawdown of bank loans | - | 36,505 |
Interest paid | (1,327) | (681) |
Expenses in relation to new shares | - | (12) |
Repurchase and cancellation of the Company's own shares | (1,461) | - |
Net cash (outflow)/inflow from financing activities | (11,662) | 4,724 |
Increase in cash and cash equivalents | 9,372 | 10,301 |
Cash and cash equivalents at the start of the year | 16,583 | 6,265 |
Exchange movements | (35) | 17 |
Cash and cash equivalents at the end of the year | 25,920 | 16,583 |
Increase in cash and cash equivalents | 9,372 | 10,301 |
Cash and cash equivalents consist of: | ||
Cash and short term deposits | 5,953 | 4,247 |
JPMorgan Euro Liquidity Fund | 19,967 | 12,336 |
Total | 25,920 | 16,583 |
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH 2017
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' 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 November 2014 and updated in January 2017.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 38 of the Directors' Report of the Company's Annual Report and Accounts form part of these financial statements.
2. Dividends
(a) Dividend paid and declared
2017 | 2016 | |
£'000 | £'000 | |
Dividends paid | ||
Unclaimed Growth dividends refunded to the Company | (2) | (1) |
Growth 2016 second interim dividend of 1.00p (2015: 1.25p) per share | 852 | 1,108 |
Growth first interim dividend of 4.85p (2016: 4.85p) per share | 3,767 | 4,134 |
Income 2016 fourth quarterly dividend of 1.45p (2015: 1.45p) per share | 1,158 | 1,068 |
Income first quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Income second quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Income third quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Total dividends paid in the year | 8,874 | 8,943 |
Dividends declared | ||
Growth second interim dividend of 2.00p (2016: 1.00p) per share | 1,549 | 852 |
Income fourth quarterly dividend of 1.70p (2016: 1.45p) per share | 1,593 | 1,158 |
Total dividends payable1 | 3,142 | 2,010 |
All dividends paid and declared in the period have been funded from the Revenue Reserve.
1 In accordance with the accounting policy of the Company, these dividends will be reflected in the financial statements of the following year.
(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 £10,814,000 (2016: £8,318,000).
2017 | 2016 | |
£'000 | £'000 | |
Growth first interim dividend of 4.85p (2016: 4.85p) per share | 3,767 | 4,134 |
Growth second interim dividend of 2.00p (2016: 1.00p) per share | 1,549 | 852 |
Income first quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Income second quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Income third quarterly dividend of 1.10p (2016: 1.10p) per share | 1,033 | 878 |
Income fourth quarterly dividend of 1.70p (2016: 1.45p) per share | 1,593 | 1,158 |
Total | 10,008 | 8,778 |
3. Return/(loss) per share
2017 | 2016 | |
£'000 | £'000 | |
Growth share | ||
Return per share is based on the following: | ||
Revenue | 5,242 | 4,561 |
Capital return/(loss) | 47,403 | (9,141) |
Total return/(loss) | 52,645 | (4,580) |
Weighted average number of shares in issue | 77,612,534 | 84,900,623 |
Revenue per share | 6.75p | 5.37p |
Capital return/(loss) per share | 61.08p | (10.77)p |
Total return/(loss) per share | 67.83p | (5.40)p |
Income share | ||
Return per share is based on the following: | ||
Revenue | 5,573 | 3,757 |
Capital return/(loss) | 29,468 | (4,361) |
Total return/(loss) | 35,041 | (604) |
Weighted average number of shares in issue | 93,837,413 | 80,505,803 |
Revenue per share | 5.94p | 4.67p |
Capital return/(loss) per share | 31.40p | (5.42)p |
Total return/(loss) per share | 37.34p | (0.75)p |
4. Net asset value per share
2017 | 2016 | |
Growth share | ||
Ordinary shareholders' funds (£'000) | 248,601 | 202,165 |
Number of shares in issue | 77,220,608 | 77,833,926 |
Net asset value per share | 321.9p | 259.7p |
Income share | ||
Ordinary shareholders' funds (£'000) | 159,354 | 128,702 |
Number of shares in issue | 93,769,494 | 93,884,791 |
Net asset value per share | 169.9p | 137.1p |
5. Status of announcement
2016 Financial Information
The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 31st March 2016 and do not constitute the statutory accounts for that year. The Annual Report and Accounts 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.
2017 Financial Information
The figures and financial information for 2017 are extracted from the Annual Report and Accounts for the year ended 31st March 2017 and do not constitute the statutory accounts for the year. The Annual Report and Accounts 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 Accounts 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 Accounts
The Annual Report and Accounts will be posted to shareholders on or around 16th June 2017 and will shortly be available on the Company's website www.jpmeuropean.co.uk or in hard copy format from the Company's Registered Office, 60 Victoria Embankment London EC4Y 0JP.
A copy of the annual report will also be shortly submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM
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.jpmeuropean.co.uk
For further information:
Paul Winship,
JPMorgan Funds Limited, Secretary - 020 7742 4000
12th June 2017