JPMorgan European Smaller Companies Trust plc Annual General Meeting

Transcription

1 JPMorgan European Smaller Companies Trust plc Annual General Meeting July 2017 Francesco Conte, Portfolio Manager Edward Greaves, Portfolio Manager

2 JPMorgan European Smaller Companies Trust plc Key characteristics Objective The Company aims to provide capital growth from a diversified portfolio of smaller European companies (excluding the United Kingdom). As the emphasis is on capital growth rather than income, shareholders should expect the dividend to vary from year to year. The company has the ability to use borrowing to gear the portfolio within the range of 20% net cash to 20% geared in normal market conditions Policy To invest in a diversified portfolio of companies the majority of which, at the time of purchase, fall within the market capitalisation range of the benchmark index Benchmark Euromoney Smaller European Companies (ex UK) Index (Total Return Net) Net assets GBP 724.8m Gearing Current: 3.6% cash Source: J.P. Morgan Asset Management. As at 31 May The Investment Manager (Portfolio Manager) seeks to achieve the stated targets/objectives. There can be no guarantee the objectives/targets will be met. The Benchmark is a point of reference against which the performance of the Investment Trust may be measured. The Investment Trust may bear little resemblance to its benchmark. Diversification does not guarantee investment returns and does not eliminate the risk of loss. 1

3 European smaller companies A compelling long asset class Cumulative returns Euromoney Smaller European Companies (ex UK) Index FTSE All Share Index MSCI Emerging Markets Index Topix Index S&P 500 Index MSCI Asia (ex Japan) Index MSCI Europe (ex UK) Index European small caps have produced long term equity returns amongst the best in the world Source: J.P. Morgan Asset Management, Thomson Reuters Datastream. All series are rebased to 100 as at 31 December 1992 to 30 June All indices in GBP and include reinvested dividends. Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not necessarily a reliable indicator of current and future performance. 2

4 Small cap investing rationale Large investment universe IPOs / M&A Seeking strong absolute returns Entrepreneurial management Strong earnings growth High Active Share Seeking strong risk adjusted returns Limited analyst coverage Stock picking opportunities Seeking long term outperformance vs. large caps 3

5 European smaller companies Generally outperform in up markets Calendar year excess returns Euromoney Smaller European Companies (ex UK) Index vs. MSCI Europe (ex UK) Index 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Mexican financial crisis Asian financial crisis Russian financial crisis.com bubble bursting Global financial crisis Eurozone sovereign debt crisis Source: J.P. Morgan Asset Management, Thomson Reuters Datastream, data from 31 December 1993 to 31 December All indices in EUR and include reinvested dividends. Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not necessarily a reliable indicator for current and future performance. 4

6 JPMorgan European Smaller Companies Trust plc Largest European smaller companies investment trust* Jim Campbell 22 years at JPMAM, 28 years industry experience Francesco Conte 18 years at JPMAM, 28 years industry experience Edward Greaves 5 years at JPMAM, 9 years industry experience One of the longest track records in European small cap investing Investment process focused on capturing change in operating momentum Consistent value-added from active use of gearing... An established track record through market cycles Source: Thomson Reuters Datastream, as at 30 June Chart shows Euromoney Europe Smaller Companies Index (light blue) and JPMorgan European Smaller Companies Investment Trust plc NAV (dark blue) from 1994, rebased to 100 as at 31 December There can be no assurance that the professionals currently employed by J.P. Morgan Asset Management will continue to be employed by J.P. Morgan Asset Management or that the past performance or success of any such professional serves as an indicator of such professional s future performance or success. Past performance is not necessarily a reliable indicator of current and future performance *Largest investment trust in the Europe Smaller Companies universe by market value as of 31 March

7 JPMorgan European Smaller Companies Trust plc Long term returns Annualised returns 31 May 2017 (%) JPM European Smaller Companies Trust NAV (net of fees) Euromoney Smaller European Companies (ex UK) Index MSCI Europe ex UK year 3 years (pa) 5 years (pa) 10 years (pa) 20 years (pa)...asset class offers opportunity for significant alpha generation Source: J.P. Morgan Asset Management, Thomson Reuters Datastream. NAV returns are net of fees, in GBP, with income reinvested. All indices in sterling and include reinvested dividends. Indices do not include fees or operating expenses and are not available for actual investment. Performance is provisional. Past performance is not necessarily a reliable indicator for current and future performance. 6

8 Our investment philosophy We believe that attractively valued, high quality stocks with positive momentum outperform the market VALUE QUALITY MOMENTUM Themes: - Cyclical recovery - Restructuring opportunities - High yielding stocks Themes: - Market leaders - High return of capital - Disciplined capital allocation - Shareholder returns Themes: - Structurally growing end markets - Disruptive technology - Bolt-on acquisition strategy Stock examples: - Alten - Ipsos - Sopra Steria Stock examples: - IMA - Finecobank - Forbo Stock examples: - Datalogic - Metso - Temenos Source: J.P. Morgan Asset Management 31 May The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not hold positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator for current and future performance. 7

9 Stock examples Classic growth stocks Ubisoft Amplifon Share price (EUR) EPS (EUR) Share price (EUR) EPS (EUR) Share price (left axis) 12 month forward earnings per share (right axis) Share price (left axis) 12 month forward earnings per share (right axis) Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar Source: Datastream. J.P. Morgan Asset Management. Data from 30 June 2014 to 30 June The companies/securities above shown are for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not have positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator of current and future performance. 8

10 Stock examples Innovative companies in traditional sectors Remy Cointreau Skandiabanken Share price (EUR) EPS (EUR) Share price (NOK) EPS (NOK) 110 Share price (left axis) Share price (left axis) month forward earnings per share (right axis) month forward earnings per share (right axis) Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Nov-2015 Jan-2016 Mar-2016 May-2016 Jul-2016 Sep-2016 Nov-2016 Jan-2017 Mar-2017 May-2017 Source: Datastream. J.P. Morgan Asset Management. Data from 30 June 2014 to 30 June The companies/securities above shown are for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not have positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator of current and future performance. 9

11 Stock examples Recent additions FLSmidth Huhtamaki Share price (DKK) EPS (DKK) Share price (EUR) EPS (EUR) 450 Share price (left axis) Share price (left axis) month forward earnings per share (right axis) month forward earnings per share (right axis) Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Source: Datastream. J.P. Morgan Asset Management. Data from 30 June 2014 to 30 June The companies/securities above shown are for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not have positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator of current and future performance. 10

12 Performance attribution JPMorgan European Smaller Companies Trust plc - 12 months to 31 May 2017 Attribution summary Benchmark Stock: Sector: EuroMoney Sm Eur Cos ex UK GBP Key sector (%) Electronic & Elec. Equip. (o) Leisure Goods (o) Industrial Engineering (o) Media (u) General Retailers (o) Key stock contributors Datalogic (o), Fingerprint Cards AB (u) UBISOFT Entertainment (o), De'Longhi (o) Interpump Group (o), IMA (o) NOS SGPS SA (u), Mediaset (u) Maisons du Monde SA (o), YOOX Net-A-Porter Group S.p.A. (u) Fixed Line Telecoms. (u) Industrial Metals & Mining (u) Support Services (o) Oil Equip., Serv. & Distn. (u) Stock selection Asset allocation Software & Comp. Serv. (o) Key stock detractors TDC (o), DNA Plc (o) Granges (o), SSAB Corporation (u) Brunel International (o), Intrum Justitia (o) TGS-NOPEC Geophysical Company (o), Aker Solutions (o) NetEnt AB (o), Nnit (o) Source: Factset. (o)= overweight, (u)= underweight, (n)=neutral. The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Past performance is not necessarily a reliable indicator for current and future performance. 11

13 Portfolio positions JPM Europe Smaller Companies Investment Trust plc as of 31 May 2017 Benchmark Euromoney Smaller European Companies ex UK Index (Net) Top 10 overweight positions Stock Portfolio weight (%) Benchmark weight (%) Relative position (%) Ipsos Stabilus SalMar Maisons du Monde Tarkett Alten Dometic Group Thule Group SimCorp Hella Source: Factset. The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. 12

14 Sector and country positions JPM Europe Smaller Companies Investment Trust plc as of 31 May 2017 Benchmark Euromoney Smaller European Companies ex UK Index (Net) Active and absolute sector positions Active and absolute country positions Relative to benchmark (%) Industrial Engineering 15.9 Portfolio weight (%) 24.1 Relative to benchmark (%) France 6.6 Portfolio weight (%) 9.9 Autos & Parts Italy Leisure Goods Norway Software & Computer Services Netherlands Beverages Denmark Industrial Transportation Germany Electricity Austria Pharma & Biotech Sweden Financial Services Belgium Real Estate Spain Source: Factset. The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. 13

15 Global manufacturing PMIs Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Eurozone Developed Emerging Global Developed Emerging Eurozone France Germany Italy Spain Switzerland UK US Japan Brazil Russia India China Korea Taiwan Source: FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers Index (PMI) assesses the economic health of the manufacturing sector by surveying output and employment intentions. Guide to the Markets - Europe. Data as of 30June

16 European smaller company valuations Absolute valuations price/book* Relative valuations price/book* Stdev Expensive 15% 10% 5% +1 Stdev Expensive 0% 2.0 Avg. -5% Avg. -10% % Stdev Cheap -20% -25% -1 Stdev Cheap Small Cap P/B -30% % valuations attractive v. large companies Source: European Quantitative Research, Citigroup Investment Research. Data as at 1 June Past performance is not necessarily a reliable indicator for current and future performance. *Price-To-Book is a ratio used to compare a stock s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest Quarter s book value per share. 15

17 German 10 year government bond yield German 10 year government bond yield 2.5 % Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15 Jan '16 Jul '16 Jan '17 Source: Bloomberg from July 2012 to July Past performance is not necessarily a reliable indicator for current and future performance. 16

18 Appendix 17

19 Gearing versus the index Since 2009 (quarterly) 125% 120% 115% 110% 105% 100% 95% 90% 85% JPMorgan European Smaller Companies Trust gearing (LHS) Euromoney Smaller European Companies (ex UK) Index (RHS) % 50 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17...active management of gearing a source of consistent value added Source: Thomson Reuters Datastream, J.P. Morgan Asset Management as at 31 March Index rebased to 100 at start of data series. * Index is Euromoney Smaller European Companies (ex UK) Index. Investment trusts may utilise gearing which will exaggerate market movements both down and up which could mean sudden and large falls in value. For further details, please refer to the trust s annual report and accounts. Gearing is the ability to borrow money to invest that money on behalf of the shareholders 18

20 5 year discount JPMorgan European Smaller Companies Trust plc Net Asset Value (LHS) Last Price (LHS) Fund Percent Premium (RHS) % May '12 Nov '12 May '13 Nov '13 May '14 Nov '14 May '15 Nov '15 May '16 Nov '16-20 Source: Bloomberg from May 2012 to May Past performance is not necessarily a reliable indicator of current and future performance. 19

21 Euromoney Smaller European Companies (ex UK) Index Key characteristics 1,000 stocks across 14 markets Market capitalisation range of 27m 4.1bn Back history from December 1985 Monthly geographic and sector analysis Daily pricing on Bloomberg-JCSCEXPT Index Source: Euromoney; as at 31 August

22 Specific risks JPM Europe Smaller Companies Fund The value of your investment may fall as well as rise and you may get back less than you originally invested. The value of Equity and Equity-Linked Securities may fluctuate in response to the performance of individual companies and general market conditions. The Fund invests in securities of smaller companies which may be more difficult to sell, more volatile and tend to carry greater financial risk than securities of larger companies. This Fund is aggressively managed, which may result in higher volatility of the Fund s performance and bigger differences between the performance of the Fund and its Benchmark. Movements in currency exchange rates can adversely affect the return of your investment. Source: J.P. Morgan Asset Management as of 30 June

23 J.P. Morgan Asset Management For AGM use only not for further public distribution This is a promotional document and as such the views contained herein are not to be taken as advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management's own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Both past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co and its affiliates worldwide. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website Investment is subject to documentation (Investor Disclosure Document, Key Features and Terms and Conditions), copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorized and regulated in the UK by the Financial Conduct Authority. Registered in England No: Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 752e2e10-623c-11e7-86c c8a 22