LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL GROWTH & INCOME PLC
ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2022
Information disclosed in accordance with DTR 4.2.2
JPMorgan Global Growth & Income plc (the 'Company') announces its results for the year ended 30th June 2022.
CHAIRMAN'S STATEMENT
First, I would like to extend a warm welcome to all shareholders in the Company. Many of you have been long-term investors in the Company and I very much welcome those of you who previously held shares in The Scottish Investment Trust PLC ('SCIN').
Combination with SCIN
The combination with SCIN, effected by way of a scheme of reconstruction of SCIN, was completed on 1st September 2022, following shareholders of both companies voting in favour of the combination. This combination brings together two investment trust companies with similar objectives that have both been in existence since 1887. We look forward to providing our shareholders with the benefits of economies of scale from the enlarged asset base, in particular, an enhanced profile, greater liquidity in the Company's shares and cost efficiencies.
On behalf of the Board, I would like to extend our thanks to our Manager and our advisors for their support and diligence in completing the Company's combination with SCIN.
Further details about the combination can be found in note 25 on page 87 of the full 2022 Annual Report, which details the post balance sheet date events. The financial information in this annual report is as at 30th June 2022 and excludes the combination with SCIN.
At the time of writing (at 26th September 2022), the net asset value of your enlarged Company is £1,300,840,375.
FTSE 250 Index
The Board was pleased to note the Company's admittance into the FTSE 250 Index in August 2022. This promotion marks another milestone in our growth and recognises our sustained performance.
Management and Performance Fees
In addition to the above combination, the Board agreed revised management fee arrangements with JPMorgan, replacing the existing management fee and performance fee structure with a tiered management fee on the following basis:
• 0.55% on net assets up to £750 million;
• 0.40% on net assets between £750 million and £1.5 billion; and
• 0.30% on net assets in excess of £1.5 billion.
The revised fee structure was implemented with effect from 1st January 2022 and any performance fees accrued to that date have been paid in full. No further performance fee is payable after 1st January 2022.
Performance
During the year under review, the Company's total return on net assets was -3.4% compared with the return on our benchmark, the MSCI AC World Index (in sterling terms) of -4.2%, while the share price produced a total return of -4.8%, reflecting the widening of the share price discount from 1.1% premium to 2.4% discount over the year. After delivering good performance during the first half of the financial year, the second half presented a challenging environment for equity investments. While this near-term contraction in value is disappointing, it is to be expected given the deterioration in global equity markets amid tightening financial conditions, rising risks of recession and growing inflation. The markets' reaction to Russia's invasion of Ukraine at the beginning of the year, with significant increases in commodity and energy prices has led to a steep rise in inflation. Our Company's returns have also been impacted by these factors.
The performance attribution below analyses how the Company achieved its performance relative to its Benchmark. The Investment Managers' report that follows provides a detailed commentary on these figures and discusses activity, performance and the market outlook.
Dividend Policy
The Company's dividend policy has now been in place for over six years. As a reminder, the dividend policy aims to pay, in the absence of unforeseen circumstances, dividends totalling at least 4% of the NAV of the Company as at the end of the preceding financial year. Where, in the view of the Board, the target dividend is likely to result in a dividend yield that is materially out of line with the wider market, the Board may choose to set the target dividend at a different level that is more in-line with the wider market and other global income trusts and funds. The Company has the ability to pay dividends out of capital and does currently pay its dividends, in part, out of its realised capital profits.
The Board announced on 1st July 2022 that, in relation to the year commencing 1st July 2022, the Company intends to pay dividends totalling 17.00 pence per share (4.25 pence per share per quarter), which represents a small increase from the last financial year's total dividend of 16.96 pence per share. It is expected that the dividends will be paid by way of four equal distributions. The first interim dividend for the financial year ending 30th June 2023 of 4.25 pence per share (for the period to 30th September 2022), was declared on 1st July 2022 and will be paid on 7th October 2022 to shareholders on the register at the close of business on 2nd September 2022. The ex-dividend date was 1st September 2022.
Performance attribution
Year ended 30th June 2022
|
|
% |
% |
|
Contributions to total returns |
|
|
|
Benchmark Total Return |
|
-4.2 |
|
Asset allocation |
0.0 |
|
|
Stock selection |
2.0 |
|
|
Currency effect |
0.2 |
|
|
Gearing/cash |
-0.9 |
|
|
Investment Manager contribution |
|
1.3 |
|
Portfolio total return |
|
-2.9 |
|
Management fees/other expenses |
-0.6 |
|
|
Performance fee* |
|
|
|
Net asset value total return – prior to structural effects |
|
-3.5 |
|
Structural effects |
|
|
|
Share buy-back/issuance |
0.1 |
|
|
Net Asset Value Total Return – Debt at Par |
|
-3.4 |
|
Impact of Fair Value Valuation of Debt |
1.9 |
|
|
Net Asset Value Total Return – Debt at Fair |
|
-1.5 |
|
Return to Shareholders |
|
-4.8 |
Source: JPMAM and MorningStar. All figures are on a total return basis.
Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.
* Until 31st December 2021, a performance fee was payable by the Company to the Manager.
With effect from 1st January 2022, no performance fee accrues or is payable to the Manager with respect to any period from 1st January 2022.
Share Issuance and Repurchases
The Company's shares continued to trade close to, or at a small premium to NAV during the year and we were able to reissue from Treasury the remaining 3,776,215 shares for a total consideration of £16,694,193. A block listing on the main market of 15 million Ordinary shares of the Company was secured in August last year. The Company further issued 11,180,785 new Ordinary shares for a total consideration of £50,194,157 up to 30th June 2022. Since then, our shares continued to trade at a premium to NAV over a period of time, allowing us to issue 2,473,000 new Ordinary shares for a total consideration of £10,867,549.
As part of the combination with SCIN, 133,919,647 new Ordinary shares were also issued and admitted to listing on 1st September 2022. Following this, the total number of Ordinary shares in issue is 302,478,932 at the time of writing.
As resolutions renewing the Director's authorities to issue new Ordinary shares and Ordinary shares from Treasury, in both cases at a premium to NAV, and to disapply pre-emption rights over such issues, were passed at the Company's General Meeting held on 30th August 2022, the Company is not seeking renewal of these authorities at the forthcoming Annual General Meeting ('AGM').
A resolution to renew the authority to permit the Company to repurchase its own shares will be proposed at the Company's forthcoming AGM on 3rd November 2022.
Since the year end, the Company has made applications to the Financial Conduct Authority and the London Stock Exchange for a new block listing on the main market of 15 million Ordinary shares of the Company. The block listing is expected to become effective at 8:00a.m. on 3rd October 2022.
Debt and Gearing
The Company's policy on borrowing is set by the Board and remains unchanged following the combination with SCIN.
Gearing is regularly discussed between the Board and the Investment Managers. In 2018, the Company issued £30 million fixed rate 30 year unsecured notes at an annual coupon of 2.93%. On 12th March 2021, the Company issued a further £20 million of fixed rate 15 year unsecured notes at an annualised coupon of 2.36%. After the issuance of these notes, the Company's total notes amounted to £50 million as at 30th June 2022.
There has been no change in the permitted gearing range, as previously set by the Board, which limits gearing within the range of 5% net cash to 20% geared in normal market conditions.
At the start of the reporting period, the gearing level was 0.2% and increased to 1.1% at the end of the year under review. During the year, gearing varied between 3.1% geared and 2.5% cash.
As part of the combination with SCIN, the Company has been substituted as issuer and sole debtor of the SCIN Bonds of which £82,827,000 in aggregate principal amount remain outstanding. Following the substitution, the SCIN Bonds remain listed and traded on the London Stock Exchange.
At the time of writing (at 26th September 2022), the gearing level stands at 2.6%.
Purchase of £200,000 secured 4.5% Perpetual Debenture
As announced on 8th March 2022, the Company purchased £196,708 of its indenture stock from a large institutional investor representing 98.35% of the issue. This was conducted at a price of 154.81 pence compared to the par value of 100 pence. The Board decided it would be prudent given the combination with SCIN to redeem the debenture as an effort to simplify the Company's balance sheet going into the transaction. This redemption was achieved at a level that was accretive to the Company and so was viewed as a further benefit to the Company and its shareholders.
Following this purchase, there remains 1.65% of the issue outstanding across two minority investors, both of whom have been offered the same terms for redemption.
Currency Hedging
The Company continues its passive currency hedging strategy (implemented in late 2009) that aims to make stock selection the predominant driver of overall portfolio performance relative to the Benchmark. This is a risk reduction measure, designed to eliminate most of the differences between the portfolio's currency exposure and that of the Company's Benchmark. As a result the returns derived from, and the portfolio's exposure to currencies may differ materially from, that of the Company's competitors, who generally do not undertake such a strategy.
The Board
The Board composition has expanded following the combination with SCIN to consist currently of eight members. I am pleased to welcome James Will, Jane Lewis, Mick Brewis and Neil Rogan, who were each appointed to the Board on 1st September 2022. This expansion ensures that both sets of shareholders are fully represented during the initial stages of the combination. It is our intention to continue this approach to provide continuity. However, to manage the size of the Board, James Will and Gay Collins will both subsequently retire from the Board at the conclusion of the Company's Annual General Meeting to be held on 3rd November 2022. Gay has also exceeded her nine-year tenure on the Board and will therefore not be seeking re-election to the Board.
Sarah Whitney will continue as Chair of the Audit & Management Engagement Committee and as Chair of the Remuneration Committee. It is intended that Jane Lewis will take over the responsibilities as Senior Independent Director upon Gay's retirement. I remain as Chairman of the Nomination Committee.
The Board is conscious of the increased focus on diversity and recognises the value and importance of diversity in the boardroom. No Directors are from a minority ethnic background. The appointment of Jane Lewis maintains the female representation on the Board following Gay's retirement from the Board at the conclusion of the forthcoming AGM of the Company on 3rd November 2022.
The Board supports the overall recommendations of the FTSE Women Leaders Review, which continues the work of the Hampton-Alexander and Davies Reviews that came before it and the Parker Report. However, with the enlarged composition, and for continuity over the coming years following the SCIN combination, it is not seen to be in the best interests of the Company and its shareholders to set prescriptive diversity targets for the Board at this point. As we refresh the Board in the future, as well as ensuring that we have a diverse range of individuals with the necessary skills and knowledge, we will aim to achieve a more ethnically diverse Board and with female representation to meet the recommendations of the FTSE Women Leaders Review.
All directors, with the exception of Gay Collins and James Will are subject to election or re-election at the forthcoming Annual General Meeting on 3rd November 2022.
I would like to take this opportunity to thank Gay for her valuable contributions and wise counsel during her tenure as a Director and also to James for his invaluable support during the Company's combination with SCIN and subsequent period on the Board assisting with the integration of the companies.
Annual General Meeting
The Company's one hundred and thirty-fifth AGM will be held at 60 Victoria Embankment, London EC4Y 0JP London at 2.30 p.m. on 3rd November 2022.
We are delighted that this year we will once again be able to invite shareholders to join us in person for the Company's AGM, to hear from the Investment Managers. Their presentation will be followed by a question and answer session. For shareholders wishing to follow the AGM proceedings but choosing not to attend, we will be able to welcome you through conferencing software. Details on how to register, together with access details, will be available on the Company's website: www.jpmglobalgrowthandincome.co.uk or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com.
As is best practice, all voting on the resolutions will be conducted on a poll. Please note that shareholders viewing the meeting via conferencing software will not be able to vote on the poll and we therefore encourage all shareholders, and particularly those who cannot attend physically, to exercise their votes in advance of the meeting by completing and submitting their proxy.
Your Board encourages all shareholders to support the resolutions proposed.
If there are any changes to the above AGM arrangements, the Company will update shareholders through the Company's website and an announcement on the London Stock Exchange.
Outlook
Let me say in conclusion that after a strong 2021, 2022 has been a difficult year to date for equity markets with rising concerns about elevated inflation, central bank tightening and the terrible devastation of Russia's invasion of Ukraine, causing significant volatility.
Concerns over rising inflation have led to increased bond yields and a severe de-rating in the valuation of growth companies, despite often strong underlying operational and financial performance. The direction of monetary policy is invariably a key determinant of the outlook for markets.
Central banks continue to deliver further interest rate rises, as anticipated given inflationary pressures. Global equity and fixed income markets rebounded in July as weaker activity data tempered expectations for further central bank tightening and Q2 earnings releases were better than feared. This said, the going is likely to get tougher for companies, faced with rising costs on the one hand and the removal of government support measures on the other, and hence we expect profit warnings and corporate failures to increase in the next 12 months.
In the shorter term we could well see increasing market volatility in a deteriorating global growth backdrop, with elevated inflation and risks to energy supply in Europe. However, we are inclined to view this prospect as a period of turbulence likely to provide attractive opportunities for our type of fundamental, longer term investment approach.
The Board is confident that the Investment Managers are well positioned to identify appropriate investment opportunities around the world and remain flexible to adjust the portfolio composition as they navigate market volatility, which is expected to remain high given investor sensitivity to inflation and the impact of tightening financial conditions against a weakening demand backdrop.
We believe that the Company's portfolio is well placed to deliver good performance over the longer term. The team has an excellent track record and we are optimistic that their disciplined approach will continue to generate good value for shareholders.