TIDMJGCI
RNS Number : 1285G
JPMorgan Glbl Con Inc Fnd Ltd
27 February 2015
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS
ENDED 31ST DECEMBER 2014
Chairman's Statement
The Company
The Company was admitted to trading on the London Stock Exchange
on 11th June 2013, initially raising net proceeds of GBP133.6
million. To date a further GBP88.6 million has been raised through
the issue of shares.
Investment Performance
For the half year ended 31st December 2014, the Company recorded
a total return on net assets of -4.8%. The total return for
shareholders was -5.8% over the same period. This is a
disappointing performance but the Board recognises the challenging
market conditions that have prevailed during the six month period.
We are satisfied that the Manager has continued to manage the
portfolio in a risk controlled framework and maintained an
appropriate defensive bias where appropriate. As I note later in
this statement, recent dislocations have created interesting
opportunities for future returns. The Investment Managers' report
reviews the Company's performance and gives a detailed commentary
on the investment strategy and portfolio construction, and their
outlook for the sector.
Dividends
The Board declared a first interim dividend for the current year
of 1.125p per share, which was paid on 12th December 2014. The
Board has also declared a second interim dividend of 1.125p per
share, payable on 27th March to shareholders on the register at
close of business on 6th March 2015. It is anticipated that two
further interim dividends will be paid for the current financial
year.
The Board will continue to target an annual dividend totalling
4.5p.
The Board has considered at length the emphasis which the
Investment Managers should attribute to the relative merits of
revenue returns versus total returns and it remains committed to
providing shareholders with a dividend income whilst offering the
potential for capital growth. The Board has concluded, therefore,
that it is in the best interests of shareholders that the
Investment Managers should continue to operate on a total return
basis where possible. Accordingly, there may be times when, for
example, the Company holds convertible bonds with lower coupons
where there is a greater expectation of capital return. The
accounting standards applicable to the Company as a Guernsey
incorporated company are such that this trade-off need not impact
the Company's ability to meet its dividend ambitions.
Gearing
The Company may employ gearing up to a maximum of 20% of Net
Asset Value at the time of borrowing. Gearing has not been employed
to date, but this is a matter of regular review.
Share Issuance
At admission on 11th June 2013, the Company issued 136,000,000
ordinary shares at a price of 100p per share raising, after issue
expenses, GBP133.6 million. To date a further 83,080,000 shares
have been issued at a premium to net asset value. Share issuance
has always taken place at a premium to the prevailing cum-income
net asset value per share and so is accretive to the returns of
existing shareholders. If conditions are appropriate, the Company
will continue to issue new shares which, as well as assisting with
premium management, will also enhance liquidity and continue to
underpin the Company as an attractive investment.
Board of Directors
The Board of Directors, appointed shortly prior to the Company's
launch in 2013, remains unchanged. The Board is committed to
improving the opportunities for people from a diverse range of
backgrounds to understand and prepare for membership of corporate
boards. During the period under review we appointed an apprentice
from Board Apprentice Limited, which is a not--for--profit
organisation dedicated to increasing diversity on boards by
widening the pool of board-ready candidates and looks at diversity
as beyond gender and encompassing ethnicity, culture, age,
disability, personality and skill set. For a period of one year, we
have appointed Fiona Davies as a Board apprentice, and in that
capacity, Fiona attends all Board and Committee meetings for
educational purposes and takes part in discussions when invited to
do so by the Board. She receives no remuneration from the Company
and her appointment commenced on 1st February 2015.
Outlook
The announcement of full-scale quantitative easing in Europe may
lead investors to seek yield from alternative sources, as well as
providing potential support to the valuations of risk assets.
Against this backdrop, convertibles can provide an attractive
combination of income and the potential to participate in equity
market returns. The convertibles market has been volatile in the
second half of 2014 and certain selling has been indiscriminate.
This has uncovered a number of interesting opportunities for new
investments which create the opportunity for enhanced returns in
the future. In addition, recent selling has pushed up yields across
the board, which embeds attractive future value that can be
unlocked over time. In the meantime, the broad diversification of
the portfolio should enable the Company to weather any further
short term volatility and challenges that may arise.
Simon Miller
Chairman
27th February 2015
Investment Managers' Report
The second half of 2014 presented a volatile and challenging
backdrop for the Fund, as a combination of energy market weakness,
cheapening convertible valuations, and stress in high yield markets
tested the downside-protection provided by the convertibles asset
class. The team has been active in reducing exposure to difficult
sectors in order to reduce the potential for mark-to-market losses,
but regret this did not prevent the Company from posting a negative
total return of -4.8% on Net Asset Value (NAV) and -5.8% on the
share price over the period (includes dividends reinvested). The
portfolio is fully currency hedged, which has detracted value over
the period as the GBP depreciated against other major currencies,
including the USD. The portfolio is fully currency hedged to reduce
volatility and to seek to produce Sterling denominated returns.
However, during the period, this eliminated some of the gains that
would otherwise have come from an appreciating US Dollar.
Well--publicised difficulties in energy and commodities markets
led to a decline in the equity valuations of a number of companies
within the portfolio, and the team estimate that the portfolio's
equity sensitivity generated a negative contribution of
approximately 2% over 2H 2014. From a credit perspective, the
contrasting impact of widening credit spreads and lower effective
interest rates led to a small negative impact on performance that
the team calculates to be approximately 30 basis points.
The cheapening of convertible valuations has been even more
significant than these factors. Technical weakness in bond--like
convertibles can be detected by comparing the market price with a
theoretical value derived from separately valuing the bond--only
element and equity option value embedded in a convertible. The
convertibles market started to cheapen in the early part of the
period, and while most profile types have subsequently stabilised
around fair values there has been a prolonged weakness in high
yielding bond--like convertibles. The team believe that such
changes in valuations are accountable for more than 3% of negative
performance in 2H 2014. A significant degree of this cheapening is
considered to be contagion from weakness in the high yield market.
In particular, anecdotal evidence suggests that a liquidity squeeze
in the high yield market has led some high yield investors to sell
convertible holdings. From this perspective, the team are
encouraged that liquidity within the convertibles market has
remained relatively robust.
The team therefore believes that the second half of 2014 can be
summarised by three key themes: weakness in energy markets,
cheapening convertible valuations, and a widening of credit
spreads.
The energy sector had offered the highest yield by sector even
before the decline in the oil price. The team's strategy had been
to focus on a combination of the highest quality names in the space
and those with an improving fundamental outlook. This positioning
was intended to take advantage of the attractive yield available
while providing some protection from weakness related to soft
demand. However, this defensive allocation did not provide the
anticipated protective benefits as almost all companies exposed to
oil and gas markets sold off, regardless of their perceived
quality. As the oil price trended lower, the team continually
assessed the extent to which the companies within the portfolio
could withstand oil prices at lower levels. The team have
subsequently reduced exposure to companies reliant on a higher oil
price, and have been concentrating the exposure on higher quality
names that should be better positioned to withstand prices at
current levels. The team believe that this rotation has a number of
advantages. In an environment of depressed oil prices these could
be considered to be among the safer yield opportunities in the
sector, whereas the extent to which they were oversold during the
initial panic could cause them to rebound more strongly in the
event that a fledgling recovery in the oil price emerges.
Widespread market volatility has also generated opportunities in
sectors that had previously been under represented in the high
yielding section of the convertible market, such as the US
technology sector. The team has used the increased yield available
on these positions to further increase the diversification of the
portfolio. These positions provide the portfolio with defensive
exposure to volatile underlying equities with significant potential
for future growth, while the opportunity to enter this exposure
with a positive yield helps support the total return on the
position. The team has also been positioning the portfolio for a
divergent regional economic outlook by focusing on companies in the
US that could benefit from a stronger fundamental growth and those
in Europe likely to benefit from the low interest rate environment
or a weaker EUR.
Recent volatility has proved challenging, but the team firmly
believes that this volatility has also unlocked a number of
opportunities that may provide catalysts for future performance. In
the near--term, a recovery in bond like valuations could be a
significant driver of performance, while quantitative easing in
Europe and an associated improvement in risk appetite could help
boost sentiment and tighten credit spreads. Longer term, resurgent
economic growth or a recovery in energy markets could also help
support returns.
Antony Vallee
Natalia Bucci
Robin Dunmall
Investment Managers
27th February 2015
Interim Management Report
The Company is required to make the following disclosures in its
interim report.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company fall
into the following broad categories: investment and strategy;
accounting, legal and regulatory; corporate governance and
shareholder relations; operational and financial. Information on
each of these areas is given in the Business Review section of the
Company's first Annual Report and Accounts for the period ending
30th June 2014.
Related Parties' Transactions
During the first six months of the current financial year, no
transactions with related parties have taken place which have
materially affected the financial position or the performance of
the Company.
Going Concern
The Directors believe, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, that the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future. For these reasons, they consider there is
reasonable evidence to adopt the going concern basis in preparing
the accounts.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its
knowledge:
(i) the condensed set of financial statements contained within
the interim financial report has been prepared in accordance with
IAS 34 and gives a true and fair view of the state of affairs of
the Company and of the assets, liabilities, financial position and
net return of the Company, as at 31st December 2014, as required by
the UK Listing Authority Disclosure and Transparency Rules 4.2.4R;
and
(ii) the interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the UK Listing
Authority Disclosure and Transparency Rules.
In order to provide these confirmations, and in preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Simon Miller
Chairman
27th February 2015
Statement of Comprehensive Income
for the six months ended 31st December 2014
(Unaudited) (Unaudited) (Audited)
Six months ended Period from 7th May 2013 Period from 7th May 2013
31st December 2014 to 31st December 2013 to 30th June 2014
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Losses on investments
held at fair value
through profit or
loss - (5,814) (5,814) - (3,139) (3,139) - (1,751) (1,751)
Income from
investments 5,225 - 5,225 3,903 - 3,903 8,157 - 8,157
Other income 4 - 4 - - - 22 - 22
Realised foreign
currency
(losses)/gains on
foreign currency
contracts - (8,956) (8,956) - 5,610 5,610 - 12,770 12,770
Realised foreign
currency
(losses)/gains - (21) (21) - 322 322 - 296 296
Unrealised foreign
currency gains on
foreign currency
contracts - 27 27 - 2,386 2,386 - 723 723
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Gross return/(loss) 5,229 (14,764) (9,535) 3,903 5,179 9,082 8,179 12,038 20,217
Management fee (477) (257) (734) (396) (213) (609) (806) (434) (1,240)
Other administrative
expenses (92) - (92) (151) - (151) (466) - (466)
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Net return/(loss) on
ordinary activities
before finance costs
and taxation 4,660 (15,021) (10,361) 3,356 4,966 8,322 6,907 11,604 18,511
Finance costs (2) (1) (3) (4) (2) (6) (8) (5) (13)
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Net return/(loss) on
ordinary activities
before taxation 4,658 (15,022) (10,364) 3,352 4,964 8,316 6,899 11,599 18,498
Taxation (146) - (146) (146) - (146) (241) - (241)
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Net return/(loss) on
ordinary activities
after taxation 4,512 (15,022) (10,510) 3,206 4,964 8,170 6,658 11,599 18,257
---------------------- -------- --------- --------- -------- --------- --------- --------- --------- --------
Return/(loss) per
share (note 4) 2.37p (7.90)p (5.53)p 2.16p 3.34p 5.50p 4.33p 7.54p 11.87p
Return/(loss) per share is based on the weighted average number
of shares in issue during the period.
The Company does not have any income or expense that is not
included in net return for the period. Accordingly the 'Net return
for the period' is also the 'Total comprehensive income for the
period', as defined in IAS 1 (revised).
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies.
All items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the
period.
Statement of Changes in Equity
for the six months ended 31st December 2014
Six months ended Share Capital Revenue
31st December 2014 Capital Reserve Reserve Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------- -------- ---------
At 30th June 2014 158,438 11,599 3,223 173,260
Issue of ordinary shares 59,317 - - 59,317
Share issue expenses (259) - - (259)
Transfer of share premium on share issuance to revenue (1,294) - 1,294 -
(Loss)/profit for the period - (15,022) 4,512 (10,510)
Dividends paid in the period - - (7,088) (7,088)
----------------------------------------------------------------------- -------- --------- -------- ---------
At 31st December 2014 216,202 (3,423) 1,941 214,720
----------------------------------------------------------------------- -------- --------- -------- ---------
Period from 7th May 2013 Share Capital Revenue
to 31st December 2013 Capital Reserve Reserve Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------- -------- ---------
At 7th May 2013
Issue of ordinary shares following placing and offer for subscription 136,000 - - 136,000
Expenses of placing and offer for subscription (2,218) - - (2,218)
Issue of ordinary shares 21,186 - - 21,186
Share issue expenses (586) - - (586)
Transfer of share premium on share issuance to revenue (89) - 89 -
Profit for the period - 4,964 3,206 8,170
----------------------------------------------------------------------- -------- --------- -------- ---------
At 31st December 2013 154,293 4,964 3,295 162,552
----------------------------------------------------------------------- -------- --------- -------- ---------
Period from 7th May 2013 Share Capital Revenue
to 30th June 2014 Capital Reserve Reserve Total
(Audited) GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------- -------- ---------
At 7th May 2013
Issue of ordinary shares following placing and offer for subscription 136,000 - - 136,000
Expenses of placing and offer for subscription (2,218) - - (2,218)
Issue of ordinary shares 25,483 - - 25,483
Share issue expenses (673) - - (673)
Transfer of share premium on share issuance to revenue (154) - 154 -
Profit for the period - 11,599 6,658 18,257
Dividend paid in the period - - (3,589) (3,589)
----------------------------------------------------------------------- -------- --------- -------- ---------
At 30th June 2014 158,438 11,599 3,223 173,260
----------------------------------------------------------------------- -------- --------- -------- ---------
Statement of Financial Position
at 31st December 2014
(Unaudited) (Unaudited) (Audited)
31st December 2014 31st December 2013 30th June 2014
GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ------------------- ------------------- ---------------
Non current assets
Investments held at fair value through
profit or loss 191,627 157,644 162,484
Investments in liquidity fund held at fair value through
profit or loss 20,334 - 2,501
----------------------------------------------------------- ------------------- ------------------- ---------------
Total portfolio 211,961 157,644 164,985
----------------------------------------------------------- ------------------- ------------------- ---------------
Current assets
Derivative financial assets 1,102 2,573 876
Trade and other receivables 2,184 1,920 7,279
Cash and cash equivalents 683 527 470
----------------------------------------------------------- ------------------- ------------------- ---------------
3,969 5,020 8,625
Current liabilities
Derivative financial liabilities (1,075) (78) (155)
Trade and other payables (135) (34) (195)
----------------------------------------------------------- ------------------- ------------------- ---------------
Net current assets 2,759 4,908 8,275
----------------------------------------------------------- ------------------- ------------------- ---------------
Total assets less current liabilities 214,720 162,552 173,260
----------------------------------------------------------- ------------------- ------------------- ---------------
Net assets 214,720 162,552 173,260
----------------------------------------------------------- ------------------- ------------------- ---------------
Amounts attributable to equity holders
Share capital 216,202 154,293 158,438
Capital reserves (3,423) 4,964 11,599
Revenue reserve 1,941 3,295 3,223
----------------------------------------------------------- ------------------- ------------------- ---------------
Total equity shareholders' funds 214,720 162,552 173,260
----------------------------------------------------------- ------------------- ------------------- ---------------
Net asset value per Ordinary share
(note 5) 99.5p 103.9p 108.0p
Incorporated in Guernsey with company registration number:
56625.
Cash Flow Statement
for the six months ended 31st December 2014
(Unaudited) (Unaudited) (Audited)
Six months Period from Period from
ended 7th May 2013 to 7th May 2013 to
31st December 2014 31st December 2013 30th June 2014
GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ------------------- ------------------- ----------------
Operating activities
(Loss)/profit before taxation (10,364) 8,316 18,498
Add back interest 7 - 9
Add back losses on investments held at fair value through
profit or loss 5,814 3,139 1,751
Add back/(deduction) of unrealised losses/(gains) on
foreign exchange 696 (2,386) (723)
Realised losses on Future Contracts (719) (250) (428)
Transfer of income accrued 141 (267) (503)
Purchases of investments held at fair value through
profit or loss (163,975) (236,674) (360,355)
Sales of investments held at fair value through profit or
loss 117,305 76,046 188,981
Effect of increase in trade and other receivables (194) (1,667) (1,734)
Effect of (decrease)/increase in trade and other payables (153) 34 195
---------------------------------------------------------- ------------------- ------------------- ----------------
Net cash outflow from operating activities before
interest and taxation (51,442) (153,709) (154,309)
---------------------------------------------------------- ------------------- ------------------- ----------------
Taxation (146) (146) (215)
Interest paid (7) - (9)
---------------------------------------------------------- ------------------- ------------------- ----------------
Net cash outflow from operating activities (51,595) (153,855) (154,533)
---------------------------------------------------------- ------------------- ------------------- ----------------
Financing activities
Proceeds from the issue of ordinary shares following
placing and offer for subscription - 136,000 136,000
Expenses paid in respect of ordinary shares issued - (2,218) (2,218)
Proceeds from the issue of ordinary shares 59,062 21,186 25,483
Share issue expenses (166) (586) (673)
Dividend paid (7,088) - (3,589)
---------------------------------------------------------- ------------------- ------------------- ----------------
Net cash inflow from financing activities 51,808 154,382 155,003
---------------------------------------------------------- ------------------- ------------------- ----------------
Increase in cash and cash equivalents 213 527 470
Cash and cash equivalents at the start of the period 470 - -
---------------------------------------------------------- ------------------- ------------------- ----------------
Cash and cash equivalents at the end of the period 683 527 470
---------------------------------------------------------- ------------------- ------------------- ----------------
Notes to the Accounts
for the six months ended 31st December 2014
1. Financial statements
The information contained within the Financial Statement in this
Interim report has not been audited or reviewed by the Company's
auditors.
2. Accounting policies
The Company's financial statements have been prepared in
accordance with International Financial Reporting Standards
('IFRS'), which comprise standards and interpretations approved by
the International Accounting Standards Board to the extent that
they have been adopted by the European Union.
Where presentational evidence set out in the Statement of
Recommended Practice (the 'SORP') issued by the Association of
Investment Companies in January 2009 is consistent with the
requirement of IFRS, the financial statements have been prepared on
a basis compliant with the recommendation of SORP.
The Board has agreed to allocate management fees and finance
costs of 35% to capital and 65% to revenue, reflecting the
investment objective of the Company.
All of the Company's operations are of a continuing nature.
The accounts have been prepared on a going concern basis.
3. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months Period from Period from
ended 7th May 2013 to 7th May 2013 to
31st December 2014 31st December 2013 30th June 2014
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------------- ------------------- ----------------
2014 first interim dividend of 2.25p - - 3,589
2014 second interim dividend of 2.25p 4,686 - -
2015 first interim dividend of 1.125p 2,402 - -
--------------------------------------- ------------------- ------------------- ----------------
Total dividends paid in the period 7,088 - 3,589
--------------------------------------- ------------------- ------------------- ----------------
A second interim dividend of 1.125p per share, amounting to
2,428,000 has been declared payable in respect of the six months
ended 31st December 2014.
4. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months Period from Period from
ended 7th May 2013 to 7th May 2013 to
31st December 2014 31st December 2013 30th June 2014
GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------------- ------------------- ----------------
(Loss)/return per share is based on the following:
Revenue return 4,512 3,206 6,658
Capital (loss)/return (15,022) 4,964 11,599
---------------------------------------------------- ------------------- ------------------- ----------------
Total (loss)/return (10,510) 8,170 18,257
---------------------------------------------------- ------------------- ------------------- ----------------
Weighted average number of shares in issue
during the period 190,106,594 148,495,098 153,766,882
Revenue return per share 2.37p 2.16p 4.33p
Capital (loss)/return per share (7.90)p 3.34p 7.54p
---------------------------------------------------- ------------------- ------------------- ----------------
Total (loss)/return per share (5.53)p 5.50p 11.87p
---------------------------------------------------- ------------------- ------------------- ----------------
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
31st December 2014 31st December 2013 30th June 2014
----------------------------------- ------------------- ------------------- ---------------
Shareholders' funds (GBP'000) 214,720 162,552 173,260
Number of shares in issue 215,830,000 156,499,999 160,499,999
Net asset value per share (pence) 99.5 103.9 108.0
----------------------------------- ------------------- ------------------- ---------------
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
ENDS
A copy of the half year report will be submitted to the National
Storage Mechanism and will be available shortly for inspection at
www.morningstar.co.uk/uk/NSM
The half year report will also be available shortly 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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