Half-year Report

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EUROPEAN GROWTH & INCOME PLC

HALF YEAR REPORT & FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30TH SEPTEMBER 2024

Legal Entity Identifier: 549300D8SPJFHBDGXS57

Information disclosed in accordance with the DTR 4.1.3

JPMorgan European Growth & Income plc reports financial performance for the half-year ended 30th September 2024.

HIGHLIGHTS

Key financial highlights include:

•     The total return on net assets with debt at fair value for six months to 30th September was -1.3% vs the Benchmark return of -0.4%.  The return to shareholders was -1.1%

•     Longer term performance remains strong.  For three years ended 30th September 2024 the NAV total return was +29.1%, outperforming the Benchmark's return of +18.8%. Share price return to shareholders, including dividends, was +28.1%.

•     For five years ended 30th September 2024 NAV total return was +64.2% vs the Benchmark return of 42.9%.  The return to shareholders was +69.7%. 

•     The dividend for the six months to 30th September is 2.40p per share, resulting in an estimated dividend yield of 4.8%. (Based on expected dividends of 4.8p for the year ending 31st March 2025 divided by the share price of 100.5p as at 30th September 2024.)

•     As at 30th September 2024, the Company's top three overweight sectors were Financials, Communication Services and Industrials.

Chair's Statement:

" The Company has marginally underperformed its benchmark in what remains a tricky backdrop of lowering growth expectations and geopolitical uncertainties. Despite this the Board believes the proposition of the Company is robust and effectively implemented.

Our Investment Managers proceed with their tried and tested approach. Having invested through many cycles they continue to operate a diversified portfolio, owning positions in companies whose fortunes although not immune are agile enough to remain resilient as we continue from 2024 into the next year."

Portfolio Managers' Report:

"Turning to the future the trade-off between economic growth and inflation remains crucial. At the time of writing European companies have again beaten expectations, albeit only by a small margin, in their third quarter earnings reports which is encouraging.

While experience suggests investors should not focus too much on political developments the outcome of elections in Germany in the spring and above all the possibility of damaging tariffs introduced by the next US administration are a concern. Nevertheless, we continue to find investment opportunities that satisfy our criteria relating to valuation, quality and operational momentum."

CHAIR'S STATEMENT

Introduction

In this six month reporting period to the 30th September 2024 the Company has marginally underperformed its benchmark in what remains a tricky backdrop of lowering growth expectations and geopolitical uncertainties.

Despite this the Board believes the proposition of the Company is robust and effectively implemented, allowing the Investment Managers the freedom to navigate European markets, whilst delivering to our shareholders the best of capital growth combined with a consistent income.

The devastating conflicts in Ukraine and Gaza continue with the latter escalating into Lebanon and Iran and threatening to engulf the wider region. At this time, there seems to be no end in sight to either tragedy. Global stock markets have shrugged off any material effects from these events, but geopolitical tensions, declining confidence levels and subdued domestic demand have taken their toll on the growth of the European economies. Throw into this mix the collapse of the German Government and a hung parliament in France and it seems from a top down perspective, the Eurozone has a lot to power through. However, there are factors that shine through the gloom. The European Central Bank (ECB) has remained proactive with three 0.25% interest rate reductions in June, September and October 2024 and headline inflation reduced to 1.8% in September supporting higher economic growth expectations in the years to come.

Performance

Return on net assets (NAV) and return to shareholders

The Company's net assets underperformed its benchmark by -0.9% in the period under review (debt at fair value). The total return on net assets was -1.3% (debt at fair value), compared with the benchmark which recorded a total return in sterling terms of -0.4%. Relative stock selection was the main reason for this. In their Report below, the Investment Managers review in more detail some of the factors underlying the performance of the Company as well as commenting on the economic and market background over the period in question. For an explanation of the calculation of the Company's NAV, please see the Glossary of Terms and Alternative Performance Measures in the Company's half year report and financial statements.

The total return to shareholders, which takes into account the movement of the share price over the period, underperformed the benchmark delivering a return of -1.1%.

Over three, five and 10 years the Company has outperformed its benchmark.

Dividends

One of the aims of the Company is to provide shareholders with a predictable dividend income at a level that is consistent and frequent. This has been set at 4% of the preceding year NAV payable in July, October, January and March. In line with the above aim, in respect of the year ending 31st March 2025, the Company has paid the first interim dividend of 1.20 pence per Ordinary share and declared the second interim dividend of 1.20 pence per Ordinary share. Between the end of this six month reporting period and the release of this report, the Company's Board declared a third interim dividend of 1.20 pence per Ordinary share.

The Board is expecting to declare the fourth interim dividend in February 2025. As was the case for the Company's dividends in respect of the year ended 31st March 2024, to the extent that brought forward revenue reserves are not sufficient, dividends will be paid from distributable capital reserves for the financial year ending 31st March 2025, as permitted by the Company's Articles.

Gearing

There has been no change in the Investment Manager's permitted gearing range, as previously set by the Board, of between 10% net cash to 20% geared. At 30th September 2024 the Company held a gearing level of 4.5% (31st March 2024: 4.5%).

Discounts, Share Issuance and Repurchase

During the period under review, the average discount across the Investment Trust sector has continued to remain at elevated levels. This seems to have been exacerbated by uncertainties over the UK budget with investors taking opportunities to reallocate. The Board remain confident in the liquidity and transparency of the markets in which your Company invests, however we remain alive to dislocations beyond our comfort levels, addressing imbalances in the supply of and demand for the Company's shares through a buy-back of shares. The Board does not wish to see the discount widen beyond 10% under normal market conditions (using the cum-income NAV with debt at fair value) on an ongoing basis. The precise level and timing of repurchases is dependent on a range of factors including prevailing market conditions.

In the period under review, 1,800,000 Ordinary shares were bought into Treasury. From 1st October 2024 to 25th November 2024, 3,580,000 Ordinary shares were bought into Treasury. No Ordinary shares were issued.

The Company's Ordinary share discount as at 30th September 2024 was 12.2% to NAV with debt at fair value. The average discount of a peer group of five companies as at the same date was 9.5%. On 25th November, 2024, the Company's Ordinary share discount was 11.7%, which compares to an average discount of the same peer group of 11.2% as at the same date, though this hides variation in strategy and performance across the sector.

Board of Directors

As previously referred to in the Company's annual report, in line with the Company's Board succession plan, Jutta af Rosenborg retired at the Company's Annual General Meeting on 3rd July 2024 as Director and Audit Committee Chair on reaching her nine-year tenure. Andrew Robson was appointed as the Company's Audit Committee Chair on the same date. On behalf of the Board thanks were given to Jutta af Rosenborg for the diligence, commitment and clear vision that she provided to the Company during her tenure.

AIC Investment Week 2024 Nomination

The Company was again a nominee in the best investment company in the European sector at the annual AIC Investment Week Award ceremony. When the Company won the award in 2023 the judges had commended the Company's performance and the benefits provided by its simplified and shareholder focused structure.

Outlook

We cannot be complacent as to the fragility of the geopolitical outlook. There is a distinct possibility a widening escalation of conflict in the Middle East means further uncertainty as to the direction of economic growth and inflation if energy prices rise as a consequence. We must also acknowledge the US Presidential elections, where the arrival of President Trump in the New Year could bring significant change both to the world stage and to US economic policy including a faster resolution to the conflicts pre-occupying us all.

Regardless of the backdrop, our Investment Managers proceed with their tried and tested approach. Having invested through many cycles they continue to operate a diversified portfolio, owning positions in companies whose fortunes although not immune are agile enough to remain resilient as we continue from 2024 into the next year. As ever, we remain confident in their abilities to deliver attractive returns to shareholders.

Rita Dhut

Chair                                                                                                                                                                                     27th November 2024

INVESTMENT MANAGERS' REPORT

Market background

Following a strong finish to the Company's financial year ending in March, European equity markets have ended the half year essentially flat over the six months to the end of September. At the start of the period economic recovery in the Eurozone appeared to be gaining momentum, amid faster increases in business activity, new orders and strong employment data, while business confidence hit a 27-month high. Service sectors continued to act as the key pillar of strength, although there were also signs of a recovery in manufacturing. Moreover, the unemployment rate in the Euro Area hit a fresh record low of 6.4% in April 2024, down from 6.5% in each of the prior five months. Despite an uptick in inflation the ECB started to cut interest rates in June. Cyclical and small cap stocks performed well in this environment.

However, by late summer investors became increasingly concerned that their optimism about European economic growth was proving premature with a slowing services sector and little sign of a recovery in manufacturing. Weaker economic indicators from the US and above all increasing concerns about the ongoing slowdown in China led to a sharp pullback in the market. Companies with significant exposure to China such as auto manufacturers and luxury goods companies suffered. The technology sector also struggled particularly as worries that the boom in Artificial Intelligence stocks was overblown. Nevertheless, the announcement of various Chinese stimulus measure saw many of the worst effected stocks rally sharply. By the end of September, the Company's benchmark index had fallen -0.4%.

Portfolio Review

The Trust NAV (debt at fair value) returned -1.3% in the period under review, underperforming its benchmark by -0.9%. Stock selection within Materials and Pharmaceuticals offset positive stock selection within Capital Goods. Bekaert in materials was impacted by lower wire rod pricing as well as weakness in their rubber business due to a sluggish European automotive market. Novo Nordisk underperformed following weaker than expected sales for Wegovy and Ozempic and releasing clinical results showing its small molecule oral weight loss drug caused neuropsychiatric side effects. On the positive side, not owning Airbus benefitted performance as the company faced supply chain issues. Prysmian, a cable maker, continues to benefit from electrification and digitalization trends.

We added to positions in Financials, including Banco Santander and Deutsche Boerse. Banco Santander is attractively valued, with operational performance improving in the US and Brazil, and a renewed discipline on capital allocation. Deutsche Boerse is guiding to above market organic growth with an improving mix of higher quality recurring revenues. On the other end of the cyclical-defensive spectrum, we added in the Utilities, Telecoms and Health Care sectors. This included stocks such as Enel, Deutsche Telekom and Roche.

We reduced positioning in consumer exposed stocks such as LVMH, L'Oreal and Nestle. Following, its takeover approach for Banco Sabadell, we reduced our holding in BBVA recognizing the regulatory hurdles ahead. We also reduced exposure in the Semiconductor and Autos sectors, with reductions in Infineon, ASML, BMW and Mercedes-Benz. The net effect of our actions through this period has been to reduce our exposure to China.

By the end of the half year, the Company's top three overweight sectors were Financials, Communication Services and Industrials.

Market Outlook

Turning to the future the tradeoff between economic growth and inflation remains crucial. At the time of writing European companies have again beaten expectations, albeit only by a small margin, in their third quarter earnings reports which is encouraging. While experience suggests investors should not focus too much on political developments the outcome of elections in Germany in the spring and above all the possibility of damaging tariffs introduced by the next US administration are a concern. Nevertheless, we continue to find investment opportunities that satisfy our criteria relating to valuation, quality and operational momentum.

Alexander Fitzalan Howard

Zenah Shuhaiber

Tim Lewis

Investment Managers                                                                                                                                             27th November 2024

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report:

Principal Risks and Uncertainties

The Principal Risks and uncertainties faced by the Company fall into the following broad categories: investment; operational; regulatory; discount/premium to NAV; strategy; climate change; geopolitical and economic concerns; artificial intelligence ('AI'). Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st March 2024. A review of risks conducted for this report concluded that except for a decrease in the pandemic risk and an increase in the intensity of geopolitical risks, the principal risks and uncertainties faced by the Company have not changed significantly.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Going Concern

The Directors believe, having considered the Company's investment objectives, future cash flow projections, risk management policies, liquidity risk, principal and emerging risks, capital management policies and procedures, nature of the portfolio and expenditure projections and the economic and operational impact of Russia's invasion of Ukraine other conflicts and geopolitical tensions that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties relating to the Company that would prevent its ability to continue in such operation existence for at least 12 months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)         the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)        the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•           select suitable accounting policies and then apply them consistently;

•           make judgements and accounting estimates that are reasonable and prudent;

•           state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•           prepare the financial statements on the 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.

For and on behalf of the Board

Rita Dhut

Chair                                                                                                                                                                                     27th November 2024

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30th September 2024

All revenue and capital items in the above statement derive from continuing operations.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns

represent supplementary information prepared under guidance issued by the Association of Investment Companies.

Net return/(loss) after taxation represents the profit/(loss) for the period/year and also the total comprehensive income.

CONDENSED STATEMENT OF CHANGES IN EQUITY

1      These reserves form the distributable reserve of the Company and may be used to fund distribution of profits to investors.

CONDENSED STATEMENT OF FINANCIAL POSITION

At 30th September 2024

For the 2024 year end, the 'Fixed Assets' sub-heading was changed to 'Non-Current Assets' to align to the adapted format under FRS 102. This change did not result in any measurement changes.

CONDENSED STATEMENT OF CASH FLOWS

For the six months ended 30th September 2024

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30th September 2024

1.    Financial statements

The information contained within the condensed financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st March 2024 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.   Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in July 2022.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 30th September 2024.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st March 2024.

3.   Return/(loss) per share

4.   Dividends paid

All dividends paid and declared in the period have been funded from the Revenue Reserve.

The Company's second interim dividend of 1.20p per share was paid on 1st November 2024 at a cost of £5,128,000

5.   Net asset value per share

The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the period/year end are shown below. These were calculated using 427,369,449 (30th September 2023: 430,969,508; 31st March 2024: 429,169,449) Ordinary shares in issue at the period/year end (excluding Treasury shares).

6.   Fair valuation of instruments

The fair value hierarchy analysis for financial instruments held at fair value at the period end is as follows:

¹     Forward foreign currency contracts.

7.   Analysis of changes in net debt

JPMORGAN FUNDS LIMITED

 27^th November 2024

For further information, please contact:

Paul Winship

JPMorgan Funds Limited

Telephone: 0800 20 40 20 or or +44 1268 44 44 70

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.

ENDS

A copy of the half year will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Half Year Report will also shortly be available on the Company's website at www.jpmrealassets.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.