2014/15. Half Year Report JPMorgan Global Convertibles Income Fund Limited. Half Year Report & Accounts for the six months ended 31st December 2014

Transcription

1 2014/15 Half Year Report JPMorgan Global Convertibles Income Fund Limited Half Year Report & Accounts for the six months ended 31st December 2014

2 Contents Contents About the Company 1 Half Year Performance 2 Chairman s Statement 4 Investment Managers Report Investment Review 6 Portfolio Analyses 7 Portfolio Disclosure Accounts 8 Statement of Comprehensive Income 9 Statement of Changes in Equity 10 Statement of Financial Position 11 Cash Flow Statement 12 Notes to the Accounts Shareholder Information 14 Interim Management Report 15 Glossary of Terms and Definitions 17 Information about the Company Investment Objective The Company aims to deliver dividend income with the potential for long term capital growth, from investing in a globally diversified portfolio of convertible securities. Investment Policies The Company will invest in a globally diversified portfolio of convertible securities and other suitable instruments exhibiting convertible or exchangeable characteristics. The portfolio is expected to be broadly diversified across sectors, geography and market capitalisations and, while there are no specific limits placed on exposure to any sector, country or market capitalisation, the Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk. The Company will have no restrictions with respect to the credit ratings of any issuer, or any securities, in which it may invest and the issuers of convertible securities may be located in any country, including emerging market countries. Benchmark The Company s benchmark is the MSCI World Index, (in Sterling terms) for reference purposes but will not be benchmark-driven in its asset allocation. Capital Structure At 31st December 2014, there were 215,830,000 ordinary shares in issue. Management Company The Company employs JPMorgan Funds Limited ( JPMF or the Manager ) to manage its assets. Prior to 1st July 2014 the Company employed JPMorgan Asset Management (UK) Limited to manage its assets. Administrator The Company employs J.P. Morgan Administration Services (Guernsey) Limited as its administrator. Website The Company s website, which can be found at includes useful information on the Company, such as daily prices, factsheets and will include current and historic half year and annual reports. FCA regulation of non-mainstream pooled investments The Company currently conducts its affairs so that the shares issued by the Company can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority ( FCA ) s rules in relation to non-mainstream pooled investment products and intends to continue to do so for the foreseeable future. The shares are excluded from the FCA s restrictions which apply to non-mainstream investment products because they are shares in an investment company, which if it were domiciled in the United Kingdom, would currently qualify as an investment trust.

3 Half Year Performance (for the six months ended 31st December 2014) Total returns (includes dividends reinvested) 5.8% 4.8% 2.25p Return to shareholders 1 Return on net assets 2 Dividend 3 Financial Data 31st December 30th June % change Net assets ( 000) 214, , Number of shares in issue 215,830, ,499, Net asset value per share 99.5p 108.0p 7.9 Share price 102.4p 112.3p 8.8 Share price premium to net asset value per share 2.9% 4.0% Gearing/(net cash) (9.8)% (1.7)% Ongoing charges 0.8% 1.1% A glossary of terms and definitions is provided on page Source: Morningstar. 2 Source: J.P. Morgan. 3 Represents the 2015 first interim dividend paid in December 2014 and the second interim dividend declared payable in March JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

4 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 million. To date a further 88.6 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 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 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. 2 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

5 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, 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 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 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

6 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 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 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 4 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

7 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 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

8 Portfolio Analyses at 31st December st December 30th June Portfolio Portfolio Sector % 1 % 1 Real Estate Diversified Financials Capital Goods Materials Automobiles & Components Energy Telecommunication Services Software & Services Banks Transportation Consumer Services Technology Hardware & Equipment Utilities Retailing 2.1 Food Beverage & Tobacco Semiconductors & Semiconductor Equipment Pharmaceuticals & Biotechnology 1.4 Liquidity Fund Total Based on total portfolio of 212.0m (30th June 2014: 165.0m). 31st December 30th June United North Developed Kingdom America Europe Asia Australia Total Total Geographic % % % % % % 1 % 1 Convertibles Fixed Interest Preference Liquidity Fund Total Based on total portfolio of 212.0m (30th June 2014: 165.0m). 6 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

9 Portfolio Disclosure Holdings representing 1.5% of the Portfolio Value or more at 31st December Holding as Time to a percentage maturity of portfolio Region Country Currency Sector Rating (years) Investment 1 3.0% Europe Spain EUR Industrial B 1.33 Investment 2 2.7% Americas United States USD Financial B 3.21 Investment 3 2.6% Europe United Kingdom GBP Financial B Investment 4 2.6% Europe Luxembourg USD Energy BBB 2.76 Investment 5 2.5% Asia Singapore SGD Financial BBB 5.47 Investment 6 2.5% Europe France EUR Consumer, Cyclical B 4.75 Investment 7 2.4% Europe United Kingdom GBP Financial BB Investment 8 2.4% Americas United States USD Communications NR 5.88 Investment 9 2.1% Europe Germany EUR Consumer, Cyclical NR 0.86 Investment % Americas United States USD Industrial NR 3.79 Investment % Americas United States USD Consumer, Cyclical NR 6.71 Investment % Americas United States USD Financial B Investment % Europe Italy EUR Communications NR 2.56 Investment % Americas United States USD Consumer, Cyclical NR 6.17 Investment % Americas United States USD Technology NR 6.71 Investment % Americas United States USD Financial NR 4.96 Investment % Americas United States USD Financial B Investment % Europe United Kingdom GBP Financial BB 4.18 Investment % Asia China USD Communications BB 3.96 Investment % Americas United States USD Financial B 8.29 Investment % Europe Luxembourg USD Basic Materials NR 1.04 Investment % Americas United States USD Financial NR 5.29 Investment % Americas United States USD Financial NR 2.79 Investment % Americas United States USD Energy NR Investment % Europe United Kingdom GBP Financial BB 1.43 Investment % Europe Russia USD Basic Materials NR 2.73 Investment % Americas United States USD Financial NR Perpetual Investment % Europe Belgium EUR Basic Materials NR 3.74 Total 56.6% Note: Rating describes the most conservative rating published by an external reputable credit rating agency. Where a security is described as not rated, no external rating is available. These securities are subject to an internal credit analysis and rating procedure. 1 Excludes holdings in liquidity fund. JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

10 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 st December 2014 to 31st December 2013 to 30th June 2014 Revenue Capital Total Revenue Capital Total Revenue Capital Total 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 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) Unrealised foreign currency gains on foreign currency contracts ,386 2, 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. 8 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

11 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) At 30th June ,438 11,599 3, ,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 ,202 (3,423) 1, ,720 Period from 7th May 2013 Share Capital Revenue to 31st December 2013 Capital Reserve Reserve Total (Unaudited) At 7th May 2013 Issue of ordinary shares following placing and offer for subscription 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 ,293 4,964 3, ,552 Period from 7th May 2013 Share Capital Revenue to 30th June 2014 Capital Reserve Reserve Total (Audited) At 7th May 2013 Issue of ordinary shares following placing and offer for subscription 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 ,438 11,599 3, ,260 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

12 Statement of Financial Position at 31st December 2014 (Unaudited) (Unaudited) (Audited) 31st December st December th June Non current assets Investments held at fair value through profit or loss 191, , ,484 Investments in liquidity fund held at fair value through profit or loss 20,334 2,501 Total portfolio 211, , ,985 Current assets Derivative financial assets 1,102 2, Trade and other receivables 2,184 1,920 7,279 Cash and cash equivalents ,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, , ,260 Net assets 214, , ,260 Amounts attributable to equity holders Share capital 216, , ,438 Capital reserves (3,423) 4,964 11,599 Revenue reserve 1,941 3,295 3,223 Total equity shareholders' funds 214, , ,260 Net asset value per Ordinary share (note 5) 99.5p 103.9p 108.0p Incorporated in Guernsey with company registration number: JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

13 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 st December th June 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, ,981 Effect of increase in trade and other receivables (194) (1,667) (1,734) Effect of (decrease)/increase in trade and other payables (153) 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 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, , ,003 Increase in cash and cash equivalents Cash and cash equivalents at the start of the period 470 Cash and cash equivalents at the end of the period JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

14 Notes to the Accounts for the six months ended 31st December 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 st December th June first interim dividend of 2.25p 3, second interim dividend of 2.25p 4, 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 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

15 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 st December th June (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, ,495, ,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 st December th June 2014 Shareholders funds ( 000) 214, , ,260 Number of shares in issue 215,830, ,499, ,499,999 Net asset value per share (pence) JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

16 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 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 JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

17 Glossary of Terms and Definitions Return to Ordinary shareholders Share price total return to the Ordinary shareholder, on a mid-market price to mid-market price basis, assuming that all dividends received were reinvested, without transaction costs, into the Ordinary shares of the Company at the time the shares were quoted ex-dividend. Return on net assets Return on the undiluted net asset value ( NAV ) per share on a bid value to bid value basis, assuming that all dividends paid out by the Company were reinvested into the shares of the Company at the NAV per share at the time the shares were quoted ex-dividend. Share price premium to net asset value ( NAV ) per share If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount. The discount is shown as a percentage of the NAV per share. The opposite of a discount is a premium. It is more common for an investment trust s shares to trade at a discount than at premium. Gearing/Net Cash Gearing represents the excess amount above shareholders funds of total assets expressed as a percentage of the shareholders funds. Total assets include total investments and net current assets/liabilities less cash/cash equivalents and excluding bank loans of less than one year. If the amount calculated is negative, this is shown as a net cash position. Leverage For the purposes of the Alternative Investment Fund Managers Directive ( AIFMD ), leverage is any method which increases the Company s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company s exposure and its net asset value and is calculated on a gross and a commitment method, in accordance with the AIFMD. Under the gross method, exposure represents the sum of the Company s positions without taking into account any hedging and netting arrangements. Under the commitment method, exposure is calculated after certain hedging and netting positions are offset against each other. Ongoing Charges The Ongoing Charges represent the Company s management fee and all other operating expenses excluding finance costs, expressed as a percentage of the average of the daily net assets during the year and is calculated in accordance with guidance issued by the Association of Investment Companies. The figure as at 31st December 2014 is an estimated annualised figure. Earnings per Ordinary share The earnings per Ordinary share represents the return on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year. Bond-like Bond-like convertibles are those where the bond component of the security s value is far greater than the value represented by the security s exposure to the underlying equity. They are therefore relatively insensitive to changes in the value of the underlying securities. Balanced Balanced convertible securities are those where the underlying equity value and the bond value of the security are within a fairly close range of each other. This makes the value of the instrument sensitive to both changes in underlying equity and the fixed income components of value of the security. JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts

18 In association with: Beware of share fraud Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, if you buy or sell shares in this way you will probably lose your money. How to avoid share fraud Report a scam Keep in mind that firms authorised by the FCA are unlikely to contact you out of the blue with an offer to buy or sell shares. Do not get into a conversation, note the name of the person and firm contacting you and then end the call. Check the Financial Services Register from to see if the person and firm contacting you is authorised by the FCA. Beware of fraudsters claiming to be from an authorised firm, copying its website or giving you false contact details. Use the firm s contact details listed on the Register if you want to call it back Call the FCA on if the firm does not have contact details on the Register or you are told they are out of date. Search the list of unauthorised firms to avoid at Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme. Think about getting independent financial and professional advice before you hand over any money. Remember: if it sounds too good to be true, it probably is! If you are approached by fraudsters please tell the FCA using the share fraud reporting form at where you can find out more about investment scams. You can also call the FCA Consumer Helpline on If you have already paid money to share fraudsters you should contact Action Fraud on ,000 people contact the Financial Conduct Authority about share fraud each year, with victims losing an average of 20, JPMorgan Global Convertibles Income Fund Limited. Interim Report & Accounts 2014

19 Information about the Company Financial Calendar Financial year end Final results announced Half year end Half year results announced Annual General Meeting 30th June September 31st December February November History JPMorgan Global Convertibles Income Fund Limited is a Guernsey-incorporated investment company which was launched in June 2013 with assets of million. Company Numbers Guernsey company registration number: Ordinary Shares London Stock Exchange ISIN code: GG00B96SW597 Bloomberg code: JGCI SEDOL B96SW59 Market Information The Company s unaudited net asset value ( NAV ) is published daily, via the London Stock Exchange. The Company s shares are listed on the London Stock Exchange. The market price is shown daily in the Financial Times, The Times, The Daily Telegraph, The Scotsman and on the JPMorgan website at where the share price is updated every fifteen minutes during trading hours. Website Share Transactions The Company s shares may be dealt in directly through a stockbroker or professional adviser acting on an investor s behalf. They may also be purchased and held through the J.P. Morgan Investment Account, J.P. Morgan ISA and J.P. Morgan SIPP. These products are all available on the online wealth manager service, J.P. Morgan WealthManager+ available at Manager and Company Secretary JPMorgan Funds Limited Administrator J.P. Morgan Administration Services (Guernsey) Limited Company s Registered Office 1st Floor Les Echelons Court Les Echelons South Esplanade St Peter Port Guernsey GY1 1AR For company secretarial matters please contact Juliet Dearlove at the above address. Depositary BNY Mellon Trust and Depositary (UK) Limited BNY Mellon Centre 160 Queen Victoria Street London EC4V 4LA The Depositary employs JPMorgan Chase Bank, NA, as the Company s custodian. Registrars Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH Telephone number: (Calls cost 10p per minute plus network extras) Lines are open Monday Friday, 9.00 a.m. to 5.30 p.m. (from outside the UK +44 (0) ) shareholder.services@capita.co.uk Registered shareholders can obtain further details on their holdings on the internet by visiting Independent Auditors Ernst & Young LLP PO Box 9 Royal Chambers St Julian s Avenue St Peter Port Guernsey GY1 4AF Brokers Winterflood Securities The Atrium Building Cannon Bridge 25 Dowgate Hill London EC4R 2GA Telephone number: Savings Product Administrators For queries on the J.P. Morgan Investment Account, J.P. Morgan ISA and J.P. Morgan SIPP, call the JPMorgan Helpline on Freephone or +44 (0) A member of the AIC JPMorgan Global Convertibles Income Fund Limited Interim Report & Accounts

20 J.P. Morgan Helpline Freephone or +44 (0) Your telephone call may be recorded for your security