18 May 2023 11:00
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN MULTI-ASSET GROWTH & INCOME PLC
ANNOUNCEMENT OF FINAL RESULTS
The Directors of JPMorgan Multi-Asset Growth & Income plc announce the Company's results
for the period ended 28th February 2023
Legal Entity Identifier: |
549300C0UCY8X2QXW762 Information disclosed in accordance with DTR 4.1. |
CHAIRMAN'S STATEMENT
Introduction
The objective of the Company is to generate income and capital growth through a multi-asset strategy, while seeking to maintain lower levels of volatility than an equity portfolio. Our commitment to this objective is underpinned by the Company's progressive distribution policy (adopted on 1st March 2021), which aims to increase the dividend in line with the UK's annual Consumer Price Index from the initial distribution level of 4p per share per annum set at launch in 2018.
Portfolio Performance
For the year ended 28th February 2023, the Company recorded a negative total return of -5.3% on its opening net asset value, an underperformance of 11.3% for the year, compared to the Company's Reference Index. The Company's share price returned -1.5% during the period as the discount to net asset value narrowed, despite the prevailing trend over the year of widening discounts across the investment trust sector. Although the underperformance is disappointing, it should be noted that the Company's Reference Index is a total return of 6.0% per annum measured over a rolling five-year period. Therefore, unlike a typical benchmark, it is not a relative index and is unaffected by the extremely challenging market conditions experienced during this reporting period.
2022 was a difficult year for global equity and bond markets. Post Covid supply chain issues and tight labour markets, combined with a surge in demand post the pandemic, created inflationary pressures which were then significantly heightened by the Russian invasion of Ukraine elevating global energy and commodity prices. Inflation has remained at persistently higher levels than initially expected and the resolve of most central Banks to tackle the issue with increased interest rates have been the prevailing features of many of the world's major economies in this reporting period. Equity and bond markets fared poorly in this environment as economic growth forecasts and corporate earnings expectations have been successively revised downwards. Heightened geopolitical tensions have further depressed investor sentiment.
During the reporting period, with the support of the Board, the Manager transitioned its global equity exposure away from higher yielding companies to those that they believe offer superior returns over the long term. Further details of the portfolio are provided in the investment manager's report on page 11 of the Company's annual report and financial statements.
Discount Management
The Board recognises that it is in the interests of shareholders to maintain a share price as close as possible to the Net Asset Value per share. The Board utilises share buybacks to address imbalances in supply of and demand for the Company's shares in the market, when it believes it is in the interests of all shareholders and subject to normal market conditions. During the 12 months, the Board utilised its authority to buy back shares in the Company to narrow the discount and bought back 3,075,000 shares at an average discount of -4.5%. The discount commenced the period under review at -4.2% but moved steadily inwards to close on 28th February 2023 at -0.4%. The Company's shares traded at a premium during part of the year ended 28th February 2023, which allowed the Company to reissue 100,000 shares from Treasury for a total consideration of £103,800. The Company's average share discount for the year under review was -2.6%. From 1st March 2023 to 15th May 2023 the Company bought back 1,625,000 shares. The Company's share price on 15th May 2023 (the last practical date before printing this document), was 94.5p per share, with a discount to net asset value of -3.1% For further details please see the share capital section on page 26 of the Company's annual report and financial statements.
Revenue and Distributions
During the 12 months to 28th February 2023, the Company's net return on revenue after taxation was £1,786,000 (2022: £2,650,000). The Board has declared four interim distributions, each of 1.1p per share in respect of the financial year ended 28th February 2023, making a total of 4.4p per share for the year (2022: 4.1p). The Company has utilised its power to draw on its distributable reserves to cover the dividend. The Company did not 'stream' part of these distributions in the year ended 28th February 2023, as detailed further on page 25 of the Company's annual report and financial statements.
As referred to in my Chairman's Statement in the Company's half year report, the Board's aim is to help protect shareholders' distribution income from the longer term effects of inflation and so for the Company's year ending 28th February 2024, the Board's expectation is to pay a total distribution of 4.8p per share. This represents an increase of 9.1% on the 2023 distribution and an increase of 20.0% since the distribution policy was adopted on 1st March 2021. As in previous years, the distributions are expected to be paid to shareholders in August, November, February and May.
Gearing
The Company may use gearing, in the form of borrowings and derivatives, to seek to enhance returns over the long term. During the period the Company had no bank loans/facilities or structured debt, but did use derivatives to enhance portfolio returns and for efficient portfolio management. The level of the Company's cash position at 28th February 2023 was 4.8%, (28th February 2022: 3.0%), reflecting a slight increase in the net cash position of the Company during this reporting period. See page 25 of the Company's annual report and financial statements for further details and definition of Gearing. Further details of the portfolio are provided in the investment manager's report on page 11 of the Company's annual report and financial statements.
The Board of Directors
There were no changes to the composition of the Board of Directors during the reporting period and the intention is to continue with a complement of four directors.
In compliance with corporate governance best practice, all Directors will be standing for re-appointment at the forthcoming Annual General Meeting.
Following the Company's annual evaluation of the existing Directors, the Chairman, the Board and its Committees, the Board recommends to shareholders that all directors standing be reappointed.
In accordance with the AIC 2019 Code of Corporate Governance, endorsed by the Financial Reporting Council, the Company has established a separate Remuneration Committee. 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 March 2022. In order to maintain the fees in line with its peers, the Board agreed that the current fees should be increased with effect from 1st March 2023. See page 46 of the Company's annual report and financial statements for further details.
Continuation Vote and Tender
In accordance with the Company's Articles, the Directors are required to propose an ordinary resolution that the Company continues its business as a closed-ended investment company at the fifth annual general meeting of the Company. If the Continuation Vote is passed by a simple majority, the Directors are required to put a further Continuation Vote to Shareholders at the Annual General Meeting (AGM) of the Company every fifth year thereafter. Therefore, a continuation vote will be put to shareholders as an ordinary resolution at the Company's forthcoming AGM to be held on 4th July 2023. The five years of the Company's life has been particularly turbulent with an extended period of global pandemic and a major equity and bond sell off during the last financial year. This has affected the Company's ability to match its absolute return benchmark over the five year period. Nevertheless the board has confidence that the JPMorgan Multi-Asset team has both the resources and experience required to deliver sustainable income and growth from a diversified multi-asset portfolio. In uncertain times there is an ongoing need for experienced active managers to help investors navigate current financial markets, and your Board recommends to shareholders that they vote in favour of the Company continuing as an investment trust for a further five year period. Since the outcome of the continuation vote is not certain, this represents a material uncertainty which may cast significant doubt on the Company's future and its ability to continue as a going concern. Notwithstanding this, the financial statements have been prepared on a going concern basis, for the reasons noted above.
Investment Manager
The performance of the Manager was formally evaluated by the Board. Following this review, undertaken in February 2023 by the Management Engagement Committee, and constructive engagement with the manager with regard to the investment approach and process, the Board concluded that the performance of the Manager had been satisfactory and that their services should be retained. The review also resulted in the decision to remove the investment restriction that required the Company to hold a minimum of 50% in listed equities and fixed income. This change was made in order to afford the Investment Managers added flexibility in managing the Company's portfolio.
Environmental, Social and Governance Considerations
As detailed in the Investment Manager's report, Environmental, Social and Governance ('ESG') considerations are integrated into the Investment Manager's investment process. The Board shares the Investment Manager's 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 17 of the Company's annual report and financial statements.
Annual General Meeting
The Company's fifth AGM will be held at 60 Victoria Embankment, London EC4Y 0JP London at 2.30 p.m. on Tuesday, 4th July 2023. We are pleased that this year we will once again be able to invite shareholders to join us in-person for the Company's AGM, hear from the Investment Managers and ask questions. Shareholders wishing to follow the AGM proceedings but choosing not to attend in person will be able to view proceedings live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company's website at www.jpmmultiassetgrowthandincome.com or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com
My fellow Board members, representatives of JPMorgan and I look forward to the opportunity to meet and speak with shareholders after the formalities of the meeting have been concluded. Shareholders who are unable to attend the AGM are strongly encouraged to submit their proxy votes in advance of the meeting, so that they are registered and recorded at the AGM. Proxy votes can be lodged in advance of the AGM either by post or electronically: detailed instructions are included in the Notes to the Notice of Annual General Meeting on pages 88 to 90 of the Company's annual report and financial statements.
If there are any changes to these arrangements for the AGM, the Company will update shareholders via the Company's website and an announcement on the London Stock Exchange.
Outlook
In recent months, at the start of the current calendar year, global markets had found renewed optimism on the back of China's successful emergence from its zero-Covid policy and the prospect of peaking inflation and interest rates. However, post the Company's financial year end this enthusiasm has been swiftly dampened by the challenges to the financial system caused by the failure of Silicon Valley Bank and Credit Suisse in March, and the subsequent turmoil in the US regional banking sector. Furthermore, geopolitical tensions continue to unsettle equity markets with Russia's aggression against Ukraine, China's lack of condemnation of Russia's invasion tactics, and difficult US/China relations over Taiwan, US sanctions and US technology transfer to Chinese companies. In such uncertain markets the Board has confidence in the breadth and depth of the investment expertise of the JPMorgan Multi-Asset team. The Investment Managers have the knowledge and experience to allocate across a wide range of asset classes to adapt to this challenging economic outlook. The investment trust structure facilitates a long-term investment outlook and the Company's progressive dividend policy should provide some reassurance to shareholders in the current environment of exceptionally high levels of inflation.
Sarah MacAulay
Chairman 17th May 2023
INVESTMENT MANAGERS' REPORT
Introduction
In this report, we review the Company's investment performance for the year ending 28th of February 2023. The period witnessed heightened volatility with Russia's invasion of Ukraine, central banks pivoting aggressively to combat high and stubborn inflation, fading yet still widespread effects of global pandemic, and elevated political uncertainty shifting the landscape of economies globally. We review how the Company's diversified portfolio has performed in this environment, how our asset allocation has evolved and how we are positioned for the year ahead.
Setting the scene - Our investment approach
We seek to achieve attractive returns by investing in a globally diversified portfolio that includes company shares, bonds, and other assets. Our aim is to construct a well-balanced portfolio which is flexible with respect to both asset class and geography. This flexibility allows us to take advantage of the best opportunities to deliver an attractive total return to our shareholders. We take a research-based approach, positioning assets in line with our medium- to long-term view of markets and leveraging the expertise of active managers in portfolio construction.
Market review: A challenging period for markets as supply chain disruptions, the lagged effect of loose monetary and fiscal policy and Russia's invasion of Ukraine caused US and UK inflation to surge to its highest level in 40 years.
The financial year proved to be a volatile and challenging year for investors as markets faced several headwinds: the Russian invasion of Ukraine and resultant impact on global energy supply, central bank action to combat stubbornly high inflation and ongoing Covid-19 related lockdowns in China. Equity and bond markets suffered significant decline through the year, with some improvement towards the period end.
Following a sluggish start to 2022, global equity markets rebounded in March, however the potential need for a faster pace of interest rate hikes to combat higher inflation once again started to dominate investor sentiment. In the second quarter, US headline inflation reached 8.5%, its highest level since 1981 and remained elevated in Europe and the UK. Central banks reacted with the Federal Reserve and Bank of England continuing to raise rates. In Europe, concerns over potential gas shortages and higher inflation drove equities lower. Globally, labour markets continued to show resilience, with unemployment rates across both the UK and Euro area close to multi-decade lows. Outside of developed markets, promising news about a drop in Covid-19 infections in China and the prospect of an easing of lockdowns led to an improvement in growth expectations across emerging markets.
Markets staged somewhat of a recovery in July; economic news in the US revealed business activity was still in expansionary territory and US job prints were strong. However, inflation remained stubbornly high and in response, central banks continued to raise rates with the ECB delivering its first-rate hike in over a decade in July, followed by a second hike in September. The recovery in equity markets proved to be short-lived, as central banks' narrative around their commitment to bring inflation under control, despite inherent risks to the growth outlook, led to further declines in equity and bond markets through August and September. In the UK, the fiscal package that was announced under the leadership of Liz Truss was poorly received by markets, sending Sterling to an all-time low in September together with significant losses in the UK gilt market.
Risk assets rallied in October and continued to perform strongly in November, as markets anticipated a slowing in the pace of tightening of financial conditions on the back of moderating inflationary pressures, although some of these gains were reversed in December. The major central banks delivered another round of policy rate hikes during the final quarter of the year. The Bank of Japan unexpectedly widened its target range for 10-year Japanese government bonds which led to a sell-off in markets towards the year end. Emerging markets posted stronger returns over the quarter as investors welcomed the easing of Covid-19 restrictions and the weaker US dollar.
2023 started on a more optimistic note on the back of improving investor sentiment regarding the outlook for the global economy. Fading recession risks in Europe due to a mild winter and signs of slowing inflation in January in the US and Eurozone strengthened market hopes that central banks could end their hiking cycles soon. Meanwhile in China, the prospect of a release of pent-up demand on the back of the fast re-opening raised expectations that the Chinese economy would experience a strong recovery in the first half of 2023. However, both equity and fixed income markets once again came under pressure in February as markets recalibrated higher terminal rate expectations following resilient economic and inflation data. One exception was European equities which performed strongly due to the fall in energy prices, rebounding consumer and business confidence and reduced risk of recession in the region.
How has the Company performed over the year under review?
The Company delivered a negative return on net assets of -5.3% over the year, underperforming the Company's Reference Index of +6.0% over a five year rolling period.
The most significant driver of negative performance was our fixed income exposure, with our government bond positions in aggregate suffering significant decline. While we maintained a lower exposure to equities on average through the year relative to longer term averages, our aggregate equity exposure also provided a negative contribution to return, driven by our emerging market exposure and our decision to reduce overall European equity exposure. Our global equity manager performed well ahead of the broad equity market over the period, generating positive absolute returns. In an environment where broad equity and fixed income markets struggled, our alternative fund holdings generated positive returns, proving their diversification benefit.
Portfolio review
We made significant changes in our asset allocation through the period as we continued to position the Company in line with favoured markets and regions. While we entered the review period with a slight overweight to equities, we began scaling this back in March 2022 as the global macro environment and investor sentiment deteriorated. We continued to reduce exposure through the summer months before adding back to the asset class in January this year, when inflation prints looked to be moderating, recession risks in Europe were fading and the growth outlook for China dramatically improved owing to the removal of the Zero-Covid-19 policy.
While stock selection is undertaken by our in-house International Equity Group, we tilt regional positioning to reflect our latest views, implemented via index futures.
We reduced our physical global equity allocation in March 2022 and took down exposure further using regional equity futures. We scaled back our European equity allocation given concerns around the impact of the Russian Ukraine war and having initially added to the US as a high-quality equity market, reduced this allocation from May. We further reduced equity exposure in these regions through the summer months, as central banks continued with their hiking paths to curb stubbornly high inflation. While we added back to Europe from August, we continued to reduce our US equity exposure which proved beneficial. We increased our overall equity weight by 10% in January, adding to both developed and emerging markets as markets rallied during the month as investors anticipated a deceleration in the pace of rate hikes from the Federal Reserve.
In the Company's portfolio of fixed income investments, we actively managed duration, generally favouring long-dated US government bonds. We maintained low levels of duration for much of 2022 although we began adding back to US Treasuries at the end of the year whilst maintaining shorts in JGB's and 10-year Bunds before adding again at the start of 2023. Outside of government bonds, we significantly reduced high yield bond exposure and removed both global convertible and emerging market debt holdings as we looked to moderate overall risk in the portfolio. Having removed our investment grade corporate bond holding in 2020, we reintroduced this in January as overall risk appetite increased, at a level less than half of our long-term strategic weight. We also re-introduced a small emerging market debt position as we felt there would be some relative value opportunities in parts of local currency emerging market debt.
Our bespoke equity portfolio generated positive returns relative to the MSCI World Index. We made some changes in the composition of the equity portfolio at the end of July when we moved from an approach that focused on companies that generate high and rising income, to one that uses an actively managed, bottom-up, research-driven approach to outperform the MSCI World Index. This change highlights the flexibility in portfolio construction and ability to represent favoured asset classes and styles in the portfolio in line with forward looking views.
At a sector level, the largest contributors to performance were pharmaceutical/medtech and retail. Detractors included banks and telecommunications. At a stock level, Analog Devices, the US semiconductor company, was one of the largest contributors. The stock performed very strongly over the period after the company cited 'resilient' demand in its quarterly results. An overweight position in Volvo, the Swedish automobile company also contributed to relative returns. The stock rallied as sales increased over the period despite supply chain issues. On the other hand, our overweight in Amazon, the US retail and technology company, detracted from returns. Shares were under pressure after the company reported results which missed expectations as AWS (their cloud business) slowed more than expected and retail margins didn't improve as much as expected. An overweight position in Bank of America, a US multinational investment bank and financial services company, also detracted from performance. The stock declined as the company warned of a negative impact from a weaker global economic outlook in 2023 with interest rates rising further to tackle inflation.
Asset Class | % |
Global Equities | 2.0 |
European Equities | -0.3 |
Emerging Market Equities | -1.2 |
Alternatives | 0.9 |
Government Bonds | -2.4 |
Corporate Bonds | -0.1 |
High Yield | -1.2 |
Emerging Market Debt | -0.3 |
Equity Futures | -1.5 |
Convertibles | -0.5 |
Cash | 0.2 |
| -4.4 |
Ongoing charges | -1.1 |
Share Buybacks | 0.2 |
Other | 0.0 |
Total Return on Net Asset ValueA | -5.3 |
Source: JPMAM.
A Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 91 and 92 of the Company's annual report and financial statements.
Outlook
The recent events in the banking sector are likely to lead to a further tightening of bank lending standards, which could further slow growth in developed economies, possibly leading to a moderate recession over the course of the year. However, with little evidence of extreme excess in the real economy and with better capitalised banks, we see a repeat of 2008 as unlikely. If the commercial banks tighten lending standards, the Federal Reserve and other central banks will need to do less to bring about the desired slowdown in activity and reduction in inflation. At this stage, there are considerable uncertainties - in both directions - over the extent to which the recent turmoil will affect sentiment and activity. This uncertain backdrop argues against extreme positioning between or within asset classes. We believe that investors should maintain balance in their portfolios with a focus on quality within both equity and bond allocations. Against this backdrop, we maintain a cautious outlook with a more favourable view on government bond markets whilst being underweight equities. Within equities we expect US large cap stocks to outperform small caps whilst economic resilience in Europe and the UK leads us to favour these regions. We have become more positive on emerging markets where we believe the growth recovery in China has further to run. The government bond markets appear increasingly attractive as global inflation continues to fade which should re-focus markets back towards growth concerns and drive a return of the stock-bond correlation towards more negative levels which is beneficial for multi-asset portfolios.
Katy Thorneycroft
Gareth Witcomb
Investment Managers 17th May 2023
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they have carried out a robust assessment of the principal risks 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 Audit Committee has drawn up a risk matrix which identifies the key and emerging risks to the Company. These are reviewed and noted by the Board. The risks identified and the broad categories in which they fall, and the ways in which they are managed or mitigated are summarised below. The AIC Code of Corporate Governance requires the Audit Committee to put in place procedures to identify emerging risks. The key emerging risks identified are also summarised below.
Principal Risk | Description | Mitigating activities |
Investment Strategy | An inappropriate investment strategy, for example asset allocation or the level of gearing or foreign exchange exposure, may lead to underperformance against the reference index or peer companies. This may result in the Company's shares trading on a narrower premium or a wider discount. | The Board manages these risks by diversification of investments through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data, revenue estimates, currency performance, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers review the Company's gearing strategically. |
Financial | The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. | The Board considers the split in the portfolio between companies, sector and 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. However, the performance of the portfolio is significantly determined by market movements in global equity and bond markets. |
Corporate Governance and Shareholder Relations | Failure to comply with relevant statute law or regulation may have an impact on the Company both in terms of fines and in terms of its ability to continue to operate. Some investors within the sector will only consider investing into an investment trust where its AUM is over a certain level; the Company's AUM currently stands below these levels. | The Board relies on the services of its Company Secretary, the Manager and its professional advisers to ensure compliance with Corporate Governance best practice, are set out in the Corporate Governance Statement on pages 38 to 42 of the Company's annual report and financial statements. The Board manages shareholder relations by review of sales and marketing activity and also receipt of regular feedback via the Manager's sales and marketing teams and the Broker from both existing and prospective shareholders. |
Operational | Loss of key staff by the Manager, such as the Investment Managers, could affect the performance of the Company. Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. This includes the risk of cybercrime and consequent potential threat to security and business continuity. | The Manager takes steps to reduce the likelihood of loss of key staff by ensuring appropriate succession planning and the adoption of a team based approach. 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 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 by independent reporting accountants and reported on every six months against the Audit and Assurance Faculty ('AAF') standard. |
Accounting, Legal and Regulatory | 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 on page 24 of the Company's annual report and financial statements. Was the Company to breach Section 1158, it would lose its investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the FCA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the FCA Prospectus Rules, Listing Rules and Disclosure, Guidance & Transparency Rules ('DTRs'). | The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. 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. |
Global Pandemics | The outbreak and spread of Covid-19 demonstrated the risk of global pandemics, in whatever form a pandemic takes. Should a new variant of the virus spread more aggressively or become more virulent, it may present risks to the operations of the Company, its Manager and other major service providers. The 'Zero Covid' policy in China that was in place during the year (although recently withdrawn) illustrates the negative impact that a pandemic can have on the global economy. | The Board monitors the effectiveness and efficiency of service providers' processes through ongoing compliance and operational reporting and there were no disruptions to the services provided to the Company in the year under review. The Company's service providers are capable of implementing business continuity plans which include working almost entirely remotely. The Board continues to receive regular reporting on operations from the Company's major service providers and would not anticipate a fall in the level of service in the event of a re-emergence of a pandemic. |
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. It is also likely to have a significant impact on business models, sustainability and even viability of individual companies, whole sectors and even asset classes. | 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 resilience, business continuity planning and the location strategies of our operations and those of our services providers will come under greater scrutiny. |
Geopolitical Tensions | Since the end of the Second World War, the world has enjoyed a technology and economic hegemony with the US at its core. With the development of China as a political, cultural, technological and economic rival, there is the risk that alongside the trade tensions we have seen in recent years, there may develop a rival technology and economic infrastructure which is not compatible with or available to some of the companies in which we invest. This process is likely to be accelerated by Russia's invasion of Ukraine in February 2022 and the significant impact that has had on global commodities markets. | The Company addresses these global developments in regular questioning of the Manager and with external expertise and will continue to monitor these issues, as they develop. The Manager regularly monitors the Company's portfolio holdings to ensure compliance with any applicable sanctions. |
Artificial Intelligence (AI) | While it might equally be deemed a great opportunity and force for good, there appears also to be an increasing risk to business and society more widely from AI. Advances in computing power means that AI has become a powerful tool that will impact a huge range of areas and with a wide range of applications that include the potential to disrupt and even to harm. In addition the use of AI could be a significant disrupter to business processes and whole companies leading to added uncertainty in corporate valuations. | The Board will work with the Manager to monitor developments concerning AI as its use evolves and consider how it might threaten the Company's activities, which may, for example, include a heightened threat to cybersecurity. The Board will work closely with the Manager in identifying these threats and, in addition, monitor the strategies of our service providers. Furthermore, the Company's investment process includes consideration of technological advancement and the resultant potential to disrupt both individual companies and the wider markets. |
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on page 36 of the Company's annual report and financial statements. The management fee payable to the Manager for the year was £453,000 (2022: £534,000) of which £nil (2022: £nil) was outstanding at the year end.
Included in administration expenses in note 6 on page 64 of the Company's annual report and financial statements are safe custody fees payable to JPMorgan Chase N.A. amounting to £2,000 (2022: £3,000) of which £nil (2022: £1,000) 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 period was £nil (2022: £nil) of which £nil (2022: £nil) was outstanding at the year end.
The Company holds investments in funds managed by JPMAM. At 28th February 2023 these were valued at £10.8 million (2022: £20.2 million) and represented 15.2% (2022: 24.3%) of the Company's investment portfolio. During the year the Company made £6.9 million (2022: £11.5 million) purchases and sales with a total value of £15.1 million (2022:£13.7 million). Income amounting to £0.9 million (2022:£1.7 million) of such investments was receivable from these investments during the year of which £nil (2022: £nil) was outstanding at the year end.
The Company holds investments in Infrastructure Investment Fund (IIF UK 1 LP), the General Partner of IIF UK 1 LP is an affiliate of JPMorgan Asset Management (UK) Limited. At 28th February 2023 these were valued at £8.8 million (2022: £8.0 million) and represented 12.3% (2022: 9.7%) of the Company's investment portfolio. During the year the Company made £nil (2022: £nil ) purchases and £nil (2022: £nil) sales. Income amounting to £506,000 (2022: £900,000) of such investments was receivable from these investments during the year of which £nil (2022: £nil) was outstanding at the year end.
The Company also holds cash in JPMorgan Sterling Liquidity Fund, which is managed by JPMF. At the year end, this was valued at £1,322,000 (2022: £797,000). Interest amounting to £74,000 (2022: £1,000) were payable during the year of which £nil (2022: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £45,000 (2022: £24,000) were payable to JPMorgan Chase N.A. during the year of which £15,000 (2022: £7,000) was outstanding at the year end.
During the period under review JPMorgan Asset Management Holdings (UK) Ltd, an affiliate of the Company's Manager did not acquire any shares in the Company (2022:nil).
At the year end, a bank balance of £736,000 (2022: £884,000) was held with JPMorgan Chase. A net amount of interest of £69,000 (2022: £nil) was receivable by the Company during the year from JPMorgan Chase of which £nil (2022: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on page 47 and in note 6 on page 64 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) 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 financial statements are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's 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 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 annual and report and financial statements are published on the www.jpmmultiassetgrowthandincome.com 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 annual and report and financial statements since they were initially presented on the website. The annual and 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 Directors' Report and Directors' Remuneration Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed on page 35 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
Sarah MacAulay
Chairman
17th May 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 28th February 2023
2023 | 2022 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
(Losses)/gains on investments held at fair value | ||||||
through profit or loss | - | (412) | (412) | - | 5,903 | 5,903 |
Net foreign currency losses | - | (5,757) | (5,757) | - | (1,464) | (1,464) |
Income from investments | 2,459 | - | 2,459 | 3,548 | - | 3,548 |
Interest receivable and similar income | 143 | - | 143 | 1 | - | 1 |
Gross return/(loss) | 2,602 | (6,169) | (3,567) | 3,549 | 4,439 | 7,988 |
Management fee | (159) | (294) | (453) | (187) | (347) | (534) |
Other administrative expenses | (404) | - | (404) | (418) | - | (418) |
Net return/(loss) before finance costs and taxation | 2,039 | (6,463) | (4,424) | 2,944 | 4,092 | 7,036 |
Finance costs | (4) | (8) | (12) | (3) | (5) | (8) |
Net return/(loss) before taxation | 2,035 | (6,471) | (4,436) | 2,941 | 4,087 | 7,028 |
Taxation (charge)/credit | (249) | 45 | (204) | (291) | 45 | (246) |
Net return/(loss) after taxation | 1,786 | (6,426) | (4,640) | 2,650 | 4,132 | 6,782 |
Return/(loss) per share | 2.27p | (8.17)p | (5.90)p | 3.22p | 5.02p | 8.24p |
STATEMENT OF CHANGES IN EQUITY
Called up |
|
|
|
|
| |
share | Share | Special | Capital | Revenue |
| |
capital | Premium | reserve1 | reserves1 | reserve1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 28th February 2021 | 931 | - | 84,768 | 1,882 | 681 | 88,262 |
Net return | - | - | - | 4,132 | 2,650 | 6,782 |
Repurchase of shares into Treasury | - | - | (5,992) | - | - | (5,992) |
Distributions paid in the year | - | - | - | (43) | (3,331) | (3,374) |
At 28th February 2022 | 931 | - | 78,776 | 5,971 | - | 85,678 |
Issue of shares from Treasury | - | 5 | - | 99 | - | 104 |
Repurchase of shares into Treasury | - | - | (2,975) | - | - | (2,975) |
Net (loss)/return | - | - | - | (6,426) | 1,786 | (4,640) |
Distributions paid in the year | - | - | (1,618) | - | (1,786) | (3,404) |
At 28th February 2023 | 931 | 5 | 74,183 | (356) | - | 74,763 |
1 These reserves form the distributable reserve of the Company and may be used to fund distributions to shareholders.
STATEMENT OF FINANCIAL POSITION
At 28th February 2023 | ||
| 2023 | 2022 |
| £'000 | £'000 |
Fixed assets |
|
|
Investments held at fair value through profit or loss | 71,148 | 83,091 |
Current assets |
|
|
Derivative financial assets | 804 | 676 |
Debtors | 1,764 | 1,018 |
Cash and cash equivalents | 4,690 | 2,515 |
7,258 | 4,209 | |
Current liabilities |
|
|
Creditors: amounts falling due within one year | (1,893) | (824) |
Derivative financial liabilities | (1,750) | (798) |
Net current assets | 3,615 | 2,587 |
Total assets less current liabilities | 74,763 | 85,678 |
Net assets | 74,763 | 85,678 |
Capital and reserves |
|
|
Called up share capital | 931 | 931 |
Share premium account | 5 | - |
Special reserve | 74,183 | 78,776 |
Capital reserves | (356) | 5,971 |
Revenue reserve | - | - |
Total shareholders' funds | 74,763 | 85,678 |
Net asset value per share | 96.7p | 106.7p |
STATEMENT OF CASH FLOWS
For the year ended 28th February 2023
2023 | 2022 | |
£'000 | £'000 | |
Net cash outflow from operations before dividends and interest | (1,046) | (1,174) |
Dividends received | 1,716 | 2,238 |
Interest received | 745 | 882 |
Overseas tax recovered | 40 | 89 |
Interest paid | (12) | (8) |
Net cash inflow from operating activities | 1,443 | 2,027 |
Purchases of investments | (86,840) | (58,934) |
Sales of investments | 101,828 | 63,171 |
Settlement of forward foreign currency contracts | (2,762) | 670 |
Settlement of future contracts | (5,421) | (515) |
Net cash inflow from investing activities | 6,805 | 4,392 |
Issue of shares from Treasury | 104 | - |
Repurchase of shares into Treasury | (2,832) | (5,992) |
Distributions paid | (3,404) | (3,374) |
Net cash outflow from financing activities | (6,132) | (9,366) |
Increase/(decrease) in cash and cash equivalents | 2,116 | (2,947) |
Cash and cash equivalents at start of year | 2,515 | 5,459 |
Exchange movements | 59 | 3 |
Cash and cash equivalents at end of year | 4,690 | 2,515 |
Cash and cash equivalents consist of: |
|
|
Cash and short term deposits | 3,368 | 1,718 |
Cash held in JPMorgan Sterling Liquidity Fund | 1,322 | 797 |
Total | 4,690 | 2,515 |
RECONCILIATION OF NET DEBT
As at |
| Exchange | As at | |
28th February 2022 | Cash flows | movement | 28th February 2023 | |
£'000 | £'000 | £'000 | £'000 | |
Cash and cash equivalents |
|
|
|
|
Cash | 1,718 | 1,591 | 59 | 3,368 |
Cash equivalents | 797 | 525 | - | 1,322 |
Total | 2,515 | 2,116 | 59 | 4,690 |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 28th February 2023
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared under 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 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 July 2022.
The financial statements have been prepared on a going concern basis. In forming this opinion, the Directors have considered the ongoing impact of the Covid-19 pandemic, the conflict between Ukraine and Russia and the forthcoming continuation vote at the AGM on 4th July 2023, on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience. The disclosures on long term viability and going concern on pages 31 and 43 of the Directors' Report in the Company's annual report and financial statements form part of these financial statements. At the Annual General Meeting (AGM) to be held on 4th July 2023, a continuation vote will be held whereby shareholders will vote for or against the continuation of the Company. A vote of 50% plus one of votes cast in favour at the AGM is required for continuation. Since the outcome of the continuation vote is not certain, this indicates the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company were unable to continue as a going concern. In arriving at the decision on the basis of preparation, the Board has considered the financial position of the Company, its cashflow and liquidity position as well as the uncertainty surrounding the outcome of the continuation vote. If it were not appropriate to prepare the financial statements on a going concern basis of accounting then adjustments would be required to reclassify all assets as current, and a provision for further liabilities, including liquidation costs, would be made. In the Directors' opinion the impact of these adjustments on the financial statements is not expected to be significant. These financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, FRS 102 issued by the FRC in September 2015, the revised Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (SORP) issued by the AIC in November 2014 and updated in October 2019 and Companies Act 2006.
The policies applied in these financial statements are consistent with those applied in the preceding year.
2. Distributions
(a) Dividends paid and declared
2023 | 2022 | |
£'000 | £'000 | |
Distributions paid |
|
|
2022 fourth distribution of 1.025p (2021: 1.0p) | 816 | 858 |
2023 first interim distribution of 1.10p (2022:1.025p) | 871 | 855 |
2023 second interim distribution of 1.10p (2022:1.025p) | 859 | 836 |
2023 third interim distribution of 1.10p (2022:1.025p) | 858 | 825 |
Total distribution paid in the year | 3,404 | 3,374 |
All distributions paid and declared in the year are and will be funded from the revenue, capital and special reserves.
(b) Distributions for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The revenue available for distribution by way of dividend and interest for the year is £1,786,000 (2022: £2,650,000) and the interim distributions for 2023 have been funded from revenue and special reserves.
2023 | 2022 | |
£'000 | £'000 | |
2023 first interim distribution of 1.10p (2022: 1.025p) | 871 | 855 |
2023 second interim distribution of 1.10p (2022:1.025p) | 859 | 836 |
2023 third interim distribution of 1.10p (2022:1.025p) | 858 | 825 |
2023 fourth interim distribution declared of 1.10p (2022: 1.025p) | 846 | 823 |
| 3,434 | 3,339 |
3. Return/(loss) per share
2023 | 2022 | |
£'000 | £'000 | |
Revenue return | 1,786 | 2,650 |
Capital (loss)/return | (6,426) | 4,132 |
Total (loss)/return | (4,640) | 6,782 |
Weighted average number of shares in issue during the year | 78,605,531 | 82,351,055 |
Revenue return per share | 2.27p | 3.22p |
Capital (loss)/return per share | (8.17)p | 5.02p |
Total (loss)/return per share | (5.90)p | 8.24p |
4. Net asset value per share
| 2023 | 2022 |
Net assets (£'000) | 74,763 | 85,678 |
Number of shares in issue | 77,293,408 | 80,268,408 |
Net asset value per share | 96.7p | 106.7p |
Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted from the Annual Report and Accounts for the year ended 28th February 2022 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include 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 Register of Companies in due course.
2023 Financial Information
The figures and financial information for 2023 are extracted from the published Annual Report and Accounts for the year ended 28th February 2023 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.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
For further information please contact:
Paul Winship
For and on behalf of
JPMorgan Funds Limited, Secretary - 020 7742 4000
18th May 2023
ENDS
Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to shareholders on or around the 24 May 2023 and will shortly be available on the Company's website (www.jpmmultiassetgrowthandincome.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
The annual report is also available on the Company's website at www.jpmmultiassetgrowthandincome.com where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.