JPMorgan Global Convertibles Income Fund Limited. Half Year Report & Accounts for the six months ended 31st December 2016

Transcription

1 JPMorgan Global Convertibles Income Fund Limited Half Year Report & Accounts for the six months ended 31st December 2016

2 Features The Company The Company is a closed-ended investment company, incorporated and registered in Guernsey, whose shares are listed on the London Stock Exchange. It is a non-cellular company and has been declared by the Guernsey Financial Services Commission to be a registered closed-ended collective investment scheme. The assets of the Company are managed by JPMorgan Funds Limited (the Manager ). The Manager has delegated the management of the portfolio to JPMorgan Asset Management (UK) Limited ( JPMAM or Investment Manager ). Investment Objective The Company will aim to provide investors with a dividend income, combined with the potential for long term capital growth, from investing in a globally diversified portfolio of convertible securities. Investment Policy The Company will invest in a globally diversified portfolio of convertible securities and other suitable instruments exhibiting convertible or exchangeable characteristics Benchmark The Company s benchmark is the Bloomberg Barclays Global Convertibles Credit/Rate Sensitive Index (hedged into sterling) for reference purposes but it is not benchmark-driven in its asset allocation. Capital Structure At 31st December 2016, the Company s share capital comprised 216,841,795 ordinary shares of 1p each, including 21,769,025 shares held in Treasury. Administrator The Company employs J.P. Morgan Adminstration Services (Guernsey) Limited (the Administrator ) 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. Financial Conduct Authority ( 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 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 Contents HALF YEAR PERFORMANCE FINANCIAL STATEMENTS ABOUT THE COMPANY 12 Statement of Comprehensive Income 3 Chairman s Statement 13 Statement of Changes in Equity 5 Investment Managers Report 14 Statement of Financial Position INVESTMENT REVIEW 15 Statement of Cash Flows 7 Portfolio Analyses 16 Notes to the Financial Statements 9 Portfolio Disclosure SHAREHOLDER INFORMATION 19 Interim Management Report 20 Glossary of Terms and Definitions 21 Information about the Company 1

4 Half Year Performance TOTAL RETURNS (INCLUDES DIVIDENDS REINVESTED) TO 31ST DECEMBER % Return to shareholders % Return on net assets p Dividend 3 4.9% Trailing 12 month dividend yield 4 Financial Data 31st December 30th June % change Net assets ( 000) 192, , Ordinary shares in issue (excluding shares held in Treasury) 195,072, ,187, Net asset value per share 98.6p 96.6p +2.1 Share price 91.3p 87.3p +4.6 Share price discount to net asset value per share (7.4)% (9.6)% Gearing 5.5% 6.6% Ongoing charges 0.98% 1.02% Source: Morningstar. Source: J.P. Morgan. Represents the 2017 first interim dividend paid in December 2016 and the second interim dividend declared on 14 February 2017 and payable in March Based on the share price as at 31st December A glossary of terms and definitions is provided on page JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

5 About the Company CHAIRMAN S STATEMENT Dear Shareholder In the half year ended 31st December 2016 the total return on the Company s net assets was 4.4% compared with 4.9% for the Company s reference index, the Bloomberg Barclays Global Convertibles Credit Rate Sensitive Index (hedged into Sterling). The total return to shareholders was 7.2%, as the discount of the share price to net asset value ( NAV ) narrowed. Investment Performance Over the past year to 18 months the portfolio had become increasingly bond like, driven in part by the Manager s positive view on credit but also caution over a number of political and macro risks. This bond-like positioning was positive for the portfolio in 2016 as a whole, but led to the flat performance in the final quarter of As global growth gained further traction, bringing enhanced prospects for equity markets, the Manager has repositioned the portfolio in recent months away from bond-like convertibles towards more balanced convertibles. These offer a greater exposure to improving equity markets, particularly in the US at a time when US economic growth and reflation expectations have taken hold. The Board believes these improving economic conditions are a positive backdrop for convertibles; an asset class that has typically been highly correlated with equity and credit markets. A more detailed analysis of the performance of the portfolio is set out in the Investment Managers Report on pages 5 to 6. Dividends The Company s objective is to provide investors with an attractive and consistent level of dividend income together with the potential for some modest capital growth in sterling terms over the medium term. During the half year ended 31st December 2016 one quarterly dividend totalling pence per share was declared and paid. A second quarterly dividend of pence per share was declared on 14th February 2016 and will be paid on 30th March In the absence of unforeseen circumstances, the Board will seek to maintain the targeted annual dividend of 4.5 pence per share, resulting in a yield of 4.9% on the share price prevailing at the end of the period. Sterling interest rates remain stubbornly low and, given the uncertainties around Brexit, appear to have little obvious catalyst to rise materially in the next couple of years. As a result, the Board believes that the Company s yield should remain attractive to a wide range of shareholders, particularly when compared to many other income generating vehicles which have a significantly higher risk profile. Managing the Discount Whilst an attractive yield and a modicum of steady growth are very important, we acknowledge that an equally important consideration for shareholders is that the share price should remain as stable as possible relative to intrinsic value. Accordingly, the Board is committed to using a buyback programme should the discount widen disproportionately and persistently. In the 6 months to 31st December 2016 the share price fluctuated between a discount to NAV of 4.9% and 11.9%, with the shares trading at a discount of 6.1% at the time of publication. During the period, the Company bought back a small number of shares, providing a modest uplift to NAV. 3

6 About the Company continued CHAIRMAN S STATEMENT CONTINUED The Board is highly alert to the current level of discount and, should discount volatility increase or the discount become persistent beyond 5%, the Board has a number of tools available to address the issue including an active share repurchase programme. Outlook With the possible exception of the UK, global economic growth is likely to continue to accelerate in 2017, supporting cyclical assets at the expense of more interest rate-sensitive exposures. The Company s global orientation and recent, greater equity sensitivity should ensure that the portfolio is well placed to capture these tailwinds to returns. Similarly, the relatively low levels of fixed income duration inherent in convertibles and the Company s fully hedged exposure back into sterling should ensure that we avoid the worst of the any potential buffeting from global markets. These characteristics should ensure that the Company remains an attractive and relevant investment in shareholders portfolios. Simon Miller Chairman 17th March JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

7 INVESTMENT MANAGERS REPORT Performance Review In the six months to the end of December 2016, we took significant steps to reposition the portfolio following the strong performance we have seen since February The returns we have generated since then were driven primarily by a significant tightening in credit spreads. Whilst we believe that current economic conditions should remain supportive for credit, we think the credit markets have moved from being attractively valued at the beginning of the year to fairly priced at best by the end of the year. With spreads at historically tight levels, we believe the risks are increasingly skewed to the downside, with the potential for any market shock to lead to a widening of credit spreads. To guard against this risk, we reduced the Company s exposure to credit-sensitive names that lacked any company-specific catalysts for further credit improvement. Whilst we do not foresee any specific catalyst for the widening of credit spreads we believe that these issuers, which had produced attractive returns over the course of 2016, no longer represented good value. In contrast, we continue to find value in companies trading at higher yields with opportunities to improve their credit profile. We believe that these companies will be better protected from any general repricing in credit markets, as we expect returns to come from company-specific factors to a greater extent than market-wide shifts in credit prices. We have therefore maintained the yield on the portfolio by increasing our exposure to these companies, even as we took profit on positions that we considered to be more exposed to credit beta. Source: J.P. Morgan Asset Management. These estimated portfolio and sub-category returns have been calculated using an internal J.P. Morgan Asset Management analytical model, and should be considered as indicative only. Performance figures represent total return calculations in local currency; Contribution is the estimated total contribution to portfolio returns. Pricing sources used to calculate returns are a composite of counterparty-provided pricing inputs. Equity effect = impact of underlying equity performance; Credit effect = impact of changes to input credit spreads; Interest rate effect = impact of changes in risk-free rate; Time decay effect = amortisation of option premium paid to maturity date; Income effect = coupon income; Valuations and Other = Residual, including changes in discount to theoretical value and fees. Prem/Disc effect = When the market price of the Company shares is worth less than the NAV per share, then the Company is said to be trading at a discount. When the market price of the Company shares is worth more than the NAV per share, then the Company is said to be trading at a premium. With credit spreads currently at tight levels and the outlook for duration-sensitive assets uncertain at best, we believe equity markets represent the best source of return in the current market. In line with this conviction, we repositioned the Company over the final quarter of 2016; reducing our exposure to bond-like convertibles and those exposed to real estate, while increasing the allocation to balanced convertibles offering greater exposure to the equity market. This increased the Company s modelled equity sensitivity from 15.5% at the end of June 2016 to 22.6% at the end of December While this increase in equity sensitivity was significant, these changes take the portfolio s equity sensitivity no higher than we saw in the company s portfolio at launch in June Despite this shift from bond-like credit exposed issuers towards more balanced convertibles, the yield on the portfolio stood at 4.5% at the end of Furthermore, the positions we added to increase our equity market exposure were acquired at prices that ensure a positive yield to maturity; meaning these bonds provide participation in any rise in the equity price of the issuer whilst also making a contribution to the yield generated by the portfolio. While maintaining the diversification of the portfolio, which we consider to be important as a means of reducing the Company s reliance on a particular source of yield, we have looked to introduce a more cyclical tilt to the Company s positioning, reflecting our view that economic growth is likely to remain strong. In particular, we reduced the Company s allocation to real estate over the past six months in favour of increased exposure to the industrial, basic material, and energy sectors. Our increased comfort in allocating to the energy sector (which at 7.4% remains relatively low in the context of the overall portfolio) is driven in large part by the actions taken by OPEC to control the supply of oil in order to address the imbalance between supply and demand. 5

8 About the Company continued INVESTMENT MANAGERS REPORT CONTINUED While we believe that the prospect of offsetting production in the US is likely to preclude a significant advance in the oil price, we are confident that OPEC s commitment will help to ensure that the worst is now behind the sector. This has given us increased confidence in exploring attractively priced opportunities to build exposure to companies that are profitable and have the prospect of improving credit characteristics at an oil price in the mid-us$50s. The Company has utilised moderate gearing on a tactical basis over the past six months. We believe that selective use of this facility enables us to tactically add exposure, particularly in the event of a drawdown in credit markets, since this would provide an opportunity to increase exposure to securities with an attractive hold-to-maturity yield. Outlook The Company has entered 2017 with a renewed commitment to provide an attractive income from the convertibles market. We believe that the portfolio s increased allocation to balanced convertibles will help to ensure that its performance in 2017 is further differentiated from non-convertible fixed income. We consider the movements in the fixed-income markets in the final quarter of 2016 as indicative of a longer-term movement away from a lower for longer interest rate environment. While the result of the US presidential election may have accelerated this repricing, improvements in economic growth and the recovery of inflation expectations were already underway prior to November Significantly, this gives us confidence that the positive investment environment for risk assets, such as convertibles and equities, is not solely reliant on President Trump enacting market-friendly policies. Indeed, we see an unpredictable President who has spoken at length about turning the US inward as a key risk for Continued strength in economic data and expectations for higher inflation suggest an environment that is likely to be positive for equity and high yield credit markets, while introducing downside risks to longer-dated exposures. We see this as a positive backdrop for convertibles, which have typically been highly correlated with equity and credit markets, while their short-dated maturity (the expected life of the portfolio is a little over three years) puts a natural cap on the extent to which they may suffer from higher rates. Whilst this environment should be supportive of credit, we see little room for further tightening of credit spreads following the strong moves since February 2016, and so we take a cautious view on outlook for this component of return. We see equity markets as the most likely beneficiary in this environment, and have used the opportunity following strong performance in 2016 to position the portfolio accordingly. The portfolio s holdings are generally short-dated, and the average price of our holdings remains below par value. Combined with an attractive yield of 4.5%, we believe that this ensures the portfolio retains its defensive characteristics in a year where we see significant potential for increased volatility. Antony Vallee Natalia Bucci Robin Dunmall Investment Managers 17th March JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

9 Investment Review PORTFOLIO ANALYSES Sector 31st December 30th June Portfolio Portfolio % 1 % 1 Real Estate Software & Services Energy Diversified Financials Capital Goods Telecommunication Services Materials Banks Transportation Technology Hardware & Equipment Retailing Semiconductors & Semiconductor Equipment Utilities Pharmaceuticals & Biotechnology Health Care Equipment & Services Media 2.3 Consumer Services Food & Staples Retailing Food Beverage & Tobacco Automobiles & Components Consumer Durables & Apparel 1.0 Total Based on total portfolio of 202.9m (30th June 2016: 201.1m). 7

10 Investment Review continued PORTFOLIO ANALYSES CONTINUED Geographic 31st December 30th June Interest 2016 Interest 2016 Rate Portfolio Rate Portfolio Convertibles Securities Preference % 1 Convertibles Securities Preference % 1 United States United Kingdom China Germany Netherlands Spain Hong Kong France Taiwan United Arab Emirates Italy Belgium South Africa Norway Greece Russia Australia Sweden South Korea Singapore Mexico Finland Luxembourg Japan Israel India Austria Total Based on total portfolio of 202.9m (30th June 2016: 201.1m). 8 JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

11 PORTFOLIO DISCLOSURE AT 31ST DECEMBER 2016 Holding as a percentage No. Investment of portfolio Region Country Currency Sector Rating 1. Vereit Inc 2.2% Americas United States USD Real Estate BBB 2. Redwood Trust Inc 2.1% Americas United States USD Real Estate NR 3. Kingsoft Corp Ltd 1.9% Asia China HKD Software & Services NR 4. OCI NV 1.9% Europe Netherlands EUR Materials NR 5. SGL Carbon Se 1.9% Europe Germany EUR Capital Goods CCC 6. Nyrstar Nv 1.8% Europe Belgium EUR Materials CCC 7. Sacyr SA 1.8% Europe Spain EUR Capital Goods NR 8. Carillion Finance Jersey Ltd 1.7% Europe United Kingdom GBP Capital Goods NR 9. Market Tech Holdings Ltd 1.5% Europe United Kingdom GBP Real Estate NR 10. YY Inc 1.5% Asia China USD Software & Services BB 11. Haitian International Holdings Ltd 1.5% Asia China USD Capital Goods NR 12. SEACOR Holdings Inc 1.5% Americas United States USD Energy B 13. Rocket Internet 1.5% Europe Germany EUR Software & Services NR 14. Brait SE 1.4% Africa South Africa GBP Diversified Financials NR 15. Ias Operating Partnership Lp 1.4% Americas United States USD Diversified Financials NR 16. DP World Ltd 1.4% Asia United Arab USD Transportation BBB Emirates 17. Ctrip.com International Ltd 1.4% Americas United States USD Retailing NR 18. America Movil Bv 1.3% Europe Netherlands EUR Telecommunication Services A 19. Weatherford International Ltd 1.3% Americas United States USD Energy B 20. St Modwen Properties Securities Jersey Ltd 1.3% Europe United Kingdom GBP Real Estate NR 21. Wells Fargo & Co 1.3% Americas United States USD Banks BBB 22. Zhen Ding Technology Holding Ltd 1.3% Asia Taiwan USD Technology Hardware & Equipment NR 23. Telefonica Sa 1.3% Europe Italy EUR Telecommunication Services BBB 24. J Sainsbury PLC 1.2% Europe United Kingdom GBP Food & Staples Retailing NR 25. Vodafone Group PLC 1.2% Europe United Kingdom GBP Telecommunication Services BBB+ 26. Tpk Holding Co. Ltd 1.1% Asia Taiwan USD Technology Hardware & Equipment NR 27. BW Group Ltd 1.1% Europe Norway USD Energy BB 28. Frontier Communications Corp 1.1% Americas United States USD Telecommunication Services B+ 29. FF Group Finance Luxembourg Sa 1.0% Europe Greece EUR Retailing NR 30. China Overseas Finance Investment Cayman V Ltd 1.0% Asia Hong Kong USD Real Estate NR 31. TCP Capital Corp 1.0% Americas United States USD Diversified Financials BBB 32. Tpg Specialty Lending Inc 1.0% Americas United States USD Diversified Financials BBB 33. NRG Yield Inc 1.0% Americas United States USD Utilities BB 34. CPUK Finance Ltd 1.0% Europe United Kingdom GBP Consumer Services B 35. Prospect Capital Corp 1.0% Americas United States USD Diversified Financials BBB 36. Neopost Sa 1.0% Europe France EUR Technology Hardware & Equipment NR 37. Iberdrola International BV 1.0% Europe Spain EUR Utilities BBB+ 38. Zillow Group Inc 1.0% Americas United States USD Software & Services NR 39. Hologic Inc 1.0% Americas United States USD Health Care Equipment & Services BB 40. Koninklijke BAM Groep NV 1.0% Europe Netherlands EUR Capital Goods NR 41. Salzgitter Finance Bv 1.0% Europe Germany EUR Materials NR 42. International Consolidated Airlines Group SA 1.0% Europe United Kingdom EUR Transportation NR 43. Air France-KLM 1.0% Europe France EUR Transportation NR 9

12 Investment Review continued PORTFOLIO DISCLOSURE CONTINUED AT 31ST DECEMBER 2016 Holding as a percentage No. Investment of portfolio Region Country Currency Sector Rating 44. Intel Corp 1.0% Americas United States USD Semiconductors & Semiconductor A Equipment 45. Yandex Nv 1.0% Europe Russia USD Software & Services NR 46. Scorpio Tankers Inc 1.0% Americas United States USD Energy NR 47. Teradyne Inc 1.0% Americas United States USD Semiconductors & Semiconductor NR Equipment 48. Fireeye Inc 1.0% Americas United States USD Software & Services NR 49. Intu Jersey Ltd 1.0% Europe United Kingdom GBP Real Estate NR 50. British Land White 2015 Ltd 1.0% Europe United Kingdom GBP Real Estate A 51. Baosteel Hong Kong Investment Co Ltd 1.0% Asia Hong Kong USD Banks NR 52. Twitter Inc 0.9% Americas United States USD Software & Services BB 53. Enterprise Funding Ltd 0.9% Europe United Kingdom GBP Consumer Services B+ 54. Helical Bar Jersey Ltd 0.9% Europe United Kingdom GBP Real Estate NR 55. Bank of America Corp 0.9% Americas United States USD Banks BB 56. WebMD Health Corp 0.9% Americas United States USD Software & Services NR 57. Mandatory Exchangeable Trust 0.9% Asia China USD Telecommunication Services NR 58. National Bank of Abu Dhabi Pjsc 0.9% Asia United Arab USD Banks AA Emirates 59. Premier Oil Finance Jersey Ltd 0.8% Europe United Kingdom USD Energy NR 60. Nuance Communications Inc 0.8% Americas United States USD Software & Services BB 61. Tullow Oil PLC 0.8% Europe United Kingdom USD Energy CCC 62. Cromwell Spv Finance Pty Ltd 0.8% Australia Australia EUR Real Estate BBB 63. Liberty Media Corp 0.8% Americas United States USD Media NR 64. Blackrock Capital Investment Corp 0.8% Americas United States USD Diversified Financials BBB 65. NantHealth Inc 0.8% Americas United States USD Health Care Equipment & Services NR 66. Remgro Jersey GBP Ltd 0.8% Europe United Kingdom GBP Diversified Financials NR 67. Bayer Capital Corp BV 0.8% Europe Germany EUR Pharmaceuticals & Biotechnology BBB 68. Bunge Ltd 0.8% Americas United States USD Food Beverage & Tobacco BB+ 69. Pharmaceutical Industries Ltd 0.8% Americas United States USD Pharmaceuticals & Biotechnology NR 70. Liberty Interactive LLC 0.8% Americas United States USD Media B 71. Blackhawk Network Holdings Inc 0.8% Americas United States USD Software & Services NR 72. Finisar Corp 0.8% Americas United States USD Technology Hardware & Equipment NR 73. Chesapeake Energy Corp 0.8% Americas United States USD Energy CCC 74. DISH Network Corp 0.7% Americas United States USD Media B 75. Inmarsat PLC 0.7% Europe United Kingdom USD Telecommunication Services BB+ 76. Sas Ab 0.7% Europe Sweden SEK Transportation B 77. Arconic Inc 0.7% Americas United States USD Materials BB 78. GNC Holdings Inc 0.7% Americas United States USD Retailing BB 79. GS Engineering & Construction Corp 0.6% Asia South Korea USD Capital Goods NR 80. Allergan Plc 0.6% Americas United States USD Pharmaceuticals & Biotechnology NR 81. Kinder Morgan Inc/DE 0.6% Americas United States USD Energy NR 82. CapitaLand Ltd 0.6% Asia Singapore SGD Real Estate NR 83. Sunpower Corp 0.6% Americas United States USD Semiconductors & Semiconductor NR Equipment 84. Hess Corp 0.6% Americas United States USD Energy NR 85. Macquarie Infrastructure Corp 0.6% Americas United States USD Transportation BBB 10 JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

13 Holding as a percentage No. Investment of portfolio Region Country Currency Sector Rating 86. Cemex SAB de CV 0.6% Americas Mexico USD Materials NR 87. Anthem, Inc 0.6% Americas United States USD Health Care Equipment & Services BBB 88. Asm Pacific Technology Ltd 0.6% Asia Hong Kong HKD Semiconductors & Semiconductor BB+ Equipment 89. Rallye Sa 0.5% Europe France EUR Food & Staples Retailing NR 90. Aabar Investments Pjsc 0.5% Europe Italy EUR Banks NR 91. Western Digital Corp 0.5% Americas United States USD Technology Hardware & Equipment BB 92. Tesla Motors Inc 0.5% Americas United States USD Automobiles & Components B 93. Ares Capital Corp 0.5% Americas United States USD Diversified Financials BBB 94. Aabar Investments Pjsc 0.5% Europe Italy EUR Banks NR 95. Colony Capital Inc 0.5% Americas United States USD Diversified Financials NR 96. Nuance Communications Inc 0.5% Americas United States USD Software & Services BB 97. Liberty Interactive LLC 0.5% Americas United States USD Retailing B 98. Liberty Interactive LLC 0.5% Americas United States USD Retailing B 99. Ensco Jersey Finance Ltd 0.4% Americas United States USD Energy BB 100. Derwent London Capital No 2 Jersey Ltd 0.4% Europe United Kingdom GBP Real Estate BBB National Grid North America Inc 0.4% Europe United Kingdom GBP Utilities BBB Intu Jersey 2 Ltd 0.4% Europe United Kingdom GBP Real Estate NR 103. TICC Capital Corp 0.3% Americas United States USD Diversified Financials NR 104. Outokumpu OYJ 0.2% Europe Finland EUR Materials B 105. Intercept Pharmaceuticals Inc 0.2% Americas United States USD Pharmaceuticals & Biotechnology NR 100.0% 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 11

14 Financial Statements STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016 (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December st December th June 2016 Revenue Capital Total Revenue Capital Total Revenue Capital Total Investments held at fair value through profit and loss: Gains on investments held at fair value through profit or loss 15,187 15, ,778 19,778 Income from investments 5,296 5,296 5,293 5,293 10,791 10,791 Gains/(losses) on financial instruments: Realised losses on close out of futures and options contracts (231) (231) (1,389) (1,389) (761) (761) Unrealised losses on futures and options contracts (258) (258) (41) (41) Realised foreign currency losses on foreign currency contracts (6,091) (6,091) (6,003) (6,003) (18,697) (18,697) Unrealised foreign currency losses on foreign currency contracts (4,000) (4,000) (4,207) (4,207) (9,075) (9,075) Realised foreign currency gains/(losses) (21) (21) Unrealised foreign currency losses (1,225) (1,225) (544) (544) (1,935) (1,935) Other income Total income/(loss) 5,314 3,995 9,309 5,327 (11,516) (6,189) 10,850 (10,752) 98 Management fee (471) (254) (725) (529) (285) (814) (1,012) (545) (1,557) Other administrative expenses (222) (222) (258) (258) (545) (545) Profit/(loss) before finance costs and taxation 4,621 3,741 8,362 4,540 (11,801) (7,261) 9,293 (11,297) (2,004) Finance costs (96) (51) (147) (66) (36) (102) (149) (81) (230) Profit/(loss) before taxation 4,525 3,690 8,215 4,474 (11,837) (7,363) 9,144 (11,378) (2,234) Taxation (110) (110) (171) (171) (369) (369) Net profit/(loss) 4,415 3,690 8,105 4,303 (11,837) (7,534) 8,775 (11,378) (2,603) Earnings/(loss) per share (note 4) 2.26p 1.89p 4.15p 1.96p (5.40)p (3.44)p 4.13p (5.35)p (1.22)p 1 The 31st December 2015 figures have been amended in line with the change in presentation to liquid assets from Non current assets to Cash equivalents. Earnings 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 profit/(loss) 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. 12 JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

15 STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016 Share Capital Revenue capital reserve reserve Total Six months ended 31st December 2016 (Unaudited) At 30th June ,368 (28,794) ,638 Repurchase of shares into Treasury (104) (104) Net profit for the period 3,690 4,415 8,105 Dividends paid in the period (4,390) (4,390) At 31st December ,368 (25,208) ,249 Six months ended 31st December 2015 (Unaudited) At 30th June ,020 1, ,311 Repurchase of shares into Treasury (605) (605) Net (loss)/profit for the period (11,837) 4,303 (7,534) Dividends paid in the period (4,928) (4,928) At 31st December ,020 (10,962) ,244 Year ended 30th June 2016 (Audited) At 30th June ,020 1, ,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 Net (loss)/profit for the year (11,378) 8,775 (2,603) Dividends paid in the year (9,522) (9,522) At 30th June ,368 (28,794) ,638 13

16 Financial Statements continued STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER 2016 (Unaudited) (Unaudited) (Audited) 31st December st December th June Non current assets Investments held at fair value through profit or loss 202, , ,127 Current assets Derivative financial assets Trade and other receivables 1,291 1,105 9,628 Cash and cash equivalents 1 8,445 12,811 3,020 Cash held as Broker ,866 14,844 13,323 Current liabilities Derivative financial liabilities (4,130) (4,592) (9,622) Trade and other payables (16,353) (4,161) (1,229) Net current (liabilities)/assets (10,617) 6,091 2,472 Total assets less current liabilities 192, , ,599 Creditors: amounts falling due after more than one year (13,569) (14,961) Net assets 192, , ,638 Amounts attributable to equity holders Share capital 217, , ,368 Capital reserve (25,208) (10,962) (28,794) Revenue reserve Total equity shareholders funds 192, , ,638 Net asset value per share (note 5) 98.6p 95.6p 96.6p 1 This line item combines the two lines of Investments in liquidity funds held at fair value through profit or loss and Cash and short term deposits in the financial statements for the period ended 31st December 2015 into one. 14 JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

17 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016 (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December st December th June Operating activities Gain/(loss) before taxation 8,215 (7,363) (2,234) Deduct dividends received (353) (578) (1,229) Deduct investment income interest (4,943) (4,715) (9,562) Deduct bank interest received (18) (34) (59) Add back interest paid Deduct gains on investments held at fair value through profit or loss (15,187) (857) (19,778) (Increase)/decrease in unrealised gains on foreign currency contracts (5,075) 10,135 15,003 (Increase)/decrease in unrealised gains on future and option contracts (41) Decrease in cash held as collateral by Brokers for futures Increase in unrealised losses on foreign currency 1, ,935 Effect of decrease/(increase) in trade and other receivables 3 (2) (5) Effect of (decrease)/increase trade and other payables (36) Net cash outflow from operating activities before interest, taxation and dividends (15,894) (1,859) (14,335) Taxation (110) (171) (369) Interest paid (134) (102) (170) Dividends received ,237 Investment income interest 2,781 3,919 6,797 Bank interest received Net cash (outflow)/inflow from operating activities after interest, taxation and dividends (12,959) 2,411 (6,781) Investing Activities Purchases of investments held at fair value through profit or loss (122,761) (136,337) (217,215) Sales of investments held at fair value through profit or loss 145, , ,156 Net cash inflow from investing activities 22,878 5,003 29,941 Financing activities Repurchase of shares into Treasury (104) (605) (20,496) Shares bought back and cancelled (1,052) Dividends paid (4,390) (4,928) (9,522) Drawdown of loan 13,026 13,026 Net cash (outflow)/inflow from financing activities (4,494) 7,493 (18,044) Increase in cash and cash equivalents 5,425 14,907 5,116 Cash and cash equivalents at the start of the period/year 3,020 (2,096) (2,096) Cash and cash equivalents at the end of the period/year 8,445 12,811 3,020 1 The 31st December 2015 figures have been amended in line with the change in presentation to liquidity assets from Non current assets to Cash equivalents. 15

18 Financial Statements continued NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31ST DECEMBER Financial statements The information contained within the financial statements in this half year 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 ( 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 ). The same accounting policies and methods of compensation are followed in these financial statements as compared with the most recent annual financial statements. Where presentational evidence set out in the Statement of Recommended Practice (the SORP ) issued by the Association of Investment Companies in November 2014 is consistent with the requirement of IFRS, the financial statements have been prepared on a basis compliant with the recommendation of SORP. All of the Company s operations are of a continuing nature. The financial statements have been prepared on a going concern basis. 3. Dividend paid (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December st December th June fourth interim dividend 1.125p (2015: 1.125p) 2,196 2,464 2, first interim dividend of 1.125p (2016: 1.125p) 2,194 2,464 2, second interim dividend of 1.125p 2, third interim dividend of 1.125p 2,239 Total dividends paid in the period/year 4,390 4,928 9,522 A second interim dividend of 1.125p per share, has been declared payable in respect of the six months ended 31st December JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

19 4. Earnings/(loss) per share (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December st December th June Earnings/(loss) per share is based on the following: Revenue return 4,415 4,303 8,775 Capital return/(loss) 3,690 (11,837) (11,378) Total return/(loss) 8,105 (7,534) (2,603) Weighted average number of shares in issue during the period/year 195,165, ,277, ,639,947 Revenue return per share 2.26p 1.96p 4.13p Capital return/(loss) per share 1.89p (5.40)p (5.35)p Total return/(loss) per share 4.15p (3.44)p (1.22)p 5. Net asset value per share (Unaudited) (Unaudited) (Audited) 31st December st December th June 2016 Shareholders funds ( 000) 192, , ,638 Number of shares in issue 195,072, ,983, ,187,705 Net asset value per share 98.6p 95.6p 96.6p 6. Disclosures regarding financial instruments measured at fair value The disclosures required by the IFRS 13: Fair Value Measurement are given below. The Company s financial instruments within the scope of IFRS 13 that are held at fair value comprise its investment portfolio. The investments are categorised into a hierarchy consisting of the following three levels: Level 1 valued using unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 valued by reference to valuation techniques using other observable inputs not included within Level 1. Level 3 valued by reference to valuation techniques using unobservable inputs. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset. The recognition and measurement policies for financial instruments measured at fair value are consistent with those disclosed in the last annual financial statements. 17

20 Financial Statements continued NOTES TO THE FINANCIAL STATEMENTS CONTINUED 6. Disclosures regarding financial instruments measured at fair value continued The following tables set out the fair value measurements using the IFRS 13 hierarchy at the relevant period/year end: 31st December 2016 Level 1 Level 2 Level 3 Total Financial assets held at fair value through profit or loss Investments: Convertibles 179, ,711 Convertible preference 15,733 15,733 Interest rate securities 7,422 7,422 Total investments 202, ,866 Derivative financial instruments: Forward foreign currency contracts Total 202, ,996 Financial liabilities held at fair value through profit or loss Forward foreign currency contracts (4,130) (4,130) Total (4,130) (4,130) 30th June 2016 Level 1 Level 2 Level 3 Total Financial assets held at fair value through profit or loss Investments: Convertibles 168, ,072 Convertible preference 15,317 15,317 Interest rate securities 17,738 17,738 Total investments 201, ,127 Derivative financial instruments: Forward foreign currency contracts Total 201, ,633 Financial liabilities held at fair value through profit or loss Forward foreign currency contracts (9,581) (9,581) Future contracts (41) (41) Total (41) (9,581) (9,622) The Company s policy for determining transfers between levels is to ascertain the listing status at each period and for each investment and determine if any changes have occurred that would necessitate a transfer. Fair values of financial assets and financial liabilities All financial assets and liabilities are either included in the Statement of Financial Position at fair value or the carrying amount is a reasonable approximation of fair value. 18 JPMORGAN GLOBAL CONVERTIBLES INCOME FUND LIMITED. HALF YEAR REPORT & ACCOUNTS 2016

21 Shareholder Information 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; foreign currency; accounting; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the 2016 Annual Report and Accounts. Related Party Transactions During the half year to 31st December 2016, no new agreements were entered into with related parties 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 and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operation existence for at least 12 months from the date of the approval of this half yearly financial report. 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 International Accounting Standard 34 Interim Financial Reporting 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 2016, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and (ii) the interim report includes a fair review of the information required by 4.2.7R (important events that have occurred since inception, their impact on these financial statements and a description of the principal risks facing the Company) and 4.2.8R (related party transactions since inception that have materially affected the financial position or performance of the Company) 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 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 17th March

22 Shareholder Information continued GLOSSARY OF TERMS AND DEFINITIONS Return to Shareholders Share price total return to the Ordinary shareholder, on a last traded price to last traded 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 investments expressed as a percentage of the shareholders funds. If the amount calculated is negative, this is shown as a net cash position. 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 2016 is an estimated annualised figure. Earnings per 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 convertible securities are those with a relatively stable credit and has a fixed income value far greater than the value of the underlying equity. It is largely insensitive to changes in the value of the underlying equity. 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 the underlying equity and the fixed income value of the security. Financial Conduct Authority 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. HALF YEAR REPORT & ACCOUNTS 2016

23 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 March 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 Junior ISA. These products are all available on the online service at jpmorgan.co.uk/online 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 Depositary BNY Mellon Trust and Depositary (UK) Limited BNY Mellon Centre 160 Queen Victoria Street London EC4V 4LA The Depositary has appointed 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 and J.P. Morgan ISA, see contact details on the back cover of this report. For company secretarial matters please contact Rhys Williams at the above address. A member of the AIC 21