TIDMJGCI
RNS Number : 8745M
JPMorgan Glbl Con Inc Fnd Ltd
18 October 2016
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED
FINAL RESULTS FOR THE YEARED
30TH JUNE 2016
Chairman's Statement
Dear Shareholders
Your Company was launched three years ago with the objective of
providing investors with dividend income, struck at 4.5p per share
for the first year, together with the potential for some modest
capital growth in sterling terms.
In the year to 30th June 2016, the total return on the Company's
net assets was 0.0% compared to -1.0% last year. The return to
shareholders, which reflects the share price movement and the
dividend, was -9.5%.
The review period covered a number of significant market events,
including a renewed downturn in energy prices, concerns over a
Chinese slowdown, a widening of high yield credit spreads, an
increase in the US Federal Reserve's Target Rate and, most
recently, the fallout from the UK Brexit vote.
Despite the challenging backdrop, the Board is disappointed by
the portfolio's performance and the poor performance of the
Company's share price.
Investment performance
In the 12 months to 30th June 2016 the total return on the net
assets was 0.0%. The main positive contributors to the portfolio's
return over the period were income and exposure to equity and fixed
income (specifically duration) factors, while the main detractors
included the widening of credit spreads and convertible-specific
valuations. Currency hedging prevented the Company from benefiting
from sterling's continued weakness against other major currencies,
particularly in the aftermath of the UK Brexit vote.
The Board judges performance over the long term. While we
continue to believe in the viability and attraction of the
Company's income-focused convertible strategy, we have asked the
Manager to consider why this is yet to be evidenced by
performance.
A more detailed analysis of performance is set out in the
Investment Managers' Report .
Benchmark
The MSCI World Index (in sterling terms) is the Company's
reference index. It is a broad global equity benchmark that
represents large and mid-cap equity performance across 23 developed
markets. Since the launch of the Company in 2013 it has become
clear that a more appropriate measure of the Company's performance
is an appropriately constructed convertible bond index. With the
assistance of the Manager, the Board has decided to resolve this
issue by changing the Company's reference index from the MSCI World
Index to the Bloomberg Barclays Global Convertibles Credit/Rate
Sensitive Index (hedged into sterling).
Dividends and performance
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. It is the
Board's intention to continue to pay 4.5p, although maintaining
this target has required a top up of capital.
Furthermore, with the Company producing a total return on net
assets of -3.4% in the six months to 31st December 2015, the Board
also recognised that the portfolio's focus on income generation was
acting as a constraint on performance. Therefore, the Board gave
the Manager additional flexibility to focus on total returns,
within similar risk parameters.
This more flexible approach has had a beneficial impact on
performance, with the Company recovering from a disappointing first
half to the review period to end the 12 months to 30th June 2016
with a total return on net assets of 0.0%.
The Manager is confident that the investment strategy is capable
of generating the necessary returns to achieve the targeted
dividend payout, without the need to place undue alpha generation
assumptions on the investment team. The Company's performance since
inception compared to comparable convertible funds and
income-generating funds supports this belief.
Three quarterly dividends totalling 3.375p per share were
declared and paid during the year. The Board declared a fourth
quarterly dividend of 1.125p per share on 22nd September 2016.
Brexit
In the build-up to the UK's referendum on European Union
membership, your Company's portfolio was invested in higher quality
issuers trading close to their bond floor. The asymmetric nature of
convertible returns provided the chance for the Company to limit
its exposure to potential market volatility caused by the vote,
while still allowing the portfolio to participate in any recovery
in equity markets following the referendum decision. This strategy
was rewarded following the outcome of the referendum.
Managing the discount
The Company is authorised by the shareholders to buy back up to
14.99% of the Company's issued share capital. This authority allows
the Board to address any imbalance that may arise between supply
and demand for shares in the Company, and thereby attempt to
control the discount to NAV at which the shares may be trading.
In the ordinary course of business, the Directors would expect
to exercise their discretion to buy back shares if the discount to
NAV at which the shares are trading exceeds 5% for any significant
period of time. The Board has delegated this discretion to the
Manager, in consultation with the Broker.
Although there can be no assurance that buybacks alone will
prevent a discount emerging or widening, the Board is committed to
using the buyback programme to enhance the NAV and to reduce
discount volatility.
In the 12 months to 30th June 2016 the share price fluctuated
between a 10.04% discount to NAV to a 1.04% premium to NAV. During
this period the Company bought back 24,442,295 ordinary shares,
representing 11.12% of the share capital of the Company at the
start of the year. This intervention did have a positive impact on
the discount but the strategy became increasingly challenged in the
lead up to the UK referendum as investors looked to de-risk their
portfolios and increase cash holdings.
In the weeks following the referendum the Company's share price
was extremely volatile and, as a result, the Board suspended the
buyback programme. From a broader market-wide perspective, those
companies that continued to buy back shares had little or no effect
on their discounts. Since the year end the Company has not bought
back any further shares. At the time of publication the discount to
NAV at which the shares are trading was 9.61%.
Annual General Meeting
The Company's AGM will be held on 7th November 2016 at 10.30
a.m. in Guernsey. I appreciate that many of our shareholders are
based in the UK but shareholders who are unable to attend can
appoint a proxy to vote their shares or ask questions.
Alternatively, shareholders are encouraged to raise questions
with the Company Secretary in advance of the meeting, by email,
mail or telephone and we will ensure that they receive an
answer.
Outlook
Although the portfolio has performed strongly in recent months,
the Board are disappointed by the fall in the absolute value, and
the volatility, of the Company's shares and the lack of a more
substantial growth in the NAV over the year to 30th June 2016.
Looking forward, markets and the Company face uncertain times.
In the short term, markets will be dominated by the US election and
the direction of Brexit negotiations. It is in times of volatility
that the asymmetric nature of convertible returns can be of most
use to investors, offering the opportunity for participation in
rising markets and protecting value when markets fall.
We also believe that the action we have taken to allow the
Manager to invest across the convertibles market, unconstrained by
the need to generate a certain level of revenue returns, promises
greater opportunities to both generate and protect returns for
shareholders.
Simon Miller
Chairman
18th October 2016
Investment Managers' Report
Performance Review
In the twelve months to 30th June 2016, the portfolio generated
a flat net asset value (NAV) total return of 0.0%, whereas the
share price total return was -9.5%. While the team aim to generate
a positive return, the challenging period covers a number of
significant market events, including a renewed downturn in energy
prices, concerns over a Chinese slowdown, a widening of high yield
credit spreads spurred by the closure of a number of US high yield
funds in December 2015, the first increase in the Federal Reserve's
Target Rate since 2006, and the fallout from the British referendum
on membership of the European Union, which meant capital
preservation was also a strong focus over the period. The team also
had to contend with general equity underperformance from the small
and mid-cap companies that typically comprise a significant
proportion of convertible issuers, illustrated by the 10.7%
underperformance of the Russell 2000 relative to the S&P 500
over the period.
The team are naturally disappointed by the negative performance
of the Company's share price over the period as the discount on the
Company's shares expanded, as well as the lack of a more positive
NAV return, but believe the flat total return of the NAV during a
volatile period (and strong recovery since February 2016) helps to
partially demonstrate the advantages of the asset class and, in
particular, targeting convertibles with a bias towards income
generation. The diversification of the drivers of performance
across fixed income and equity return factors can help to reduce
the underlying volatility of the portfolio's NAV, and reduces
reliance on any particular source of return. Over the twelve month
period, the flat NAV performance of the Trust was obtained with an
annualised daily volatility of 4.0%, which compares favourably to
the Thomson Reuters Global Convertible Index hedged in GBP, which
returned -5.1% over the same period with an annualised daily
volatility of 7.8%.
The main contributors to the portfolio's return over the period
were income and exposure to equity and fixed income (specifically
duration) factors. On the other side, a widening of credit spreads
and convertible-specific valuations detracted. The portfolio
benefited from its exposure to US real estate, driven primarily by
the extended low rate environment following delays to the
anticipated rate hiking cycle of the Federal Reserve. A number of
balanced positions that had been introduced into the portfolio as a
way of reducing exposure to credit risk also provided positive
contributions, notably in the Technology and Communications
sectors. The energy sector continued to drag on performance, driven
by the renewed decline in oil prices, although this was partially
offset by the rebound in the first half of 2016.
The currency hedging of the account prevented the Company from
benefiting from Sterling's continued weakness against other major
currencies, particularly in the aftermath of the British
referendum. The 17.7% performance differential between the GBP
hedged and unhedged versions of the Thomson Reuters Global
Convertible index over the review period (+12.6% return for the
unhedged version versus -5.1% for the hedged version) illustrates
the extent to which currency movements can become the driving force
of the returns of a convertible portfolio that is not hedged. It is
for this reason that we consider it prudent to currency hedge the
portfolio, acknowledging that there will be periods where this
precludes the portfolio from benefiting from depreciation of
Sterling.
Portfolio Review
The portfolio was positioned defensively during the second half
of 2015, motivated by the team's caution on exposure to company
specific credit risk. Although the team considered fundamental
valuations to remain attractive, particularly in light of the view
that credit spreads were pricing in a greater probability of
recession in the US than the team believed to be likely, we were
increasingly cautious on the ability of companies to access credit
markets. As a consequence, we felt the vulnerability of companies
to miss-steps was increasing, and sought to protect the portfolio
from this increased idiosyncratic risk by further diversifying the
portfolio. The equity market sell-off surrounding concerns over the
Chinese economy presented a good opportunity for us to do this,
lowering the price of a number of balanced convertibles in the
Technology and Internet sectors that had previously not offered
compelling yield opportunities. While the yields on these names
remains lower than other positions in the portfolio, we considered
the diversification provided by adding balanced exposure to these
companies with high growth potential to be an attractive
opportunity.
This enhanced diversification helped the portfolio considerably
during the final quarter of 2015 and into 2016, following the
realisation of stresses in credit markets and widening of high
yield spreads driven in part by the high-profile closure of some
hedge funds in the US. The team considered this to open up
opportunities to incrementally increase risk within the portfolio,
especially since the sell-off appeared to be driven by technical,
rather than fundamental, factors. These fund closures and
subsequent high yield redemptions on fears of low liquidity hit
market risk appetite and pushed credit spreads wider. While the
team remained cautious on company-specific risk, we felt this was
being increasingly priced in to asset prices going into 2016 and
used this opportunity to add some positions to the portfolio.
The positions in more credit sensitive names that were added by
the team in the first quarter of 2016 subsequently left the
portfolio well-positioned to benefit from the rally in credit
spurred by the announcement of aggressive quantitative easing by
the European Central Bank.
The team had positioned the portfolio for a 'Remain' scenario in
the build-up to the British referendum, but the focus on building
the exposure through high-quality issuers with convertibles trading
near their bond-only values ensured maximum asymmetry to the
result. As such, while the referendum result was generally negative
for the portfolio's holdings, particularly its allocation to
British real estate, the positions significantly outperformed their
respective underlying equities. The portfolio retains its exposure
to British real estate, even though the team acknowledges that the
result of the referendum has limited the prospect of significant
equity upside from here. The rationale for the continued allocation
is the fact that these convertibles are generally trading below par
value and offer an attractive yield, while we consider the balance
sheets of the companies we are exposed to sufficiently robust to
withstand the darkening of the fundamental outlook. In particular,
we note that British real estate companies are running lower
loan-to-value ratios than they were going into the 2008 crisis.
The company continues to deploy a modest degree of gearing,
which is invested conservatively in short-dated, high quality
balanced convertibles that provide potential for some equity
participation and an income in excess of the costs of the
facility.
Outlook
The portfolio has performed strongly in the latter part of the
review period, driven largely by the strong performance of fixed
income factors. We continue to see valuation opportunities, but are
choosing to increasingly position the portfolio in companies with
specific improvement stories that could drive further credit spread
tightening, rather than those with more general exposure to credit
conditions. In conjunction with this, we are also adding to
convertibles defensively positioned near their bond-only values
with positive yields, providing the portfolio with defensive
exposure to further equity market upside. These exposures are being
funded primarily through profit-taking on positions that have moved
higher in price or those where longer-dated maturities mean the
security is more exposed to mark-to-market risk.
Although we do not see any significant prospects of an imminent
reversal of the recent positive trends in fixed income and credit
markets, the board's decision to provide the team with more
flexibility to implement a total return approach should give the
team the ability to better shield the portfolio during future
drawdowns. The team remain convinced that an income-focused
approach to investing in the convertibles market is attractive, but
acknowledge that there will be times where credit market weakness
will make it optimal to temporarily reduce the portfolio's focus on
covering the dividend payment through yield factors. We believe
that the understanding of the board on this matter provides the
Company with the flexibility to be optimally positioned through all
market conditions, and should reduce the impact of future
credit-related drawdowns.
Despite the positive impact of duration on performance over the
past year, we do not see a resumption of rate hiking by the Federal
Reserve as a large risk for the portfolio. We would anticipate that
the portfolio's holdings would move more in line with high yield
and equity return factors than with duration, and as such believe
that a scenario in which the US economy improves to the extent that
the Federal Reserve can continue increasing rates could be
supportive for at least one of these factors, potentially
offsetting any directly negative impact from duration. While there
is a risk that a perceived Federal Reserve policy error could hit
investor confidence and lead to declines in equity and credit
markets, it is worth noting that both US equities and US high yield
were able to generate positive returns in 2013, despite the 'Taper
Tantrum' that pulled US investment grade into negative territory
for the year.
The portfolio's exposure to the energy sector remains lower than
might be expected for a yield-focused portfolio, and this reflects
the teams continued caution on the sector. Nevertheless, the team
are increasingly open to opportunities to add exposure to higher
quality issuers within the space. In particular, capital raising by
a number of companies in the sector in 2016 is seen as a good sign
that companies are taking the right approach in addressing balance
sheet vulnerabilities rather than waiting for a recovery in prices.
Furthermore, some isolated defaults in the sector have helped to
address some oversupply concerns. We don't anticipate strong upside
to energy prices from here, in light of the flexibility of marginal
producers to bring production back on line, and as such prefer to
gain exposure through high quality issuers that are profit-making
with oil in the $40s, and indirect exposure to the sector through
oil services companies that have addressed balance sheet weakness
and that could benefit from an increase in the US oil rig
count.
We consider the economic picture to remain somewhat clouded, and
as such believe the diversified and defensive exposure to fixed
income and equity return factors provided by convertibles to be an
attractive way for investors to remain exposed to potential further
upside in risk assets while being supported by the stable income
stream generated by the portfolio's holdings.
Antony Vallee
Natalia Bucci
Robin Dunmall
Investment Managers
18th October 2016
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, which 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, liquidity 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've 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 or Custodian'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.
-- Political Risk
Political risks, such as those 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.
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.
-- Political and Regulatory Risks
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.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and Accounts 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.
The 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 Rules &
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.
Disclosure of information to Auditors
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 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, 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
18th October 2016
Financial Statements
Statement of Comprehensive Income
for the year ended 30th June 2016
2016 2015
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:
Gains/(losses) on
investments held
at fair value through
profit and loss - 19,778 19,778 - (6,127) (6,127)
Income from investments 10,791 - 10,791 9,902 - 9,902
--------------------------- -------- --------- --------- -------- --------- --------
Gains/(losses) on
financial instruments:
Realised losses on
close out of futures
and options contracts - (761) (761) - (1,276) (1,276)
Unrealised (losses)/gains
on futures and options
contracts - (41) (41) - 302 302
Realised foreign
currency losses on
foreign currency
contracts - (18,697) (18,697) - (8,094) (8,094)
Unrealised foreign
currency (losses)/gains
on foreign currency
contracts - (9,075) (9,075) - 5,928 5,928
Realised foreign
currency losses - (21) (21) - (300) (300)
Unrealised foreign
currency losses - (1,935) (1,935) - - -
Other income 59 - 59 48 - 48
--------------------------- -------- --------- --------- -------- --------- --------
Total income/(loss) 10,850 (10,752) 98 9,950 (9,567) 383
Management fee (1,012) (545) (1,557) (1,019) (549) (1,568)
Other administrative
expenses (545) - (545) (349) - (349)
--------------------------- -------- --------- --------- -------- --------- --------
Profit/(loss) before
finance costs and
taxation 9,293 (11,297) (2,004) 8,582 (10,116) (1,534)
Finance costs (149) (81) (230) (5) (3) (8)
--------------------------- -------- --------- --------- -------- --------- --------
Profit/(loss) before
taxation 9,144 (11,378) (2,234) 8,577 (10,119) (1,542)
Taxation (369) - (369) (277) - (277)
--------------------------- -------- --------- --------- -------- --------- --------
Net profit/(loss) 8,775 (11,378) (2,603) 8,300 (10,119) (1,819)
--------------------------- -------- --------- --------- -------- --------- --------
Earnings/(loss) per
share 4.13p (5.35)p (1.22)p 4.06p (4.94)p (0.88)p
Earnings per share is based on the weighted average number of
shares in issue during the year.
The Company does not have any income or expense that is not
included in net profit for the year. Accordingly the 'Net profit
for the year' is also the 'Total comprehensive income for the
year', as defined in IAS 1 (revised).
The 'Total' column of this statement is the profit and loss
account of the Company prepared in accordance with IFRS. 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
year.
Statement of Changes in Equity
for the year ended 30th June 2016
Share Capital Revenue
capital reserves reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------- -------- --------- --------- ---------
At 30th June 2014 158,438 11,599 3,223 173,260
Issue of ordinary shares 63,209 - - 63,209
Share issue expenses (315) - - (315)
Transfer of share premium on share issuance to revenue (1,312) - 1,312 -
(Loss)/profit for the year - (10,119) 8,300 (1,819)
Dividends paid in the year - - (12,024) (12,024)
-------------------------------------------------------- -------- --------- --------- ---------
At 30th June 2015 220,020 1,480 811 222,311
Shares bought back and cancelled (1,052) - - (1,052)
Repurchase of shares into Treasury - (20,496) - (20,496)
Cancellation of shares in Treasury (1,600) 1,600 - -
(Loss)/profit for the year - (11,378) 8,775 (2,603)
Dividends paid in the year - - (9,522) (9,522)
-------------------------------------------------------- -------- --------- --------- ---------
At 30th June 2016 217,368 (28,794) 64 188,638
-------------------------------------------------------- -------- --------- --------- ---------
Statement of Financial Position
at 30th June 2016
2016 2015
GBP'000 GBP'000
------------------------------------------------------- --------- --------
Non current assets
Investments held at fair value through profit or loss 201,127 215,487
Current assets
Derivative financial assets 506 6,534
Trade and other receivables 9,628 1,630
Cash and cash equivalents 3,020 19
Cash held at Broker 169 1,128
------------------------------------------------------- --------- --------
13,323 9,311
Current liabilities
Derivative financial liabilities (9,622) (304)
Trade and other payables (1,229) (68)
Bank overdraft - (2,115)
------------------------------------------------------- --------- --------
Net current assets 2,472 6,824
------------------------------------------------------- --------- --------
Total assets less current liabilities 203,599 222,311
Non current liabilities
Loans payable (14,961) -
------------------------------------------------------- --------- --------
Net assets 188,638 222,311
------------------------------------------------------- --------- --------
Amounts attributable to equity holders
Share capital 217,368 220,020
Capital reserve (28,794) 1,480
Revenue reserve 64 811
------------------------------------------------------- --------- --------
Total equity shareholders' funds 188,638 222,311
------------------------------------------------------- --------- --------
Net asset value per share 96.6p 101.2p
Incorporated in Guernsey with the company registration number:
56625.
Statement of Cash Flows
for the year ended 30th June 2016
2016 2015(1)
GBP'000 GBP'000
------------------------------------------------------------------------------------ ---------- -----------
Operating activities
Loss before taxation (2,234) (1,542)
Deduct dividends received (1,229) (966)
Deduct investment income - interest (9,562) (8,975)
Deduct bank interest received (59) (9)
Add back interest paid 230 8
Add back (gains)/losses on investments held at fair value through profit or loss (19,778) 6,127
Decrease/(increase) in unrealised gains on foreign currency contracts 15,003 (5,205)
Decrease/(increase) in unrealised gains on future and option contracts 343 (304)
Decrease/(increase) in cash held as collateral by Brokers for futures 959 (1,070)
Increase/(decrease) in unrealised losses on foreign currency 1,935 -
Effect of increase in trade and other receivables (5) (1)
Effect of increase/(decrease) in trade and other payables 62 (127)
------------------------------------------------------------------------------------ ---------- -----------
Net cash outflow from operating activities before interest, taxation and dividends (14,335) (12,064)
Taxation (369) (277)
Interest paid (170) (8)
Dividends received 1,237 1,002
Investment income - interest 6,797 7,728
Bank interest received 59 9
------------------------------------------------------------------------------------ ---------- -----------
Net cash outflow from operating activities after interest, taxation and dividends (6,781) (3,610)
------------------------------------------------------------------------------------ ---------- -----------
Investing activities
Purchases of investments held at fair value through profit or loss (217,215) (224,003)
Sales of investments held at fair value through profit or loss 247,156 171,734
------------------------------------------------------------------------------------ ---------- -----------
Net cash inflow/(outflow) from investing activities 29,941 (52,269)
------------------------------------------------------------------------------------ ---------- -----------
Financing activities
Proceeds from the issue of ordinary shares - 63,209
Share issue expenses - (315)
Repurchase of shares into Treasury (20,496) -
Shares bought back and cancelled (1,052) -
Dividends paid (9,522) (12,024)
Drawdown of loan 13,026 -
------------------------------------------------------------------------------------ ---------- -----------
Net cash (outflow)/inflow from financing activities (18,044) 50,870
------------------------------------------------------------------------------------ ---------- -----------
Increase/(decrease) in cash and cash equivalents 5,116 (5,009)
Cash and cash equivalents at the start of the year (2,096) 2,913
------------------------------------------------------------------------------------ ---------- -----------
Cash and cash equivalents at the end of the year 3,020 (2,096)(2)
------------------------------------------------------------------------------------ ---------- -----------
1 The 2015 comparative figures have been amended in line with
the change in presentation to liquidity funds as outlined in note
2(b).
2 The cash and cash equivalents balance as at 30th June 2015
comprises positive balances of GBP19,000 and overdrafts of
GBP(2,115,000).
Notes to the Financial Statements
for the year ended 30th June 2016
1. Principal Activity
The Company is a closed-ended investment company incorporated in
accordance with the Companies (Guernsey) Law, 2008. The principal
activity of the Company is investing in a globally diversified
portfolio of high-yielding convertible securities as set out in the
Company's Objective and Investment Policies.
2. Basis of Preparation
(a) Statement of compliance
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 ('IASB'), the
International Accounting Standards and Standing Interpretations
Committee and interpretations approved by the International
Accounting Standards Committee ('IASC') that remain in effect and
to the extent that they have been adopted by the European Union
('EU').
3. Dividends
2016 2015
GBP'000 GBP'000
------------------------------------------------------------------------------ -------- --------
Dividends paid
2015 Fourth interim dividend 1.125p (2014: Second interim dividend of 2.25p) 2,464 4,686
2016 First interim dividend of 1.125p (2015: 1.125p) per share 2,464 2,402
2016 Second interim dividend of 1.125p (2015: 1.125p) per share 2,355 2,465
2016 Third interim dividend of 1.125p (2015: 1.125p) per share 2,239 2,471
------------------------------------------------------------------------------ -------- --------
Total dividends paid in the year 9,522 12,024
------------------------------------------------------------------------------ -------- --------
Dividend declared
2016 Fourth interim dividend proposed of 1.125p (2015: 1.125p) 2,196 2,471
------------------------------------------------------------------------------ -------- --------
Dividend payments in excess of the revenue amount will be paid
out of Company's distributable capital reserve.
The fourth interim dividend declared in respect of the period
ended 30th June 2015 amounted to GBP2,471,000. However, the actual
payment amounted to GBP2,464,000 due to share buy backs after the
balance sheet date, but prior to the share register record
date.
4. Net asset value per share
2016 2015
-------------------------------------------- ------------ ------------
Ordinary shareholders funds (GBP'000) 188,638 222,311
Number of Ordinary shares in issue 195,187,705 219,630,000
Net asset value per Ordinary share (pence) 96.6 101.2
-------------------------------------------- ------------ ------------
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
18 October 2016
For further information:
Rhys Williams,
JPMorgan Funds Limited
020 7742 4000
ENDS
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 also 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FFIFIAFMSEES
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