TIDMJGCI
RNS Number : 0855E
JPMorgan Glbl Con Inc Fnd Ltd
15 October 2018
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED
FINAL RESULTS FOR THE YEARED
30TH JUNE 2018
Legal Entity Identifier: 549300DKZ0OX0PZH5H23
Information disclosed in accordance with the DTR 4.1.3
CHAIRMAN'S STATEMENT
I am pleased to present the Company's annual results for the
year ended 30th June 2018.
The review period again covered a number of significant market
events, including ongoing trade conflicts, the sell-off in emerging
markets currencies and oil prices reaching multi-year highs, with
market volatility increasing from levels last seen in the
mid-1960s.
Total return performance this year has been disappointing
compared to 2017; however, the Company continues to pay an annual
dividend of 4.5p per share and offer exposure to the global equity
markets, whilst offering investors a degree of NAV stability.
Looking forward, it is anticipated that interest rates will
continue to rise, which historically has resulted in convertible
bonds outperforming other fixed income investments. The Board
therefore believes that convertible bonds remain an attractive
investment proposition at the current time.
Investment Performance
The total return on the Company's net assets for the year to
30th June 2018 was +1.1%. This compares with the return of +1.4%
from the Company's reference index, the Bloomberg Barclays Credit
Sensitive Convertibles Index (hedged into sterling). The total
return to shareholders was -0.6% reflecting a widening in the share
price discount to net asset value over the year from 1.9% to
3.6%.
The main positive contributors to the portfolio's return over
the year were the impact of rising equity prices on the value of
convertible securities and coupon income from our convertible bond
holdings. The main detractor was the sensitivity to interest
rates.
The Board judges performance over the long term and over the
three years to 30th June 2018; over the three year period the
Company produced a net asset value ('NAV') total return of +10.4%
and a return to shareholders of +7.2%; over the five years to 30th
June 2018 the NAV return was +25.0% and the return to shareholders
+14.5%. The difference between NAV total return and return to
shareholders reflects the discount to NAV at which the shares have
historically traded.
A more detailed analysis of performance is set out in the
Investment Managers' Report that follows.
Dividends
When the Company was launched in 2013, it was the stated
intention to pay a dividend of 4.5p per share in the first year,
thereby attributing a yield of 4.5% on the issue price. In the
absence of unforeseen circumstances, the Board seeks to maintain
the annual targeted dividend of 4.5p, which is a yield of 4.8% on
the year end share price. The maintenance of this target has
required a small contribution from the Company's capital reserves.
In seeking an attractive level of total shareholder return in
excess of the dividend yield paid, the Board is content to use
capital reserves periodically to support the stability of income to
shareholders. We would hope that these reserves would be rebuilt
from capital gains during other periods of the market cycle. Whilst
there are signs of rising interest rates across much of the world,
it still seems highly unlikely that interest rates will revert to
historical norms for a considerable time. In such a low interest
rate world, the Company's yield remains an attractive feature to a
wide range of investors.
Three quarterly dividends totalling 3.375p per share have been
declared and paid during the financial year. On 12th September
2018, the Board declared a fourth quarterly dividend of 1.125p per
share to be paid on 25th October 2018, bringing the total dividends
paid in relation to the financial year ending 30th June 2018 to
4.5p.
Discount
In May 2017, the Board announced that it was concerned that, for
a low-volatility asset class, the level of movement in the
Company's share price had significantly increased the overall
volatility of shareholder returns. Whilst the Company's discount
had narrowed in the months prior to that announcement to
approximately 5%, it was the Board's view that the Company's share
price should, ideally, track the Company's net asset value ('NAV')
more closely than it had done. Therefore, the Board introduced a
revised discount control policy under which it intended to seek to
ensure that the Company's share price remained close to NAV such
that, under normal market conditions, the Company's shares traded
within a range of a 2% discount to a 2% premium to the Company's
cum income NAV per share. This would be achieved primarily through
the use of share buybacks and/or share issuance as necessary.
In the period from the Board's announcement to 30th June 2018,
the Company's shares traded in a range of -4.5% to +0.4% (premium),
averaging 2.2%, and finishing the year at a discount of 3.6%, wider
than the 1.9% discount at the previous year end.
During the year the Company bought back into treasury a total of
32,060,128 shares, representing 17.4% of the shares in issue
(excluding shares held in treasury) at the start of the Company's
financial year.
Since the year end, the Company has repurchased a further
20,441,906 shares. Notwithstanding the number of shares
repurchased, the discount widened during this period as a result of
the volume of shares sold, reaching 7.7% in the middle of September
2018. Since that date the discount has narrowed, in part as a
result of the Company continuing to buy back shares, and as a
consequence of the selling pressure easing, and as at 10th October
2018 the shares were trading at a 5.2% discount to NAV.
In order to seek to ensure that there is continuity in the
Company's ability to repurchase shares the Directors have brought
forward the Annual General Meeting (the 'AGM') from a scheduled
date of 4th December 2018 to 14th November 2018, when shareholders
will be asked to renew the Company's buy back authority.
The buybacks undertaken during the year, and since the year end
to 10th October 2018, have added approximately 1.1 pence per share
for ongoing shareholders.
Continuation Vote and Outlook
At the AGM shareholders will be asked to consider a resolution
that the Company continues its business as a closed-ended
collective investment scheme (the '2018 Continuation Vote'). The
Board believes that the approval of this resolution is in the best
interests of the shareholders as a whole and therefore recommends
that shareholders vote in favour of the resolution.
In coming to this recommendation the Directors have carefully
reviewed and considered the outlook for the Company's asset class
and the views of the Company's Investment Manager, which are set
out in detail in the Investment Managers' Report, together with the
Company's performance since launch and the experience and resources
of JPMorgan Asset Management ('JPMAM'). The Board has also taken
into account feedback received from a number of the Company's
shareholders and the views of the Company's corporate broker.
The asset class offers access to an attractive level of income
with the opportunity to benefit from further gains in global equity
markets without taking undue risk at a time when equity markets are
near all-time highs, interest rates are rising and credit spreads
remain tight.
As noted above the Company targets, and since launch on 11th
June 2013 has paid, a 4.5p per share annual dividend. It is the
Directors' current intention that the Company will continue to
target this level of dividend, representing a yield of around 5% on
the current share price. Combined with the portfolio's defensive
characteristics, the Board believes the Company offers shareholders
a useful investment opportunity, differentiated from fixed income
alternatives. Historically, when interest rates have risen,
convertible bonds have more often than not outperformed other fixed
income investments.
In addition, whilst there has been some downward pressure on the
discount in recent months, the Board remains of the view that it is
in shareholders' interests for the Company's share price to more
closely track the Company's NAV, thereby reducing share price
volatility. Accordingly, subject to market conditions (and renewal
of the buyback authority at the AGM) the Company will continue to
repurchase shares, when required.
The JPMAM convertible bond team has been managing convertibles
since 1995; it has AUM of c. $6.2 billion and is one of the
world-leading fund managers in the asset class. Hart Woodson has
recently been appointed as Head of the Convertible Bond team. Mr
Woodson has 25 years of experience as a portfolio manager of global
convertible bond portfolios and funds, having previously served as
a portfolio manager at both Advent Capital Management and Gabelli
Asset Management. Prior to his portfolio management roles, he
worked for more than a decade as a capital markets specialist and
credit analyst, with ABN AMRO in Amsterdam and Meridian
International Bank in New York.
The Company's portfolio will continue to be managed by the
existing Investment Managers, Natalia Bucci and Paul Levene.
However, as the Company draws on the investment insight and
resources of both the broader JPMAM convertible bond team and wider
multi-asset solutions investment resource, we anticipate that Mr
Woodson's depth of knowledge and experience will be beneficial to
the Company and are pleased that JPMAM has shown its commitment to,
and enhanced its capabilities in, this asset class.
However, the Board recognises that there has been a significant
level of buying back of the Company's shares over the course of the
last 12 months and, therefore, subject to the passing of the 2018
Continuation Vote, will be putting a further continuation vote to
shareholders at the Annual General Meeting to be held in 2019.
Annual General Meeting
The AGM will be held at JPMorgan's offices in Guernsey on 14th
November 2018 at 11.00 a.m. All shareholders are encouraged to use
their proxy votes.
Simon Miller
Chairman
15th October 2018
INVESTMENT MANAGERS' REPORT
Performance Review
In the year to 30th June 2018, the Company's portfolio generated
a positive net asset value ('NAV') total return of 1.1%. It was a
year characterised by geopolitical events, oil reaching multi-year
highs and some markets making all-time highs (e.g. tech and small
cap stocks). More recently the focus has been on local funding
issues for companies, from emerging markets to Italy, given higher
interest rates and the selloff in emerging market currencies, and
whether the ongoing trade conflicts with the US damages growth
through sentiment and financial conditions.
As a result of the uncertainty, the market experienced a pick-up
in volatility which had fallen to levels last seen in the
mid-1960s. Nevertheless, the U.S. delivered bumper earnings,
although Europe displayed mixed results. Energy together with tech
delivered earnings growth significantly outperforming expectations.
In contrast, the upturn in inflation and erosion of capacity in the
labour market means that it is likely the US Federal Reserve will
continue to increase interest rates; this expectation has led to a
sell-off in bonds. However, rising bond yields were, and continue
to be, impacted by the escalation of geopolitical and trade
tensions, whilst economic data were mixed. We expect the
sensitivity of US Treasury yields to inflation data to persist.
Inevitably, rising government bond yields present a headwind to our
returns but it is important to remember that the normalisation of
bond yields will be positive to portfolio returns over the long
term as we are able to reinvest in higher coupons in the future. In
the meantime, convertibles are an attractive sector in which to
weather the rise in rates.
Two reasons underpin this. Firstly, convertibles have the
opportunity to benefit from rising equity prices, which typically
accompany a strong economy. Indeed, the portfolio benefitted from
supportive equity market performance during the year. Of particular
note was the contribution from the U.S. and Asia ex-Japan. In terms
of the Company's sector allocation, Energy and Basic Materials
outperformed all other sectors.
Secondly, against the macro backdrop we think that equity
volatility will be higher, which supports convertible valuations in
the short term as the rise in equity volatility causes a rise in
the option value embedded in convertible bonds. We maintain our
belief that convertible bonds could perform well in the current
reflationary environment. This is reflected in the fact that while
over the year the interest rate sensitivity of our holdings
detracted from performance, this was more than offset by the
positive contributions from credit and most notably equity
factors.
Portfolio Review
Throughout the year, the equity sensitivity of the portfolio has
been increasing, whilst the proportion of high quality investment
grade credit has grown. In contrast to the period that followed the
market sell-off in credit-sensitive bonds in late 2015, the
portfolio has shifted to the more balanced and equity bond-like
part of the convertible universe. This reflected our view that
going forward a larger portion of the return is expected to come
from increases in the value of the issuers' share prices rather
than exposure to credit. In general, our view on credit conditions
and pricing is that they are nearing their peak.
As such, we believe we have entered a period where credit risk
is becoming increasingly skewed to the downside. As a result, we
took profit on credit exposures that we considered fairly valued or
that did not have a clear catalyst for outperformance. By contrast,
we were content to retain exposure to higher yielding positions
where we felt that the actions being taken by the company to
improve its credit profile would be validated.
As a result of the move away from being predominately invested
in the bond-like part of the convertible universe, the Company's
sensitivity to equity prices has increased. Therefore we have also
taken profit on issuers whose performance was derived from strong
underlying equity price movements and in some cases added to
positions with higher t equity sensitivity where we viewed
valuations as undemanding and hence attractive. These positions
added value through the first half of the financial year, as equity
markets continued moving higher, particularly in the U.S. and Asia
ex. Japan.
The Company's largest regional exposure is to the U.S. where
equities have remained resilient amidst rising geopolitical and
trade risks. The S&P500 has performed well on the back of
strong earnings, upbeat guidance and accelerating investment
activity, including buybacks, dividend growth and mergers and
acquisitions. Moreover, the gap between the value of announced and
executed buybacks has grown over the last few years with the
divergence most pronounced in the Financial, Communication and
Technology sectors. These sectors combined represent more than half
the portfolio holdings. Thus, we believe that the strong earnings
delivery and upbeat guidance should provide support for U.S. equity
valuations at the very least and we take comfort in our U.S.
exposure.
We continued to seek exposure to the Technology and
Communications ('TMT') sectors (including internet) during the year
as the various subsectors provided us with an attractive range of
opportunities. For instance, the internet sector boasts a number of
companies with strong, cash-rich balance sheets and exciting
long-term prospects. In certain cases, our high conviction view has
led us to opt for more equity-sensitive instruments, for example
the Alibaba mandatory convertible. Elsewhere, we remain exposed to
more mature, stable or declining subsectors such as Pay-TV to
benefit from the higher yielding securities.
The Company's largest sector exposure is to the Financial (ex.
Real estate) sector, while exposure to Industrials fell the most
compared to all other sectors. The rationale for this continued
preference is that Financials tend to be less sensitive to global
trade and do not have such stretched valuations in general. The
Financial exposure also includes business development companies
that combine a high quality portfolio, well-regarded management and
exposure to U.S. middle market companies that, in our view, will
benefit from an expanding U.S. economy. By way of contrast, some of
our holdings within the industrial space were expensive, sensitive
to a rollover in global economic momentum and had significantly
outperformed over the last few years.
During the year within the Financial (Real Estate) sector we
continued a shift away from U.S. real estate exposure, adding short
dated China and Singapore property names with positive yields and
more balanced profiles. We prefer to remain holders of shorter
dated China property risk here as if there is no improvement in the
onshore refinancing environment we would expect supply to come to
the off-shore U.S. Dollar market, resulting in spread widening. At
such a time we would assess the attractiveness of longer dated
China property names and potentially look to add. Unlike U.S. real
estate during the period, China real estate investment demonstrated
strong growth, although in the latter half of year valuations were
under pressure as a result of trade tensions and emerging market
weakness.
The standout performer of the portfolio was the Energy sector.
The positioning reflected our bullish stance on crude oil
throughout the year, as we anticipated a continuation of higher
prices due to unprecedented compliance of the OPEC members to their
oil supply agreement, and above trend oil demand. To us,
geopolitical risk seemed particularly pronounced given U.S.
sanctions against Venezuela and Iran. Accordingly, throughout the
year we continued to hold our energy positions and in some cases
have extended the duration, resulting in energy being the best
performing sector over the year.
In the last financial year we added a small position in Asset
Swapped Convertible Option Transactions ('ASCOTs') to the
portfolio, which provides exposure to the Japanese equity market.
ASCOTs are long-tenor options on convertible bonds and are designed
to provide asymmetrical equity exposure. At the portfolio level,
the market value of the ASCOTs as at 30th June 2018 represented c.
1% of the portfolio., Throughout the year, domestic and foreign
investors have displayed a low risk appetite towards the Japanese
equity market resulting in a reduction in the value of these
options. Furthermore, concerns around decreased levels of bond
purchases by the Bank of Japan and its exit policy from the
purchase programme has added to investor caution in the region.
However, we remain comfortable with the level of exposure to Japan,
also considering the long tenor of these instruments, and believe
that corporate governance improvement and attractive equity
valuations should benefit the Japanese market in the longer
term.
The level of gearing has remained limited over the financial
year, reflecting our general caution on current valuations across
most asset classes. However, we considered it optimal to roll the
facility in order to ensure that the Company would have the
capacity to increase exposure if a correction were to present us
with more attractive investment opportunities, albeit remaining
within the Company's gearing limit of 20%.
Outlook
We believe global growth is set to remain above trend, but
changes to U.S. trade policy and the impact of higher U.S. rates
have increased the risks to our outlook. We retain our pro-risk
tilt given the equity sensitivity of the portfolio, anticipating an
economic and earnings environment consistent with equity
outperformance. U.S. real yields are now positive for most
maturities and we expect U.S. interest rates to continue steadily
to increase over coming quarters. However, we believe that monetary
policy will remain accommodative and supportive for risky assets
into next year.
We believe that the Company is well placed to continue
differentiating itself from fixed income alternatives in an
environment that we anticipate will have higher interest rates and
geopolitical headline risk. Nevertheless, with high equity
valuations and credit spreads at historic tights, we consider it
pragmatic to retain our somewhat conservative positioning. What
makes convertibles especially attractive today is their historical
performance during periods of rising interest rates. When interest
rates have risen, convertible bonds have tended to outperform other
fixed income investments, as they are less sensitive to interest
rate movements compared to traditional fixed income
investments.
The portfolio's exposures remain generally short-dated with an
average price below par value. Combined with an attractive
portfolio yield of 4.7% (as at 30th September 2018), we believe
that the Company remains positioned to participate in further
equity or credit market upside while retaining its defensive
characteristics.
Paul Levene
Natalia Bucci
Investment Managers
15th October 2018
Principal Risks
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The principal risks and how they are being
managed or mitigated are summarised as follows:
-- Investment Risk
An inappropriate investment strategy, for example excessive
concentration of investments, asset allocation, the level of
gearing, or the degree of portfolio risk, may lead to
underperformance against the Company's benchmark index and peer
companies. In addition this may result in the Company's shares
trading on a wider discount. A widening of the discount results in
loss of value for shareholders. In order to try to manage the
Company's discount, which can be volatile, the Company operates a
share issuance and repurchase programme. The Board regularly
discusses discount policy and has set parameters for the Manager
and the Company's broker to follow.
The Board manages investment risks by diversification of
investments through its investment restrictions and guidelines
which are monitored and reported on by the Manager. The Manager
provides the Directors with timely and accurate management
information, including performance data and attribution analyses,
revenue estimates, cash reports and shareholder analyses. The Board
monitors the implementation and results of the investment process
with the Investment Managers, who attend Board meetings, and
reviews data which show statistical measures of the Company's risk
profile. The Investment Managers employ the Company's gearing
tactically, within a strategic range set by the Board. In addition
to regular Board meetings, the Board conducts an annual strategy
session where it discusses the portfolio's objective and challenges
the strategy they have set to achieve it.
-- Market Risk
Market risk arises from uncertainty about the future prices of
the Company's investments. It represents the potential loss that
the Company might suffer through holding investments in the face of
negative market movements. The Board considers asset allocation,
stock selection and levels of gearing on a regular basis and has
set investment restrictions and guidelines, which are monitored and
reported on by the Manager. The Board monitors the implementation
and results of the investment process with the Manager.
-- Operational Risk
Disruption to, or failure of, the Manager's accounting, dealing
or payments systems or the Depositary's, Custodian's or
Administrator's records may prevent accurate reporting and
monitoring of the Company's financial position. This includes the
risk of cybercrime and consequent potential threat to security and
business continuity.
Details of how the Board monitors the services provided by the
Manager and its associates and the key elements designed to provide
effective risk management and internal controls are included within
the Risk Management and Internal Controls section of the Corporate
Governance Statement in the annual report.
-- Political and Regulatory Risks
Political risks, such as the UK leaving the European Union, or a
change in financial or tax legislation impacting the treatment of
the Company's earnings, may impair the Manager's ability to
continue with its investment activity. These risks are discussed by
the Board on a regular basis.
Other political risks, such as the imposition of restrictions on
the free movement of capital may impair the Manager's ability to
continue with its investment activity. Similarly, adverse tax,
regulatory or political change could have a material impact on the
Company. The Company must also comply with the provisions of the
Guernsey Companies Law and, since its shares are listed on the
London Stock Exchange, the UKLA Listing Rules and Disclosure
Guidance and Transparency Rules ('DTRs'). A breach of the Companies
Law could result in the Company and/or the Directors being fined or
the subject of criminal proceedings. Breach of the UKLA Listing
Rules or DTRs could result in the Company's shares being suspended
from listing. The Board relies on the services of its Company
Secretary and its professional advisers to ensure compliance with
the Companies Law and the UKLA Listing Rules and DTRs.
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors'
Report in the annual report. The management fee payable to Manager
by the Company for the year was GBP1,289,000 (2017: GBP1,458,000)
of which GBPnil was outstanding at the year end. In addition
GBP38,000 was refunded by (2017: GBP18,000 was paid to) the Manager
for the administration of savings scheme products of which GBP1,000
(2017: GBPnil) was outstanding at the year end. Included in other
administration expenses in note 7 in the annual report are safe
custody fees payable to JPMorgan Chase Bank, N.A. as custodian of
the Company amounting to GBP9,000 (2017: GBP11,000) of which
GBP3,000 (2017: GBP3,000) was outstanding at the year end.
The Manager carries out some of its dealing transactions through
subsidiaries. These transactions are carried out at arms'
length.
Handling charges payable to JPMorgan Chase Bank, N.A. on dealing
transactions undertaken by overseas sub custodians on behalf of the
Company amounted to GBP12,000 (2017: GBP9,000) of which GBP3,000
(2017: GBP2,000) was outstanding at the year end.
At the year end, the Company held bank balances of GBP296,000
(2017: GBP281,000), with JPMorgan Chase Bank, N.A. which was placed
on deposit with an approved list of banks. Interest amounting to
GBP3,000 (2017: GBP1,000) was receivable by the Company during the
year from JPMorgan Chase Bank, N.A. of which GBPnil (2017: GBPnil)
was outstanding at the year end.
The Company also holds cash in the JPMorgan Sterling Liquidity
Fund, which is managed by JPMF. At the year end this was valued at
GBP12,253,000 (2017: GBP16,402,000). Interest amounting to
GBP51,000 (2017: GBP30,000) was receivable during the year of which
GBP6,000 (2017: GBPnil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be
found in the Directors' Remuneration Report in the annual report.
No fees were outstanding at the year end (2017: GBPnil).
STATEMENT of directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable laws and
regulations.
Guernsey company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted in
the European Union. The financial statements are required by law to
give a true and fair view of the state of affairs of the Company
and of the financial performance of the Company for that period.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Company's
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and presentation
of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
IFRSs.
In preparing these financial statements, the Directors are
required to:
-- properly select and apply accounting policies and then apply them consistently;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with specific
requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance;
-- make an assessment of the Company's ability to continue as a going concern;
-- state that the Company has complied with IFRSs, subject to
any material departures disclosed and explained in the financial
statement; and
-- make judgements and estimates that are reasonable and prudent.
Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and which enable them to ensure that the
financial statements comply with the Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for ensuring that the Company complies with the
provisions of the Listing Rules and the Disclosure Guidance &
Transparency Rules of the UK Listing Authority which, with regard
to Corporate Governance, require the Company to disclose how it has
applied the principles, and complied with the provisions, of the UK
Corporate Governance Code applicable to the Company.
In the case of each of the persons who are Directors of the
Company at the time when this report was approved:
(a) so far as each of the Directors is aware, there is no
relevant audit information of which the Company's auditor is
unaware, and
(b) each of the Directors has taken all the steps that he/she
ought to have taken as a Director in order to make himself/herself
aware of any relevant audit information (as defined) and to
establish that the Company's auditor is aware of that
information.
The Directors of the Company, who are listed in the annual
report, each confirm to the best of their knowledge that:
-- the financial statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company;
-- this annual report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces; and
-- this annual report and financial statements, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
For and on behalf of the Board
Philip Taylor
Director
15th October 2018
Statement of Comprehensive income
For the year ended 30th June 2018
2018 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Investments held at fair value through profit and loss:
(Losses)/gains on investments held at fair value through
profit or loss - (4,721) (4,721) - 15,331 15,331
Income from investments 8,220 - 8,220 10,253 - 10,253
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Gains/(losses) on financial instruments:
Realised losses on close out of futures and options
contracts - (448) (448) - (231) (231)
Unrealised losses on futures and options contracts - (478) (478) - - -
Realised foreign currency gains/(losses) on foreign
currency contracts - 1,929 1,929 - (6,029) (6,029)
Unrealised foreign currency (losses)/gains on foreign
currency contracts - (1,099) (1,099) - 271 271
Realised foreign currency (losses)/gains - (52) (52) - 60 60
Unrealised foreign currency gains/(losses) - 248 248 - (436) (436)
Other income 54 - 54 31 - 31
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total income/(loss) 8,274 (4,621) 3,653 10,284 8,966 19,250
Management fee (838) (451) (1,289) (948) (510) (1,458)
Other administrative expenses (417) - (417) (468) - (468)
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) before finance costs and taxation 7,019 (5,072) 1,947 8,868 8,456 17,324
Finance costs (255) (137) (392) (205) (110) (315)
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Profit/(loss) before taxation 6,764 (5,209) 1,555 8,663 8,346 17,009
Taxation (287) - (287) (242) - (242)
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net profit/(loss) 6,477 (5,209) 1,268 8,421 8,346 16,767
---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Earnings/(loss) per share 3.81p (3.06)p 0.75p 4.33p 4.29p 8.62p
statement of changes in equity
For the year ended 30th June 2018
Share Capital Revenue
capital reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- -------- ---------
At 30th June 2016 217,368 (28,794) 64 188,638
Repurchase of shares into Treasury - (10,823) - (10,823)
Profit for the year - 8,346 8,421 16,767
Dividends paid in the year (note 3) - - (8,762) (8,762)
------------------------------------- -------- --------- -------- ---------
At 30th June 2017 217,368 (31,271) (277) 185,820
Repurchase of shares into Treasury - (31,182) - (31,182)
(Loss)/profit for the year - (5,209) 6,477 1,268
Dividends paid in the year (note 3) - - (7,643) (7,643)
------------------------------------- -------- --------- -------- ---------
At 30th June 2018 217,368 (67,662) (1,443) 148,263
------------------------------------- -------- --------- -------- ---------
statement of financial position
At 30th June 2018
2018 2017
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Non current assets
Investments held at fair value through profit or loss 149,978 185,007
Current assets
Derivative financial assets 1,708 763
Trade and other receivables 3,037 1,702
Cash and cash equivalents 12,549 16,683
------------------------------------------------------- --------- ---------
17,294 19,148
Current liabilities
Derivative financial liabilities (1,161) (492)
Trade and other payables (2,699) (2,446)
------------------------------------------------------- --------- ---------
Net current assets 13,434 16,210
------------------------------------------------------- --------- ---------
Total assets less current liabilities 163,412 201,217
Non current liabilities
Loans payable (15,149) (15,397)
------------------------------------------------------- --------- ---------
Net assets 148,263 185,820
------------------------------------------------------- --------- ---------
Amounts attributable to equity holders
Share capital 217,368 217,368
Capital reserve (67,662) (31,271)
Revenue reserve (1,443) (277)
------------------------------------------------------- --------- ---------
Total shareholders' funds 148,263 185,820
------------------------------------------------------- --------- ---------
Net asset value per share 97.5p 100.9p
statement of cash flows
For the year ended 30th June 2018
2018 2017
GBP'000 GBP'000
-------------------------------------------------------------- ---------- ----------
Operating activities
Profit before taxation 1,555 17,009
Deduct dividends received (940) (768)
Deduct investment income - interest received (7,280) (9,485)
Deduct bank interest received (54) (31)
Add back interest paid 392 315
Add back losses/(deduct gains) on investments held
at fair value through profit or loss 4,721 (15,331)
Decrease/(increase) in unrealised gains on foreign
currency contracts 1,370 (9,346)
Increase in unrealised gains on future and option
contracts (1,646) (41)
Decrease in cash held as collateral by Brokers for
futures - 169
(Decrease)/increase in unrealised losses on foreign
currency (248) 436
Effect of decrease/(increase) in trade and other receivables 9 (3)
Effect of increase/(decrease) in trade and other payables 9 (55)
-------------------------------------------------------------- ---------- ----------
Net cash outflow from operating activities before
interest, taxation and dividends (2,112) (17,131)
-------------------------------------------------------------- ---------- ----------
Taxation (287) (242)
Interest paid (350) (299)
Dividends received 926 796
Investment income - interest 4,326 5,545
Bank interest received 48 31
-------------------------------------------------------------- ---------- ----------
Net cash inflow/(outflow) from operating activities
after interest, taxation and dividends 2,551 (11,300)
-------------------------------------------------------------- ---------- ----------
Investing activities
Purchases of investments held at fair value through
profit or loss (113,425) (236,907)
Sales of investments held at fair value through profit
or loss 147,834 279,160
-------------------------------------------------------------- ---------- ----------
Net cash inflow from investing activities 34,409 42,253
-------------------------------------------------------------- ---------- ----------
Financing activities
Repurchase of shares into Treasury (33,451) (8,528)
Dividends paid (7,643) (8,762)
-------------------------------------------------------------- ---------- ----------
Net cash outflow from financing activities (41,094) (17,290)
-------------------------------------------------------------- ---------- ----------
(Decrease)/increase in cash and cash equivalents (4,134) 13,663
Cash and cash equivalents at the start of the year 16,683 3,020
-------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the end of the year 12,549 16,683
-------------------------------------------------------------- ---------- ----------
Notes to the financial statements
For the year ended 30th June 2018
1. Basis of Accounting
These financial statements have been prepared on a going concern
basis in accordance with IAS 1, applying the historical cost
convention, except for the measurement of financial assets
including derivative financial instruments designated as held at
fair value through profit or loss ('FVTPL') and that have been
measured at fair value.
Where presentational guidance is set out in the Statement of
Recommended Practice ('SORP') for investment companies issued by
the Association of Investment Companies ('AIC') in November 2014
and updated in February 2018 is consistent with the requirements of
IFRS, the Directors have sought to prepare the financial statements
on a basis compliant with the recommendations of the SORP, where
relevant.
All of the Company's operations are of a continuing nature.
2. Earnings/(loss) per share
2018 2017
GBP'000 GBP'000
------------------------------------------------------ ------------ ------------
Earnings/(loss) per share is based on the following:
Revenue return 6,477 8,421
Capital (loss)/return (5,209) 8,346
------------------------------------------------------ ------------ ------------
Total return 1,268 16,767
------------------------------------------------------ ------------ ------------
Weighted average number of shares in issue during
the year used for the purpose of the calculation 170,230,486 194,513,155
Revenue return per share 3.81p 4.33p
Capital (loss)/return per share (3.06)p 4.29p
------------------------------------------------------ ------------ ------------
Total return per share 0.75p 8.62p
------------------------------------------------------ ------------ ------------
3. Dividends
2018 2017
GBP'000 GBP'000
----------------------------------------------------------------- -------- --------
Dividends paid
2017 Fourth interim dividend 1.125p (2016: 1.125p) per share 1,987 2,196
2018 First interim dividend of 1.125p (2017: 1.125p) per share 1,969 2,195
2018 Second interim dividend of 1.125p (2017: 1.125p) per share 1,874 2,195
2018 Third interim dividend of 1.125p (2017: 1.125p) per share 1,813 2,176
----------------------------------------------------------------- -------- --------
Total dividends paid in the year 7,643 8,762
----------------------------------------------------------------- -------- --------
Dividend proposed
2018 Fourth interim dividend proposed of 1.125p (2017: 1.125p) 1,711 1,987
----------------------------------------------------------------- -------- --------
Dividend payments in excess of the revenue amount will be paid
out of Company's capital reserves.
4. Net asset value per share
2018 2017
--------------------------- ------------ ------------
Net assets (GBP'000) 148,263 185,820
Number of shares in issue 152,131,663 184,191,791
--------------------------- ------------ ------------
Net asset value per share 97.5p 100.9p
--------------------------- ------------ ------------
5. Status of results announcement
2017 Financial Information
The figures and financial information for 2017 are extracted
from the Annual Report and Accounts for the year ended 30th June
2017 and do not constitute the statutory accounts for the year. The
Annual Report and Accounts include the Report of the Independent
Auditors which was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006.
2018 Financial Information
The figures and financial information for 2018 are extracted
from the published Annual Report and Accounts for the year ended
30th June 2018 and do not constitute the statutory accounts for
that year. The Annual Report and Accounts include the Report of the
Independent Auditors which was unqualified and did not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The Annual Report and Accounts will be
delivered to the Register of Companies in due course.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
JPMORGAN FUNDS LIMITED
S
A copy of the annual report will shortly be submitted to the
National Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The annual report will shortly be available on the Company's
website at www.jpmconvertiblesincome.co.uk where up-to-date
information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
JPMORGAN FUNDS LIMITED
, the news service of the London Stock Exchange. RNS is approved by
the Financial Conduct Authority to act as a Primary Information
Provider in the United Kingdom. Terms and conditions relating to
the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
FR LLFVVIELELIT
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