JPMorgan European Smaller Companies Trust plc Annual General … · 2017-07-12 · 2016. Euromoney...

JPMorgan European Smaller Companies Trust plc Annual General Meeting July 2017

Francesco Conte, Portfolio Manager

Edward Greaves, Portfolio Manager

1

JPMorgan European Smaller Companies Trust plc

Source: J.P. Morgan Asset Management. As at 31 May 2017. 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.

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

Key characteristics

2

European smaller companies

Source: J.P. Morgan Asset Management, Thomson Reuters Datastream. All series are rebased to 100 as at 31 December 1992 to 30 June 2017. 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.

A compelling long asset class

… European small caps have produced long term equity returns amongst the best in the world

Cumulative returns

0

200

400

600

800

1000

1200

1400

1600

1800

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Euromoney Smaller European Companies (ex UK) Index S&P 500 Index

FTSE All Share Index MSCI Asia (ex Japan) Index

MSCI Emerging Markets Index MSCI Europe (ex UK) Index

Topix Index

3

Small cap investing rationale

Seeking strong absolute returns

Seeking strong risk adjusted returns

Seeking long term outperformance vs.

large caps

High Active Share

Large investment universe IPOs / M&A

Limited analyst coverage

Stock picking opportunities

Entrepreneurial management

Strong earnings growth

4

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Asian financial crisis

Russian financial crisis

.com bubble bursting

Global financial crisis

Eurozone sovereign debt crisis

Calendar year excess returns Euromoney Smaller European Companies (ex UK) Index vs. MSCI Europe (ex UK) Index

Mexican financial crisis

European smaller companies

Source: J.P. Morgan Asset Management, Thomson Reuters Datastream, data from 31 December 1993 to 31 December 2017. 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.

Generally outperform in up markets

5

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Source: Thomson Reuters Datastream, as at 30 June 2017. 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 1994. 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 2017.

Largest European smaller companies investment trust*

... An established track record through market cycles

Jim Campbell 22 years at JPMAM, 28 years industry experience

Francesco Conte 18 years at JPMAM, 28 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

Edward Greaves 5 years at JPMAM, 9 years industry experience

6

35.2

17.9

24.5

8.9

14.1

39.1

14.5

21.5

6.8

11.1

35.6

11.1

17.5

6.0 8.1

1 year 3 years (pa) 5 years (pa) 10 years (pa) 20 years (pa)

JPM European Smaller Companies Trust NAV (net of fees)Euromoney Smaller European Companies (ex UK) IndexMSCI Europe ex UK

Annualised returns 31 May 2017 (%)

...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.

Long term returns

7

Our investment philosophy

Source: J.P. Morgan Asset Management 31 May 2017. 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.

VALUE QUALITY MOMENTUM

We believe that attractively valued, high quality stocks with positive momentum outperform the market

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

8

Stock examples

Source: Datastream. J.P. Morgan Asset Management. Data from 30 June 2014 to 30 June 2017. 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.

Classic growth stocks

Ubisoft

Share price (EUR) EPS (EUR)

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

10

15

20

25

30

35

40

45

50

55

Jun-

2014

Sep

-201

4

Dec

-201

4

Mar

-201

5

Jun-

2015

Sep

-201

5

Dec

-201

5

Mar

-201

6

Jun-

2016

Sep

-201

6

Dec

-201

6

Mar

-201

7

Share price (left axis)

12 month forward earnings per share(right axis)

Amplifon


0.2

0.25

0.3

0.35

0.4

0.45

2

4

6

8

10

12

14

Jun-

2014

Sep

-201

4

Dec

-201

4

Mar

-201

5

Jun-

2015

Sep

-201

5

Dec

-201

5

Mar

-201

6

Jun-

2016

Sep

-201

6

Dec

-201

6

Mar

-201

7


12 month forward earnings pershare (right axis)

9

Stock examples


Innovative companies in traditional sectors

Remy Cointreau


1.8

2

2.2

2.4

2.6

2.8

3

3.2

3.4

40

50

60

70

80

90

100

110

Jun-

2014

Sep

-201

4

Dec

-201

4

Mar

-201

5

Jun-

2015

Sep

-201

5

Dec

-201

5

Mar

-201

6

Jun-

2016

Sep

-201

6

Dec

-201

6

Mar

-201

7



Skandiabanken

Share price (NOK) EPS (NOK)

4

4.5

5

5.5

6

6.5

7

20

30

40

50

60

70

80

90

Nov

-201

5

Jan-

2016

Mar

-201

6

May

-201

6

Jul-2

016

Sep

-201

6

Nov

-201

6

Jan-

2017

Mar

-201

7

May

-201

7



10

Stock examples


Recent additions

FLSmidth

Share price (DKK) EPS (DKK)

12

14

16

18

20

22

24

26

200

250

300

350

400

450

Jun-

2014

Sep

-201

4

Dec

-201

4

Mar

-201

5

Jun-

2015

Sep

-201

5

Dec

-201

5

Mar

-201

6

Jun-

2016

Sep

-201

6

Dec

-201

6

Mar

-201

7


12 month forward earnings per share (right axis)

Huhtamaki


1.4

1.5

1.6

1.7

1.8

1.9

2

2.1

2.2

15

20

25

30

35

40

45

Jun-

2014

Sep

-201

4

Dec

-201

4

Mar

-201

5

Jun-

2015

Sep

-201

5

Dec

-201

5

Mar

-201

6

Jun-

2016

Sep

-201

6

Dec

-201

6

Mar

-201

7


12 month forward earningsper share (right axis)

11

Performance attribution

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.

JPMorgan European Smaller Companies Trust plc - 12 months to 31 May 2017

Key sector (%) 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)

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)

Attribution summary Stock: -4.21 Sector: -0.59

Benchmark EuroMoney Sm Eur Cos ex UK GBP

0.76

0.45

-0.48

-0.97

-1.07

0.59

0.57

0.46

-0.45

-0.99

-3.0 -1.5 0.0 1.5 3.0

Electronic & Elec. Equip. (o)

Leisure Goods (o)

Industrial Engineering (o)

Media (u)

General Retailers (o)

Fixed Line Telecoms. (u)

Industrial Metals & Mining (u)

Support Services (o)

Oil Equip., Serv. & Distn. (u)

Software & Comp. Serv. (o)

Stock selection

Asset allocation

12

Portfolio positions

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.

JPM Europe Smaller Companies Investment Trust plc as of 31 May 2017

Top 10 overweight positions

Stock Portfolio weight (%) Benchmark weight (%) Relative position (%)

Ipsos 2.4 0.1 2.3

Stabilus 2.4 0.1 2.2

SalMar 2.4 0.2 2.2

Maisons du Monde 2.2 0.1 2.1

Tarkett 2.3 0.2 2.1

Alten 2.3 0.2 2.1

Dometic Group 2.2 0.2 2.0

Thule Group 2.2 0.1 2.0

SimCorp 2.2 0.2 2.0

Hella 2.0 0.0 2.0

Benchmark Euromoney Smaller European Companies ex UK Index (Net)

13

Active and absolute country positions Active and absolute sector positions

Sector and country positions

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.

JPM Europe Smaller Companies Investment Trust plc as of 31 May 2017

Portfolio weight (%)

Relative to benchmark (%) Portfolio weight (%)

Relative to benchmark (%)

Benchmark Euromoney Smaller European Companies ex UK Index (Net)

-2.2

-2.6

-3.9

-4.8

-6.9

15.9

10.1

4.9

3.3

3.3

-20.0 -10.0 0.0 10.0 20.0

Industrial Engineering

Autos & Parts

Leisure Goods

Software & Computer Services

Beverages

Industrial Transportation

Electricity

Pharma & Biotech

Financial Services

Real Estate

-1.5

-3.7

-4.1

-4.3

-7.8

6.6

4.9

3.9

2.8

2.1

-10.0 -5.5 -1.0 3.5 8.0

France

Italy

Norway

Netherlands

Denmark

Germany

Austria

Sweden

Belgium

Spain

9.9

18.9

16.9

8.2

7.2

13.3

0.0

10.0

0.0

0.0

24.1

12.0

6.6

8.1

4.1

1.4

0.0

0.0

0.0

0.0

14

Global manufacturing PMIs

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 2016.

Korea

Japan

Switzerland

Eurozone France

Germany Italy

Spain

UK US

Brazil Russia

India China

Taiwan

Global

Euro

zone

D

evel

oped

Em

ergi

ng

Developed Emerging

50.8 50.5 50.4 51.0 51.0 50.7 50.9 50.0 50.7 50.2 50.1 50.4 51.0 50.7 51.0 51.9 52.0 52.7 52.7 53.0 53.0 52.7 52.6 52.6

52.1 51.9 51.7 52.6 52.3 52.0 52.1 50.8 50.9 50.5 50.3 51.1 51.4 51.2 51.5 52.6 52.9 53.7 54.2 54.1 53.9 54.1 54.1 53.9

49.1 48.6 48.4 49.0 49.2 49.0 49.4 48.9 50.2 49.6 49.5 49.3 50.3 50.1 50.3 51.0 50.8 51.1 50.8 51.3 51.6 50.8 50.5 50.8

52.4 52.3 52.0 52.3 52.8 53.2 52.3 51.2 51.6 51.7 51.5 52.8 52.0 51.7 52.6 53.5 53.7 54.9 55.2 55.4 56.2 56.7 57.0 57.4

49.6 48.3 50.6 50.6 50.6 51.4 50.0 50.2 49.6 48.0 48.4 48.3 48.6 48.3 49.7 51.8 51.7 53.5 53.6 52.2 53.3 55.1 53.8 54.8

51.8 53.3 52.3 52.1 52.9 53.2 52.3 50.5 50.7 51.8 52.1 54.5 53.8 53.6 54.3 55.0 54.3 55.6 56.4 56.8 58.3 58.2 59.5 59.6

55.3 53.8 52.7 54.1 54.9 55.6 53.2 52.2 53.5 53.9 52.4 53.5 51.2 49.8 51.0 50.9 52.2 53.2 53.0 55.0 55.7 56.2 55.1 55.2

53.6 53.2 51.7 51.3 53.1 53.0 55.4 54.1 53.4 53.5 51.8 52.2 51.0 51.0 52.3 53.3 54.5 55.3 55.6 54.8 53.9 54.5 55.4 54.7

50.0 51.3 48.0 49.6 49.0 49.9 50.2 51.1 53.0 53.1 55.3 51.5 51.5 51.6 54.4 55.2 55.9 56.2 54.6 57.8 58.6 57.4 55.6 60.1

52.3 51.8 51.5 54.5 52.5 51.2 52.5 50.9 51.1 49.5 50.4 53.1 48.3 53.5 55.3 54.2 53.5 55.9 55.6 54.6 54.0 57.0 56.3 54.3

53.8 53.0 53.1 54.1 52.8 51.2 52.4 51.3 51.5 50.8 50.7 51.3 52.9 52.0 51.5 53.4 54.1 54.3 55.0 54.2 53.3 52.8 52.7 52.1

51.2 51.7 51.0 52.4 52.6 52.6 52.3 50.1 49.1 48.2 47.7 48.1 49.3 49.5 50.4 51.4 51.3 52.4 52.7 53.3 52.4 52.7 53.1 52.4

47.2 45.8 47.0 44.1 43.8 45.6 47.4 44.5 46.0 42.6 41.6 43.2 46.0 45.7 46.0 46.3 46.2 45.2 44.0 46.9 49.6 50.1 52.0 51.5

48.3 47.9 49.1 50.2 50.1 48.7 49.8 49.3 48.3 48.0 49.6 51.5 49.5 50.8 51.1 52.4 53.6 53.7 54.7 52.5 52.4 50.8 52.4 50.3

52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4 50.5 50.7 51.7 51.8 52.6 52.1 54.4 52.3 49.6 50.4 50.7 52.5 52.5 51.6 50.9

47.8 47.3 47.2 48.3 48.6 48.2 48.4 48.0 49.7 49.4 49.2 48.6 50.6 50.0 50.1 51.2 50.9 51.9 51.0 51.7 51.2 50.3 49.6 50.4

47.6 47.9 49.2 49.1 49.1 50.7 49.5 48.7 49.5 50.0 50.1 50.5 50.1 48.6 47.6 48.0 48.0 49.4 49.0 49.2 48.4 49.4 49.2 50.1

47.1 46.1 46.9 47.8 49.5 51.7 50.6 49.4 51.1 49.7 48.5 50.5 51.0 51.8 52.2 52.7 54.7 56.2 55.6 54.5 56.2 54.4 53.1 56.2

Jan

Mar

Sep

Nov

Dec

May

Jul

Aug

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

2015 2016

Jun

Jul

Aug

Sep

Oct

2017

Feb

Apr

Jun

15

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

Expensive

Cheap

0.5

1.0

1.5

2.0

2.5

3.0

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

Relative valuations – price/book* Absolute valuations – price/book*

European smaller company valuations

Source: European Quantitative Research, Citigroup Investment Research. Data as at 1 June 2017. 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.

+1 Stdev

-1 Stdev

Avg.

Cheap

Expensive

+1 Stdev

-1 Stdev

Avg.

___ Small Cap P/B

… valuations attractive v. large companies

16

German 10 year government bond yield

German 10 year government bond yield

Source: Bloomberg from July 2012 to July 2017. Past performance is not necessarily a reliable indicator for current and future performance.

-0.5

0

0.5

1

1.5

2

2.5

Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15 Jan '16 Jul '16 Jan '17

%

17

Appendix

18

Gearing versus the index

Source: Thomson Reuters Datastream, J.P. Morgan Asset Management as at 31 March 2017. 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

...active management of gearing a source of consistent value added

Since 2009 (quarterly)

50

100

150

200

250

300

350

400

80%

85%

90%

95%

100%

105%

110%

115%

120%

125%

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

JPMorgan European Smaller Companies Trust gearing (LHS)Euromoney Smaller European Companies (ex UK) Index (RHS)

19

5 year discount

Source: Bloomberg from May 2012 to May 2017. Past performance is not necessarily a reliable indicator of current and future performance.


-20

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

50

100

150

200

250

300

350

400

450

May '12 Nov '12 May '13 Nov '13 May '14 Nov '14 May '15 Nov '15 May '16 Nov '16

Net Asset Value (LHS) Last Price (LHS) Fund Percent Premium (RHS)%

20

Euromoney Smaller European Companies (ex UK) Index Key characteristics

Source: Euromoney; as at 31 August 2016.

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

21

Specific risks JPM Europe Smaller Companies Fund

Source: J.P. Morgan Asset Management as of 30 June 2017.

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.

22

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 www.jpmorgan.com/pages/privacy. 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: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP. 752e2e10-623c-11e7-86c4-005056960c8a

http://www.jpmorgan.com/pages/privacy

Date post:	20-Jul-2020
Category:	Documents
Upload:	others
View:	2 times
Download:	0 times

JPMorgan European Smaller Companies Trust plc Annual General … · 2017-07-12 · 2016. Euromoney...

Documents