Half Year Report JPMorgan European Investment Trust plc · 2017-02-03 · T H E C O M P A N Y JPMorgan European Investment Trust plc. Half Year Report & Accounts 2012 5 Chairman’s

Half Year Report2012JPMorgan European Investment Trust plc

Half Year Report & Accounts for the six months ended 30th September 2012

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JPMorgan European Investment Trust plc. Half Year Report & Accounts 20122

Half Year PerformanceTotal returns (includes dividends reinvested)

Growth Portfolio+2.5%Return to shareholders1

–0.6%Return on net assets2

–1.8%Benchmark return3

Long Term Performance1

Return to Return on Benchmarkshareholders net assets return

3 Year Performance (1st Oct 2009 – 30th Sept 2012) +4.2% +0.7% –3.7%

5 Year Performance (1st Oct 2007 – 30th Sept 2012) –14.0% –15.2% –10.7%

10 Year Performance (1st Oct 2002 – 30th Sept 2012) +171.4% +134.7% +138.9%

Financial Data30th September 31st March %

2012 2012 change

Shareholders’ funds (£’000) 177,806 186,990 –4.9

Number of shares in issue 97,091,853 100,351,487 –1.8

Net asset value per share 183.1p 186.3p –1.7

Share price 163.0p 164.0p –0.6

Share price discount to net asset value per share4 8.5% 10.9%

A glossary of terms and definitions is provided on page 28.

1Source: Morningstar.2Source: J.P.Morgan.3Source: FTSE. The Growth portfolio’s benchmark is the FTSE All World Developed Europe (ex-UK) Index in sterling terms(total return). 4Based on capital-only net asset value. Source: Bloomberg.

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JPMorgan European Investment Trust plc. Half Year Report & Accounts 2012 3

Half Year PerformanceTotal returns (includes dividends reinvested)

Income Portfolio +2.6%Return to shareholders1

+0.8%Return on net assets2

–0.5%Benchmark return3

Long Term Performance1

Return to Return on Benchmarkshareholders net assets return



5 Year Performance(1st Oct 2007 – 30th Sept 2012) +2.3% +2.4% –6.0%

Financial Data30th September 31st March %

2012 2012 change

Shareholders’ funds (£’000) 61,048 61,895 –1.4

Number of shares in issue 63,311,986 63,849,822 –0.8

Net asset value per share 96.4p 96.9p –0.5

Share price 85.5p 86.5p –1.2

Share price discount to net asset value per share4 9.1% 9.9%

A glossary of terms and definitions is provided on page 28.

1Source: Morningstar.2Source: J.P.Morgan.3Source: MSCI. The Income portfolio’s benchmark is the MSCI Europe Index in sterling terms (total return).4Based on capital-only net asset value. Source: Bloomberg.

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Features

Contents

About the Company

2 Half Year Performance – GrowthPortfolio

3 Half Year Performance – IncomePortfolio

5 Chairman’s Statement7 Investment Managers’ Report

Growth Shares

9 List of Investments 10 Portfolio Analyses 12 Income Statement 13 Balance Sheet

Income Shares

14 List of Investments15 Portfolio Analyses17 Income Statement18 Balance Sheet

Accounts

19 Income Statement20 Reconciliation of Movements in

Shareholders’ Funds21 Balance Sheet22 Cash Flow Statement23 Notes to the Accounts

Shareholder Information

26 Interim Management Report27 Capital Structure and Conversion

between Share Classes28 Glossary of Terms and Definitions31 Information about the Company

Objectives

Growth Capital growth from Continental European investments, by consistentoutperformance of the benchmark and a rising share price over the longer termby taking carefully controlled risks through an investment method that is clearlycommunicated to shareholders.

Income To provide a growing income together with the potential for long-term capital growthfrom a diversified portfolio of investments in pan-European stockmarkets.

Investment Policies

Growth - To invest in a diversified portfolio of investments in the stockmarkets ofContinental Europe. - To emphasise capital growth rather than income, with the likely result that thedividend will fluctuate. - To use borrowings to increase potential returns to shareholders. - To invest no more than 15% of the assets attributable to the Growth shares in otherUK listed investment companies (including investment trusts).

Income - To invest in a diversified portfolio of investments in pan-European stockmarkets. - To provide a growing income together with the potential for long-term capitalgrowth. - To manage liquidity and borrowings to increase returns to shareholders. - To invest no more than 15% of the assets attributable to the Income shares in otherUK listed investment companies (including investment trusts).

Benchmarks

Growth The FTSE All World Developed Europe (ex UK) Index in sterling terms (total return).

Income The MSCI Europe Index in sterling terms (total return).

Capital Structure

At 30th September 2012, the Company’s share capital comprised 98,507,423 Growthshares and 63,311,986 Income shares.

Management Company

The Company employs JPMorgan Asset Management (UK) Limited (‘JPMAM’ or the‘Manager’) to manage its assets.

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Chairman’s Statement

Performance

In the six months to 30th September 2012 the Company’s Growth portfolio produceda total return (capital plus net income reinvested) of –0.6% against a total return onthe benchmark index, the FTSE All World Developed Europe (ex-UK) Index, of –1.8%(both in sterling terms). The Growth share price fell by 0.6% over the six months but,with net dividends re-invested, the total return to Growth shareholders was 2.5%. It ispleasing to report this outperformance of the benchmark and the Growth portfolioalso remains slightly ahead of benchmark over three years.

In the same period, the Income portfolio produced a total return of 0.8%, comparedwith the total return on the benchmark index, the MSCI Europe Index, of –0.5%. Withnet dividends re-invested, the total return to shareholders was 2.6% over the period.This capital outperformance, whilst maintaining a good yield, leaves the Incomeportfolio comfortably ahead of benchmark over two and five years.

The factors underlying the performance of the two portfolios over the period areexplained in the Investment Manager’s Report on pages 7 and 8.

Revenue and Dividends

Earnings per share on the Growth portfolio for the six months to 30th September2012 (calculated by reference to the average number of shares in issue over theperiod) amounted to 4.39 pence per share (2011: 5.62 pence). A first interimdividend of 4.80 pence per Growth share was paid on 5th October 2012 (2011:4.80 pence).

Earnings per share on the Income portfolio for the first half (again, calculated byreference to the average number of shares in issue over the period) amounted to2.89 pence per share (2011: 3.47 pence). Despite the decline in earnings, the Boardmaintained the first interim dividend of 3.00 pence per Income share paid on5th October 2012 (2011: 3.00 pence) and hopes to be able to maintain similarlythe dividend for the full year.

Both dividend payments reflect the Board’s policy to pay dividends in line withrevenues received on the underlying portfolios, in order to ensure that income isdistributed in line with shareholdings ahead of each conversion opportunity (inSeptember and March each year).

Share Repurchases

The Board has a proactive and structured approach to the use of its share repurchasepowers. It remains of the view that it is important to seek to address imbalances inthe supply of and demand for the Company’s shares and to minimise thereby thevolatility and absolute level of the discount to net asset value at which the Company’sshares trade. As stated previously, your Board does not wish to see the discountswiden beyond 10% on an ongoing basis. The precise level and timing of repurchasescarried out pursuant to this policy depend upon prevailing market conditions, which

European HY_pp03_08_European HY_pp03_08_B 29/11/2012 15:33 Page 5

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have been highly volatile during the period, and the Board continues to monitor thispolicy in light of market conditions.

During the six months ended 30th September 2012, the Company repurchased a totalof 3,253,399 Growth shares and 1,043,353 Income shares for cancellation. Theserepurchases were made at discounts between approximately 9.7% and 13.1% and10.0% and 14.5% respectively (with debt valued at par). Since the period end, theCompany has repurchased a further 490,174 Growth shares and 574,518 Incomeshares for cancellation.

Investment Management Team

I am please to report that Michael Barakos, Chief Investment Officer EuropeanEquities Behavioural Finance Team, has become co-manager of the Income Sharesportfolio.

For and on behalf of the BoardAndrew MurisonChairman 27th November 2012

Chairman’s Statement continued

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Stephen Macklow-Smith

Alexander Fitzalan Howard

Michael Barakos

Investment Managers’ Report

During the first three months of the period under review, the European indexcorrected around 10% after rallying into March. Bond markets in Italy and Spaincame under attack as slowing growth raised the possibility of a further deteriorationin their debt position. In addition, the new Spanish government admitted that issuesin the Spanish banking sector continued to overshadow the Spanish economy, withexposure to real estate and developers still problematic. Politics also exerted anegative effect, with a general election in Greece in early May returning no overallwinner, but the extreme left bloc, Syriza, emerging as a surprise runner-up.Mr Sarkozy lost the Presidential election to Francois Hollande, with the Socialistsalso gaining an overall majority in the French Parliament.

The lack of a result in Greece triggered a second election. Campaigning wasdominated by Syriza’s promise to repudiate the previous Memorandum ofUnderstanding with the Troika , and this led to speculation that a Syriza victorymight result in a hasty Greek exit from the Euro. During the resultant rounds ofdiplomacy the Troika reaffirmed its opposition to any renegotiations, but at thesame time a consensus coalesced around the leaders of France, Italy and Spainthat the EU collectively needs to do more to foster growth. During the quarter theEuro fell further, by around 4% on a trade-weighted basis, and the Eurozone PMIcontinued to weaken.

This weaker growth picture was not confined to Europe, however. US jobs numbersdisappointed, and continuing signs of a Chinese slowdown weighed on sentiment.Commodity prices, often viewed as a barometer of economic strength, fell, with theoil price particularly weak, falling by around 25%. Weaker growth forecasts had anegative effect on earnings forecasts, with analysts revising expectations lower onceagain. Reflecting this perception of slowing growth, bond yields also fell in the US andthe UK. German bond yields also fell, although they gave back some of the fall in theaftermath of the EU summit in June, which appeared to open the way to greaterNorthern European support for the periphery.

The EU summit delivered in a number of areas, with the Eurozone taking the firststeps towards a banking union, with the ECB as regulator. There was also an attemptto break the link between governments and banks by opening the possibility of EUbail-out funds bailing out banks directly, rather than forcing the funding to go viagovernment and, in the process, driving up the burden of government debt to GDP.The initial reaction to the summit was optimistic, with Italian and Spanish bondssignificantly narrowing their spread against Bunds, and both the Euro and Europeanstock markets rallying.

The rally continued into September, with the market gaining nearly 20% from thetrough in May. Much of the new-found optimism stemmed from a significant changein stance by the European Central Bank, preceded by an important interview given byMr Draghi, in which he said that the Euro was ‘irreversible’ and that the ECB would do‘whatever it takes’ to protect it, and that nothing was taboo. Investors interpreted thisas meaning that the ECB would make use of the ultimate power of central banks,which is that their balance sheet is theoretically unlimited. At the ECB’s meeting inearly September, Mr Draghi launched a new policy, called Outright MonetaryTransactions (OMT), meaning in brief that if countries ask for aid and submit to certainconditions the ECB will intervene at maturities up to three years to ensure that therates at which governments can borrow bears some relation to the ECB’s own policyrate. Mr Draghi was able to present this as an exercise in ensuring that the ECB’s

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mandate to set monetary conditions for the Euro area was actually being effective,and he found support for the new policy from Chancellor Merkel, even though he hadmade it clear that OMT could be unlimited in scope. Shortly afterwards the GermanConstitutional Court ruled that the ESM was consistent with the German Constitution,removing another hurdle to Europe’s crisis management mechanisms.

We also heard in September that the Federal Reserve and the Bank of England wereto expand their quantitative easing programmes, and the Fed announced that theywould keep interest rates close to zero through to 2015. In the case of the Fed, theannouncement on QE also spoke of its being theoretically unlimited in size, and thatthe intention was to bring unemployment down significantly. Central banks havemade it clear, therefore, that they will continue to apply huge monetary stimulus tothe economy, and will gauge the success of their policies against real economicindicators.

Speculation continued over whether Spain would need to go into a programme ofsupport. Spain published the details behind its bank sector restructuring, and alsoadmitted as part of its 2013 budget that the budget deficit in 2012 would exceedprevious expectations, largely because of an undershoot in growth. Greece’sinspection by the Troika was concluded, and a report into their findings is expectedshortly after the date of this report. It appears that the appetite for a Greek exit fromthe Euro has appreciably diminished.

The second quarter results season was disappointing at both the revenue and theprofit lines as analysts put through further reductions in their estimates of 2012profits. The Euro rallied against the US Dollar, and the oil price also rose, although itdid not manage to get close to its March high. Manufacturing confidence indicesremain fairly depressed, suggesting that growth in the Eurozone is still weak.

Performance across both legs was satisfactory. The Growth leg saw the share pricerise by 2.5% on a total return basis and the NAV fell by 0.6%, against a benchmarkwhich fell by 1.8%. The major contributor to performance was stock selection,although gearing was a modest detractor. In the Income leg the stock price rose by2.6% on a total return basis, with the NAV rising by 0.8% against a benchmark whichfell by 0.5%. In both legs the dividend paid in September was kept at the same levelas the previous year, reflecting the fact that earnings in Europe are expected to showlittle if any growth in 2012.

Stephen Macklow-SmithAlexander Fitzalan Howard Michael BarakosInvestment Managers 27th November 2012

Investment Managers’ Reportcontinued

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ValueCompany Country Sector £’000 %

Nestlé Switzerland Consumer Goods 7,288 3.9Roche Switzerland Health Care 6,414 3.4Novartis Switzerland Health Care 6,310 3.4Sanofi-Aventis France Health Care 5,461 2.9Total France Oil & Gas 5,046 2.7Anheuser-Busch InBev Belgium Consumer Goods 4,334 2.3JPMorgan European Smaller Companies Trust UK Financials 4,255 2.3ENI Italy Oil & Gas 4,112 2.2Novo-Nordisk Denmark Health Care 4,087 2.2Zurich Financial Services Switzerland Financials 3,874 2.1JPM Micro Cap Luxembourg Financials 3,461 1.9E.ON Germany Utilities 3,298 1.8Unilever Netherlands Consumer Goods 3,236 1.7BNP Paribas France Financials 3,072 1.6Ahold Netherlands Consumer Services 2,958 1.6BASF Germany Basic Materials 2,906 1.6Banco Santander Spain Financials 2,668 1.4Deutsche Post Germany Industrials 2,579 1.4Michelin France Consumer Goods 2,504 1.3Svenska Handelsbanken Sweden Financials 2,488 1.3Hannover Rueckversicherungs Germany Financials 2,483 1.3Eiffage France Industrials 2,479 1.3Swiss Re Switzerland Financials 2,355 1.3Skandinaviska Enskilda Banken Sweden Financials 2,328 1.2SAP Germany Technology 2,310 1.2Volkswagen Germany Consumer Goods 2,175 1.2Bilfinger Berger Germany Industrials 2,011 1.1RWE Germany Utilities 1,933 1.0Swedbank Sweden Financials 1,822 1.0Vivendi France Consumer Services 1,808 1.0DSM Netherlands Basic Materials 1,769 0.9Ferrovial Spain Industrials 1,715 0.9Belgacom Belgium Telecommunications Services 1,654 0.9Banco Bilbao Vizcaya Argentaria Spain Financials 1,646 0.9JPM Eastern European Fund Luxembourg Financials 1,551 0.8Telecom Italia Italy Telecommunications Services 1,547 0.8Ageas Belgium Financials 1,433 0.8AXA France Financials 1,342 0.7Deutsche Bank Germany Financials 1,332 0.7Oerlikon Corporation Switzerland Industrials 1,297 0.7

Total 117,341 62.7

1For full portfolio go to www.jpmeuropean.co.uk

Forty Largest Investments1at 30th September 2012


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Geographic30th September 2012 31st March 2012

Portfolio Benchmark Portfolio Benchmark%1 % %1 %

Switzerland 18.8 20.0 15.6 19.5

France 18.6 22.6 18.4 23.2

Germany 17.4 18.6 19.3 19.6

Netherlands 8.8 6.1 9.1 6.0

Sweden 7.0 7.6 9.5 7.3

Spain 5.4 6.8 6.2 6.9

Italy 5.4 5.6 5.4 5.9

Belgium 5.3 2.6 2.9 2.3

Denmark 4.1 4.1 3.4 2.9

Finland 3.0 1.7 3.9 2.0

Norway 1.4 2.5 2.1 2.4

Austria 0.7 0.7 0.5 0.8

United Kingdom 0.7 — 0.5 —

Russia 0.5 — 0.7 —

Turkey 0.2 — 0.1 —

Luxembourg 0.1 — — —

Poland 0.1 — 0.1 —

Portugal — 0.5 — 0.6

Ireland — 0.4 — 0.4

Greece — 0.2 — 0.2

Fixed Interest2 2.5 — 2.3 —

Total Investments 100.0 100.0 100.0 100.0

1Based on total investments of £183.2m (31st March 2012: £192.4m), which includes investment of any borrowings to gear the portfolio and excludes liquidity fund holdings and netcurrent liabilities.2Consists entirely of German Bundesrepublik Deutschland 4.00% 2037.

Portfolio Analyses


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Sector30th September 2012 31st March 2012


Financials2 18.9 19.6 18.8 19.8

Consumer Goods 18.5 19.2 17.9 19.2

Industrials 15.2 14.9 14.7 15.0

Health Care 13.3 12.9 12.5 11.6

Oil & Gas Producers 7.6 6.9 8.5 7.1

Basic Materials 6.1 8.6 7.5 8.3

Consumer Services 5.5 5.1 5.4 5.1

Telecommunications Services 4.4 4.6 4.0 5.1

Technology 4.4 3.5 4.0 3.8

Utilities 3.6 4.7 4.4 5.0



1Based on total investments of £183.2m (31st March 2012: £192.4m), which includes investment of any borrowings to gear the portfolio and excludes liquidity fund holdings and netcurrent liabilities.2Includes £9.3m invested in investment companies, representing 5.1% of the portfolio (31st March 2012: £10.2m, representing 5.3% of the portfolio).3Consists entirely of German Bundesrepublik Deutschland 4.00% 2037.


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(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended

30th September 2012 30th September 2011 31st March 2012Revenue Capital Total Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Losses on investments held at fair value through profit or loss — (6,400) (6,400) — (66,269) (66,269) — (44,037) (44,037)

Net foreign currency gains/(losses) — 769 769 — (340) (340) — (64) (64)Income from investments 5,236 — 5,236 6,928 — 6,928 9,179 — 9,179Other interest receivable and similarincome 82 — 82 453 — 453 455 — 455

Gross return/(loss) 5,318 (5,631) (313) 7,381 (66,609) (59,228) 9,634 (44,101) (34,467)Management fee (198) (462) (660) (183) (426) (609) (306) (715) (1,021)Performance fee (charge)/writeback — (364) (364) — 914 914 — 879 879Other administrative expenses (242) — (242) (249) — (249) (521) — (521)

Net return/(loss) on ordinary activities before finance costs and taxation 4,878 (6,457) (1,579) 6,949 (66,121) (59,172) 8,807 (43,937) (35,130)

Finance costs (37) (87) (124) (123) (285) (408) (178) (414) (592)

Net return/(loss) on ordinary activities before taxation 4,841 (6,544) (1,703) 6,826 (66,406) (59,580) 8,629 (44,351) (35,722)

Taxation (516) — (516) (672) — (672) (906) — (906)

Net return/(loss) on ordinary activities after taxation 4,325 (6,544) (2,219) 6,154 (66,406) (60,252) 7,723 (44,351) (36,628)

Return/(loss) per Growth share 4.39p (6.64)p (2.25)p 5.62p (60.65)p (55.03)p 7.28p (41.81)p (34.53)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired ordiscontinued in the period.

The ‘Total’ column of this statement is the profit and loss account of the Growth pool of assets and the ‘Revenue’ and ‘Capital’columns represent supplementary information.

Growth PortfolioIncome Statementfor the six months ended 30th September 2012


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(Unaudited) (Unaudited) (Audited)30th September 30th September 31st March

2012 2011 2012£’000 £’000 £’000

Fixed assets Investments held at fair value through profit or loss 183,165 183,275 192,381Investments in liquidity funds held at fair value through profit or loss 3,736 1,809 8,418

Total portfolio 186,901 185,084 200,799

Current assets Debtors 713 730 1,237Cash and short term deposits 4,732 189 310Derivative financial instruments — forward foreign currency contracts held at fair value through profit or loss 12 330 19

5,457 1,249 1,566Creditors: amounts falling due within one year (13,479) (14,669) (14,615)Derivative financial instruments — forward foreign currency contracts held at fair value through profit or loss (19) (734) (71)

Net current liabilities (8,041) (14,154) (13,120)

Total assets less current liabilities 178,860 170,930 187,679Creditors: amounts falling due after more than one year Provisions for liabilities and chargesPerformance fee (1,054) (670) (689)

Net assets 177,806 170,260 186,990

Net asset value per Growth share 183.1p 162.5p 186.3p

Growth PortfolioBalance Sheetat 30th September 2012


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ValueCompany Country Sector £’000 %

Royal Dutch Shell United Kingdom Energy 2,079 3.1HSBC United Kingdom Financials 1,562 2.3Novartis Switzerland Health Care 1,346 2.0Vodafone United Kingdom Telecommunication Services 1,309 2.0BP United Kingdom Energy 1,277 1.9Roche Switzerland Health Care 1,268 1.9GlaxoSmithKline United Kingdom Health Care 1,113 1.7Sanofi-Aventis France Health Care 1,078 1.6Total France Energy 1,018 1.5British American Tobacco United Kingdom Consumer Staples 964 1.4Unilever United Kingdom Consumer Staples 859 1.3BASF Germany Materials 736 1.1BHP Billiton United Kingdom Materials 699 1.0Rio Tinto United Kingdom Materials 685 1.0ENI Italy Energy 584 0.9Allianz Germany Financials 575 0.9Tesco United Kingdom Consumer Staples 493 0.7BNP Paribas France Financials 486 0.7Banco Bilbao Vizcaya Argentaria Spain Financials 477 0.7E.ON Germany Utilities 472 0.7National Grid United Kingdom Utilities 446 0.7Zurich Financial Services Switzerland Financials 440 0.7Barclays United Kingdom Financials 429 0.6Imperial Tobacco United Kingdom Consumer Staples 427 0.6Deutsche Telekom Germany Telecommunication Services 415 0.6Reckitt Benckiser United Kingdom Consumer Staples 409 0.6Prudential United Kingdom Financials 402 0.6Daimler Germany Consumer Discretionary 400 0.6BT United Kingdom Telecommunication Services 360 0.5Munich Re Germany Financials 349 0.5AXA France Financials 346 0.5Statoil Norway Energy 340 0.5Nordea Bank Sweden Financials 336 0.5Centrica United Kingdom Utilities 333 0.5GDF Suez France Utilities 333 0.5Philips Electronics Netherlands Industrials 323 0.5Enel Italy Utilities 320 0.5Vivendi France Telecommunication Services 317 0.5RWE Germany Utilities 314 0.5Swiss Re Switzerland Financials 312 0.5

Total 26,431 39.4

1For full portfolio go to www.jpmeuropean.co.uk

Forty Largest Investments1at 30th September 2012

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Geographic30th September 2012 31st March 2012


United Kingdom 41.8 35.6 45.2 33.4

France 11.0 14.1 7.7 14.3

Germany 8.9 13.1 8.9 13.3

Switzerland 6.1 13.2 7.3 13.3

Sweden 5.5 5.0 3.6 4.9

Finland 5.3 1.1 5.0 1.4

Italy 5.1 3.4 4.7 3.6

Spain 4.4 4.4 4.4 4.5

Norway 3.6 1.5 3.8 1.5

Netherlands 3.2 3.8 2.8 5.2

Belgium 1.8 1.8 1.6 1.6

Ireland 0.5 0.4 0.7 0.5

Austria 0.4 0.4 0.8 0.4

Denmark 0.4 1.8 0.4 1.7

Luxembourg 0.2 — — —

Portugal — 0.3 1.0 0.3

Greece — 0.1 0.4 0.1



1Based on total investments of £63.6m (31st March 2012: £65.9m), which includes investment of any borrowings to gear the portfolio and excludes liquidity fund holdings and netcurrent liabilities.2Consists entirely of German Bundesrepublik 4.00% 2037.

Portfolio Analyses

Sector30th September 2012 31st March 2012


Financials 22.9 19.2 23.7 19.1

Industrials 12.6 10.8 10.6 10.9

Consumer Discretionary 12.0 8.5 9.8 8.8

Energy 10.3 11.4 12.1 11.8

Consumer Staples 8.5 14.9 12.1 14.0

Health Care 8.4 12.3 7.3 11.3

Telecommunications Services 7.6 6.1 6.6 6.4

Utilities 7.4 4.4 7.2 4.7

Materials 6.8 9.5 6.6 9.9

Information Technology 1.7 2.9 2.3 3.1



1Based on total investments of £63.6m (31st March 2012: £65.9m), which includes investment of any borrowings to gear the portfolio and excludes liquidity fund holdings and netcurrent liabilities.2Consists entirely of German Bundesrepublik 4.00% 2037.

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Portfolio Analyses continued

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30th September 2012 30th September 2011 31st March 2012Revenue Capital Total Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000


Net foreign currency (losses)/gains — (134) (134) — 295 295 — 325 325Income from investments 2,134 — 2,134 2,287 — 2,287 3,295 — 3,295Other interest receivable and similarincome 21 — 21 78 — 78 80 — 80

Gross return/(loss) 2,155 (1,304) 851 2,365 (12,484) (10,119) 3,375 (6,797) (3,422)Management fee (99) (148) (247) (111) (167) (278) (210) (316) (526)Performance fee — (71) (71) — (66) (66) — 61 61Other administrative expenses (65) — (65) (65) — (65) (148) — (148)

Net return/(loss) on ordinary activities before finance costs and taxation 1,991 (1,523) 468 2,189 (12,717) (10,528) 3,017 (7,052) (4,035)

Finance costs (27) (41) (68) (54) (81) (135) (95) (143) (238)

Net return/(loss) on ordinary activities before taxation 1,964 (1,564) 400 2,135 (12,798) (10,663) 2,922 (7,195) (4,273)

Taxation (130) — (130) (140) — (140) (169) — (169)

Net return/(loss) on ordinary activities after taxation 1,834 (1,564) 270 1,995 (12,798) (10,803) 2,753 (7,195) (4,442)

Return/(loss) per Income share 2.89p (2.46)p 0.43p 3.47p (22.24)p (18.77)p 4.56p (11.91)p (7.35)p


The ‘Total’ column of this statement is the profit and loss account of the Income pool of assets and the ‘Revenue’ and ‘Capital’columns represent supplementary information.

Income PortfolioIncome Statementfor the six months ended 30th September 2012

(Unaudited) (Unaudited) (Audited)30th September 30th September 31st March

2012 2011 2012£’000 £’000 £’000

Fixed assets Investments held at fair value through profit or loss 63,561 56,891 65,895Investments in liquidity funds held at fair value through profit or loss 3,241 4,025 3,057

Total portfolio 66,802 60,916 68,952

Current assets Debtors 287 505 602Cash and short term deposits 1,253 2,377 200Derivative financial instruments — forward foreign currency contracts held at fair value through profit or loss 28 145 15

1,540 3,027 817Creditors: amounts falling due within one year (7,195) (7,878) (7,837)Derivative financial instruments — forward foreign currency contracts held at fair value through profit or loss (21) (504) —

Net current liabilities (5,648) (5,355) (7,020)

Total assets less current liabilities 61,154 55,561 61,932Provisions for liabilities and chargesPerformance fee (106) (329) (37)

Net assets 61,048 55,232 61,895

Net asset value per Income share 96.4p 86.8p 96.9p

Income PortfolioBalance Sheetat 30th September 2012

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30th September 2012 30th September 2011 31st March 2012Revenue Capital Total Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000


Net foreign currency gains/(losses) — 635 635 — (45) (45) — 261 261Income from investments 7,370 — 7,370 9,215 — 9,215 12,474 — 12,474Other interest receivable and similar

income 103 — 103 531 — 531 535 — 535

Gross return/(loss) 7,473 (6,935) 538 9,746 (79,093) (69,347) 13,009 (50,898) (37,889)Management fee (297) (610) (907) (294) (593) (887) (516) (1,031) (1,547)Performance fee (charge)/writeback — (435) (435) — 848 848 — 940 940Other administrative expenses (307) — (307) (314) — (314) (669) — (669)

Net return/(loss) on ordinary activities before finance costs and taxation 6,869 (7,980) (1,111) 9,138 (78,838) (69,700) 11,824 (50,989) (39,165)

Finance costs (64) (128) (192) (177) (366) (543) (273) (557) (830)

Net return/(loss) on ordinary activities before taxation 6,805 (8,108) (1,303) 8,961 (79,204) (70,243) 11,551 (51,546) (39,995)

Taxation (646) — (646) (812) — (812) (1,075) — (1,075)

Net return/(loss) on ordinary activities after taxation 6,159 (8,108) (1,949) 8,149 (79,204) (71,055) 10,476 (51,546) (41,070)

Return/(loss) per share (note 4):

Growth share 4.39p (6.64)p (2.25)p 5.62p (60.65)p (55.03)p 7.28p (41.81)p (34.53)p

Income share 2.89p (2.46)p 0.43p 3.47p (22.24)p (18.77)p 4.56p (11.91)p (7.35)p


The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columnsrepresent supplementary information prepared under guidance issued by the Association of Investment Companies. The totalcolumn represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses(‘STRGL’). For this reason a STRGL has not been presented.

The CompanyIncome Statementfor the six months ended 30th September 2012

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Called up Capitalshare Share redemption Capital Other Revenue

Six months ended capital premium reserve reserves reserve reserve Total30th September 2012 (Unaudited) £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 31st March 2012 6,618 35,628 12,484 190,006 — 4,149 248,885Repurchase and cancellation of the

Company’s own shares (176) — 176 (5,345) — — (5,345)Share conversions during the period — 485 12 (497) — — —Net (loss)/return on ordinary activities — — — (8,108) — 6,159 (1,949)Dividends appropriated in the period — — — — — (2,737) (2,737)

At 30th September 2012 6,442 36,113 12,672 176,056 — 7,571 238,854


Six months ended capital premium reserve reserves reserve reserve Total30th September 2011 (Unaudited) £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 31st March 2011 7,001 28,030 11,903 262,001 (61) 2,632 311,506Repurchase and cancellation of the

Company’s own shares (167) — 167 (6,060) — — (6,060)Share conversions during the period (11) 6,401 179 (6,569) — — —Net (loss)/return on ordinary activities — — — (79,204) — 8,149 (71,055)Cash flow hedge allocated to finance

costs during the period — — — — 61 — 61Dividends appropriated in the period — — — — — (8,960) (8,960)

At 30th September 2011 6,823 34,431 12,249 170,168 — 1,821 225,492


Year ended capital premium reserve reserves reserve reserve Total31st March 2012 (Audited) £’000 £’000 £’000 £’000 £’000 £’000 £’000

At 31st March 2011 7,001 28,030 11,903 262,001 (61) 2,632 311,506Repurchase and cancellation of the

Company’s own shares (383) — 383 (12,653) — — (12,653)Share conversions during the year — 7,598 198 (7,796) — — —Net (loss)/return on ordinary activities — — — (51,546) — 10,476 (41,070)Cash flow hedge allocated to finance

costs during the year — — — — 61 — 61Dividends appropriated in the year — — — — — (8,959) (8,959)

At 31st March 2012 6,618 35,628 12,484 190,006 — 4,149 248,885

The CompanyReconciliation of Movements inShareholders’ Funds

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(Unaudited) (Unaudited) (Audited)30th September 2012 30th September 2011 31st March 2012

Growth Income Total Total Total£’000 £’000 £’000 £’000 £’000

Fixed assets Investments held at fair value through profit or loss 183,165 63,561 246,726 240,166 258,276Investments in liquidity funds held at fair value

through profit or loss 3,736 3,241 6,977 5,834 11,475

Total portfolio 186,901 66,802 253,703 246,000 269,751

Current assets Debtors 713 287 1,000 1,235 1,839Cash and short term deposits 4,732 1,253 5,985 2,566 510Derivative financial instruments 12 28 40 475 34

5,457 1,568 7,025 4,276 2,383

Creditors: amounts falling due within one year (13,479) (7,195) (20,674) (22,547) (22,452)Derivative financial instruments (19) (21) (40) (1,238) (71)

Net current liabilities (8,041) (5,648) (13,689) (19,509) (20,140)

Total assets less current liabilities 178,860 61,154 240,014 226,491 249,611

Provisions for liabilities and charges Performance fee (1,054) (106) (1,160) (999) (726)

Net assets 177,806 61,048 238,854 225,492 248,885

Capital and reserves Called up share capital 4,884 1,558 6,442 6,823 6,618Share premium 8,698 27,415 36,113 34,431 35,628Capital redemption reserve 11,635 1,037 12,672 12,249 12,484Capital reserves 147,362 28,694 176,056 170,168 190,006Other reserve — — — — —Revenue reserve 5,227 2,344 7,571 1,821 4,149

Total equity shareholders’ funds 177,806 61,048 238,854 225,492 248,885

Net asset values (note 5):Net asset value per Growth share 183.1p 162.5p 186.3pNet asset value per Income share 96.4p 86.8p 96.9p

The CompanyBalance Sheetat 30th September 2012

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30th September 2012 30th September 2011 31st March 2012£’000 £’000 £’000

Net cash inflow from operating activities (note 6) 5,795 5,258 6,599Net cash outflow from returns on investments

and servicing of finance (245) (506) (761)Taxation recovered 49 137 624Net cash inflow from capital expenditure

and financial investment 9,021 34,319 38,126Dividends paid (2,737) (8,960) (8,959)Net cash outflow from financing (6,069) (71,386) (77,887)

Increase/(decrease) in cash in the period 5,814 (41,138) (42,258)

Reconciliation of net cash flow tomovement in net debt

Increase/(decrease) in cash in the period 5,814 (41,138) (42,258)Net repayment of loans — 65,795 65,991Exchange movements 599 945 523Other movements — (43) (44)

Changes in net debt arising from cash flows 6,413 25,559 24,212Net debt at the beginning of the period (20,743) (44,955) (44,955)

Net debt at the end of the period (14,330) (19,396) (20,743)

Represented by:Cash and short term deposits 5,985 2,566 510Foreign currency bank loans (20,315) (21,962) (21,253)

Net debt (14,330) (19,396) (20,743)

The CompanyCash Flow Statementfor the six months ended 30th September 2012

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1. Financial statements

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

The figures and financial information for the year ended 31st March 2012 are extracted from the latest published accounts ofthe Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar ofCompanies and included the report of the auditors which was unqualified and did not contain a statement under eitherSection 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’)and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture CapitalTrusts’ issued in January 2009.

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

The accounting policies applied in these half year accounts are consistent with those applied in the accounts for the yearended 31st March 2012.

3. Dividends



Dividends paidUnclaimed European Growth dividends refunded to the Company — — (1)

Growth 2012 final dividend of 1.95p (2011: 1.1p) 1,981 1,235 1,235Growth 2011 interim dividend of 4.8p — 5,236 5,236Income 2012 final dividend of 1.2p (2011: 1.4p) 756 787 787Income 2011 interim dividend of 3.0p — 1,702 1,702

Total dividends paid in the period 2,737 8,960 8,959

Dividends declaredGrowth 2012 final dividend of 1.95p — — 1,978Growth 2012 interim dividend of 4.8p 4,678 — —Income 2012 final dividend of 1.2p — — 755Income 2012 interim dividend of 3.0p 1,890 — —

Total dividends declared 6,568 — 2,733

Notes to the Accountsfor the six months ended 30th September 2012

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Notes to the Accounts continued

4. Return/(loss) per share


30th September 2012 30th September 2011 31st March 2012Growth share £’000 £’000 £’000

Return/(loss) per share is based on the following:Revenue return 4,325 6,154 7,723Capital loss (6,544) (66,406) (44,351)

Total loss (2,219) (60,252) (36,628)

Weighted average number of shares in issue 98,507,423 109,481,337 106,082,351Revenue return per share 4.39p 5.62p 7.28pCapital loss per share (6.64)p (60.65)p (41.81)p

Total loss per share (2.25)p (55.03)p (34.53)p


30th September 2012 30th September 2011 31st March 2012Income share £’000 £’000 £’000

Return/(loss) per share is based on the following:Revenue return 1,834 1,995 2,753Capital loss (1,564) (12,798) (7,195)

Total return/(loss) 270 (10,803) (4,442)

Weighted average number of shares in issue 63,443,720 57,564,002 60,428,209Revenue return per share 2.89p 3.47p 4.56pCapital loss per share (2.46)p (22.24)p (11.91)p

Total return/(loss) per share 0.43p (18.77)p (7.35)p

5. Net asset values

Net asset value per Growth share is calculated by dividing Growth shareholders’ funds of £177,806,000 (30th September 2011:£170,260,000 and 31st March 2012: £186,990,000) by the 97,091,853 Growth shares in issue at 30th September 2012(30th September 2011: 104,802,735 shares and 31st March 2012: 100,351,487 shares).

Net asset value per Income share is calculated by dividing Income shareholders’ funds of £61,049,000 (30th September 2011:£55,232,000 and 31st March 2012: £61,895,000) by the 63,311,986 Income shares in issue at 30th September 2012(30th September 2011: 63,667,980 shares and 31st March 2012: 63,849,822 shares).

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6. Reconciliation of net loss on ordinary activities before finance costs and taxation to net cash inflow from operating activities



Net loss on ordinary activities before financecosts and taxation (1,111) (69,700) (39,165)

Less capital loss on ordinary activities 7,980 78,838 50,989Decrease/(increase) in net debtors and accrued income 588 (310) (339)Management fee charged to capital (427) (593) (1,031)Performance fee paid (182) (1,165) (1,165)Overseas withholding tax (953) (1,278) (1,698)Scrip dividends included in income (159) (536) (556)Increase/(decrease) in accrued expenses 54 — (439)Effective interest rate adjustment on bonds 5 2 3

Net cash inflow from operating activities 5,795 5,258 6,599

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Interim Management Report

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

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fallinto the following broad categories: investment and strategy;accounting, legal and regulatory; corporate governance andshareholder relations; operational; and financial. Informationon each of these areas is given in the Business Review withinthe Annual Report and Accounts for the year ended 31st March2012.

Related Parties Transactions

During the first six months of the current financial year, notransactions with related parties have taken place which havematerially affected the financial position or the performance ofthe Company.

Directors’ Responsibilities

The Board of Directors confirms that, to the best of itsknowledge:

(i) the condensed set of financial statements contained withinthe half yearly financial report has been prepared inaccordance with the Accounting Standards Board’sStatement ‘Half-Yearly Financial Reports’; and

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

For and on behalf of the Board

AndrewMurisonChairman 27th November 2012

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Capital Structure and Conversionbetween Share ClassesThe Company has two share classes, each with distinctinvestment policies, objectives and underlying asset pools.Each share class is listed separately and traded on the LondonStock Exchange. This capital structure means thatshareholders may benefit from greater investment flexibilityin a tax-efficient manner.

Capital Structure

• Growth Shares Capital growth from Continental European investments, byconsistent out-performance of the benchmark and a risingshare price over the longer term by taking carefully controlledrisks through an investment method that is clearlycommunicated to shareholders.

• Income Shares To provide a growing income together with the potential forlong-term capital growth from a diversified portfolio ofinvestments in pan-european stockmarkets.

Conversion Opportunities

Shareholders in either of the two share classes are able toconvert some or all of their shares into shares of the otherclasses without such conversion being treated, under currentlaw, as a disposal for UK capital gains tax purposes.

The conversion mechanism allows shareholders to alter theirinvestment profile to match their changing investment needsin a tax-efficient manner.

Conversion dates arise every six months on 15th Septemberand 15th March (if such a date is not a business day, then theconversion date will move to the next business day).

The Company, or its Manager, makes no administrative chargefor any of the above conversions.

Conversion between the share classes

Those who hold shares through the JPM Investment TrustInvestment Account, ISA or SIPP must submit a conversioninstruction form which can be found atwww.jpmeuropean.com. Instructions for CREST holders canalso be found at this address. Those who hold shares incertificated form on the main register must complete theconversion notice printed on the reverse of their certificate.

Instructions must be received in the month of August forSeptember conversions and in the month of February forMarch conversions.

The number of shares that will arise upon conversion will bedetermined on the basis of the relative net asset values of eachshare class.

More details concerning conversion dates and conversioninstruction forms can be found on the Company’s website:www.jpmeuropean.co.uk.

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Return to shareholders

Total return to the investor, on a mid-market price tomid-market price basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the relevantshare class of the Company at the time the shares were quotedex-dividend.

Return on net assets

Total return on net asset value (‘NAV’) per share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested into the relevant share class of theCompany at the NAV per share at the time the shares werequoted ex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the NAV per share when calculatingthe total return on net assets

Benchmark return

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested into the shares of the underlying companies attime the shares were quoted ex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the Company’sinvestment universe. The Company's investment strategy doesnot track this index and consequently, there may be somedivergence between the performance of the portfolio and thatof the benchmark.

Share price discount/premium to net asset value (‘NAV’) per share

If the share price of an investment trust is lower than the NAVper share, the shares are said to be trading at a discount. Thediscount is shown as a percentage of the NAV per share. Theopposite of a discount is a premium. It is more common for aninvestment trust’s shares to trade at a discount than at apremium.

Glossary of Terms and Definitions

HistoryJPMorgan European Investment Trust plc was formed in 1929 asThe London and Holyrood Trust Limited and was a generalinvestment trust until 1982 when the name was changed to TheFleming Universal Investment Trust. Under this name the portfoliobecame more internationally invested until November 1988, whenthe Board decided to concentrate on Continental Europeaninvestments. In 1992 shareholders approved a formal adoption ofthis specialisation. The Company adopted its current structure andname in August 2006.

DirectorsAndrew Murison (Chairman)Robin FaberStephen GoldmanStephen RussellFerdinand Verdonck

Company NumbersCompany registration number: 237958 London Stock Exchange Sedol numbers: Growth: B18JK16 Income: B17XWW4

ISIN numbers: Growth: GB00B18JK166 Income: GB00B17XWW44

Bloomberg Codes: Growth: JETG LN Income: JETI LN

Market InformationThe Company’s net asset value is published daily, via TheLondon Stock Exchange. The Company’s shares are listed on theLondon Stock Exchange. The market prices are shown daily inthe Financial Times, The Times, the Daily Telegraph, TheScotsman, The Independent and on the Company website atwww.jpmeuropean.co.uk, where the share prices are updatedevery fifteen minutes during trading hours.

Websitewww.jpmeuropean.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbrokeror professional adviser acting on an investor’s behalf. They may alsobe purchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all availableon the online wealth manager service, J.P. Morgan WealthManager+available at www.jpmorganwealthmanagerplus.co.uk

Manager and Company SecretaryJPMorgan Asset Management (UK) Limited

Company’s Registered OfficeFinsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone number: 020 7742 4000

Please contact Jonathan Latter for company secretarial andadministrative matters.

CustodianJPMorgan Chase Bank, N.A.25 Bank StreetCanary WharfLondon E14 5JP

RegistrarsEquiniti LimitedReference 1080 Aspect House Spencer RoadLancing West Sussex BN99 6DA Telephone number: 0871 384 2319

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrars quoting reference 1080.

Registered shareholders can obtain further details on theirholdings on the internet by visiting www.shareview.co.uk.

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISAand J.P. Morgan SIPP, see contact details on the back cover of thisreport.

Independent AuditorErnst & Young LLP Chartered Accountants and Statutory Auditor1 More London Place London SE1 2AF

BrokersWinterflood Securities LimitedThe Atrium Building Cannon Bridge25 Dowgate HillLondon EC4R 2GATelephone 020 7621 0004

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Information about the Company

Financial CalendarFinancial year end 31st MarchFinal results announced JuneHalf year end SeptemberHalf year results announced NovemberInterim Management Statements announced July/JanuaryDividends payable – Growth and Income April and OctoberAnnual General Meeting July

A member of the AIC

J.P. Morgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmeuropean.co.uk

Documents

Half Year Report JPMorgan European Investment Trust plc · 2017-02-03 · T H E C O M P A N Y JPMorgan European Investment Trust plc. Half Year Report & Accounts 2012 5 Chairman’s