Final Results
JPMorgan Fleming Eur Fldglng IT PLC
02 June 2006
JPMORGAN FLEMING EUROPEAN FLEDGELING INVESTMENT TRUST PLC
STOCK EXCHANGE ANNOUNCEMENT
PRELIMINARY ANNOUNCEMENT OF FINAL RESULTS
The Board of JPMorgan Fleming European Fledgeling Investment Trust plc is
pleased to announce the Company's results for the year ended 31st March 2006.
Commenting on the results, the Chairman has made the following statement:
Review of the year
For the third year running I am delighted to report that the Company has
returned a positive performance. As with the previous years, this has been due
to strong results from Continental Europe and the investment managers'
consistent stock picking abilities. Over a three year period, the return to
shareholders which the Company has produced are +70.2% (year to 31st March
2004), +50.3% (year to 31st March 2005) and +72.0% (year to 31st March 2006). I
am sure you will agree that these are excellent returns.
At the end of the year under review, the net asset value per share was 709.0p
which was 68.6% higher than the previous year end. This represented a
substantial 17% outperformance of the Company's benchmark, the HSBC Smaller
European Companies (ex UK) Index, which returned +51.6%.
The Company's 17% outperformance can be analysed by use of the underlying
attribution data, which is calculated net of fees and the expenses from the
running of the Company. This shows that the investment managers stock selection
during the year added +13.6%, and this was further enhanced by the positive
impact of the Company's gearing in a rising market.
The Board regularly discusses gearing with the investment managers and it is the
Board's current intention to keep gearing within a range of 10% cash to 15%
geared under normal market conditions. During the year the investment manager's
have used gearing skilfully and the gearing range has varied between 101% and
112%. It is important to note that having the ability to gear is an advantage of
the investment trust structure over other collective investment vehicles.
The discount on the Company's share price to net asset value per share during
the year ranged from -6.1% to -16.0%, and ended the year at -10.3%. (12.3% year
to 31st March 2005), the narrowing discount no doubt reflecting the Company's
excellent performance. The Board regularly reviews the discount level and wishes
to avoid discount volatility returning to the levels seen previously.
At the 2005 AGM, the Board sought shareholder approval subject to certain
conditions to reissue shares from treasury at a discount to net asset value. The
Board continues to believe that the ability to reissue, rather than cancel,
shares bought in the market is in the interests of shareholders as it has the
effect of improving liquidity in the Company's shares, managing any imbalance
between the supply and demand, minimising the volatility and absolute levels of
the discount and enhancing the net asset value by selling shares at a narrower
discount than that at which they were purchased. During the year the Board has
fully demonstrated the advantage of treasury shares as in January 2006 it
purchased 300,000 shares into treasury at a discount of 10.65% and a cost of
£5.40 per share, this purchase was necessary due to an imbalance in the market
between supply and demand. The demand for the Company's shares increased and
they were subsequently reissued in three tranches in accordance with the Board's
guidelines. The first tranch was for 125,000 shares on 24th February 2006 at a
price of £6.13 which equated to a discount of 6.33%. The second was for 100,000
shares on 19th April 2006 at a price of £6.62 which equated to a discount of
6.50% and the last was for 75,000 shares on 20th April 2006 at a price of £6.71
which equated to a discount of 6.00%. The use of treasury shares also resulted
in a modest net positive contribution to the relative return. Following the year
end, the Company again experienced an imbalance in the supply and demand of its
shares and between 5th May 2006 and 22nd May 2006 a further 1,020,000 were
bought into treasury at an average weighted discount of 11.45%. The Board
continues to believe that the use of treasury shares will benefit shareholders
as a whole and is therefore putting forward resolutions to shareholders at the
forthcoming AGM seeking approval to renew the necessary powers. It is important
to note that the Board will maintain the policy of the Company's ability to
reissue shares being constrained in order to strictly limit the dilution
associated with the reissue of treasury shares at a discount to a maximum of
0.5% of net asset value in any year.
The Company operates in accordance with the corporate governance best practice
and the Board is committed to the highest standards of corporate governance as
applicable to investment trust companies.
I would like to report that during the year the Board has carried out a formal
review of the investment manager, company secretarial and marketing services
provided to the Company by JPMAM. This review included their investment
performance record, management processes, investment style, resources and risk
control mechanisms. Due to the volatile nature of this asset class the
investment performance needs to be reviewed over the medium to longer term, an
investment horizon of three to ten years. As can be seen from the comparative
performance against the benchmark, the investment managers have performed well
against this measure. After a full consideration of all aspects of the services
provided, the Board concluded that the continued appointment of JPMAM for the
provision of these services is in the best interest of shareholders.
On 3rd May 2005 the investment manager changed its name from J.P. Morgan Fleming
Asset Management (UK) Limited to JPMorgan Asset Management (UK) Limited. We have
been informed that the 'Fleming' name will no longer be used in the general
promotions of companies in the JPMorgan investment trust range. In view of this,
the Board considers it appropriate to change the name of the Company to JPMorgan
European Fledgeling Investment Trust plc. We will be seeking shareholders'
approval for this change at the forthcoming AGM.
I would like announce my intention to stand down from the Board at the
forthcoming AGM having served as a Director of the Company since October 1997
and Chairman since July 1998. It has been a pleasure and a privilege to serve as
a Director. I am delighted to inform you that Liz Airey will succeed me as
Chairman following the conclusion of the forthcoming AGM. Liz has been a
Director of the Company since January 2002 and has all the skills necessary to
be an excellent Chairman. During 2005, your Board conducted a search for a new
Director prior to my retirement. Liz Airey and Michael Wrobel interviewed a
number of candidates.
On the 1st December 2005 the Board decided to appoint two new directors Paul
Manduca and Federico Marescotti having concluded that both brought considerable
expertise to the Company, but from different angles. Paul has extensive
knowledge of the investment trust industry and European equity markets and was
until recently Chief Executive Officer of Deutsche Asset management whilst
Federico has considerable knowledge of the European small cap market and is
currently a Managing Partner of an Italian private equity Management company.
This means that following my retirement the Board will increase by one in
number. To accommodate this and any future rise in Directors' fees shareholders
will be asked to approve an increase in the maximum aggregate Directors' fees to
£175,000.
Annual General Meeting
The Annual General Meeting will be held at The The Library, JPMorgan, 60
Victoria Embankment, London EC4Y 0JP at 12 noon. on Wednesday 12th July 2006.
The format of the meeting will be similar to that of last year, and will include
a presentation from the Investment Manager on investment policy and performance.
There will also be the usual opportunity for shareholders to meet the Board and
representatives of JPMorgan after the meeting.
If you wish to raise any detailed or technical questions at the Meeting, it
would be helpful if you could mention them in advance to the Company Secretary
at Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. Shareholders who are
unable to attend the Meeting in person are encouraged to use their proxy votes.
Michael Hart
Chairman, 2nd June 2006
For further information please contact:
Hilary Lowe
JPMorgan Asset Management (UK) Limited
Telephone 0207 742 6000
JPMorgan Fleming European Fledgeling Investment Trust plc
Unaudited figures for the year ended 31st March 2006
Income Statement (Unaudited)
Year ended 31st March 2006 Year ended 31st March 2005
Revenue Capital Total Revenue Capital Total
return return return return return return
£'000 £'000 £'000 £'000 £'000 £'000
Realised gains on investments - 54,938 54,938 - 26,087 26,087
Unrealised gains on investments - 96,077 96,077 - 40,786 40,786
Currency gains/(losses) on cash and
short-term deposits held during the year - -
240 240 (823) (823)
Unrealised loss on currency hedge - (7) (7) - (39) (39)
Realised currency losses on Euro loans - - - - (393) (393)
Other capital charges - (54) (54) - - -
Income from investments 4,667 - 4,667 4,156 - 4,156
Other income 231 - 231 62 - 62
_______ ________ _______ _______ _______ _______
Gross revenue and capital return 4,898 151,194 156,092 4,218 65,618 69,836
Management fee (3,159) - (3,159) (1,899) - (1,899)
Other administrative expenses (592) - (592) (439) - (439)
_______ ________ _______ _______ _______ _______
Net return before finance costs and 1,147 151,194 152,341 1,880 65,618 67,498
taxation
Finance costs (525) - (525) (970) - (970)
_______ _______ _______ _______ _______ _______
Net return before taxation 622 151,194 151,816 910 65,618 66,528
Taxation (406) - (406) (819) - (819)
_______ _______ _______ _______ _______ _______
Total return attributable to ordinary
shareholders 216 151,194 151,410 91 65,618 65,709
Return per ordinary share 0.41p 286.38p 286.79p 0.17p 121.70p 121.87p
JPMorgan Fleming European Fledgeling Investment Trust plc
Unaudited figures for the year ended 31st March 2006
Reconciliation of Movements in Shareholders' Funds
Capital Capital Capital
Called up redemption reserve reserve -
Share Share reserve Other -realised unrealised Revenue
Capital Premium Reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31st March 2004 13,629 - 2,007 32,912 95,665 27,350 (8,990) 162,573
Shares bought back and
cancelled (238) - 238 (2,348) - - - (2,348)
Net capital return from
ordinary activities - - - - 37,833 27,785 - 65,618
Net revenue return from
ordinary activities - - - - - - 91 91
_______ _______ ________ _______ _______ _______ _______ ________
At 31st March 2005 13,391 - 2,245 30,564 133,498 55,135 (8,899) 225,934
Adjustment to reflect the
adoption of bid prices - - - - - (752) - (752)
Purchase of shares into
treasury - - - (1,623) - - - (1,623)
Sale of shares from - 91 - 675 - 766
treasury
Shares bought back and
cancelled (196) - 196 (2,765) - - - (2,765)
Net capital return from
ordinary activities - - - - 82,717 68,477 - 151,194
Net revenue return from
ordinary activities - - - - - - 216 216
_______ _______ ________ _______ _______ _______ ________ ________
At 31st March 2006 13,195 91 2,441 26,851 216,215 122,860 (8,683) 372,970
JPMorgan Fleming European Fledgeling Investment Trust plc
Unaudited figures for the year ended 31st March 2006
SUMMARISED BALANCE SHEET 31st March 31st March
2006 2005
£'000 £'000
Investments at fair value through profit or loss 387,213 237,033
Net current liabilities (14,243) (11,099)
_______ _______
Total net assets 372,970 225,934
======= =======
Net asset value per ordinary share 709.0p 421.8p
SUMMARISED CASH FLOW STATEMENT
2006 2005
£'000 £'000
Net cash inflow from operating activities 553 1,019
Net cash outflow from servicing of finance (556) (1,025)
Total tax recovered 184 211
Net cash inflow/(outflow) from capital expenditure and financial
investment 15,757 (3,677)
Net cash (outflow)/inflow from financing (27,547) 17,857
_______ _______
(Decrease)/increase in cash for the year (11,609) 14,385
======= =======
The Company has adopted certain new accounting policies following the issue of
new financial reporting standards (FRSs) and the issue of the revised Statement
of Recommended Practice 'Financial statements of investment trust companies' by
the AITC in December 2005. Investments are now valued at bid market prices in
accordance with FRS 26. In prior periods, investments were valued using last
trade prices. The comparatives have not been restated for this change.
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The comparative financial
information is an extract from the statutory accounts for the year ended 31st
March 2005. Those accounts, upon which the auditors issued an unqualified
opinion, have been delivered to the Registrar of Companies.
JPMORGAN ASSET MANAGEMENT (UK) LIMITED
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