Half-year Report to 31 December 2017

RNS Number : 2894G

JPMorgan Global Growth & Income PLC

28 February 2018

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN GLOBAL GROWTH & INCOME PLC ('the Company')

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST DECEMBER 2017

Legal Entity Identifier: 5493007C3I0O5PJKR078

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

The six month period to 31st December 2017 saw a further rise in global equity markets in a continuing low interest rates environment. During the half year, the total return on the Company's net assets was +8.0% compared with the return on our benchmark, the MSCI AC World Index (in sterling terms) of +6.8%. The return to shareholders for the same period was +12.3%, reflecting the move in the share price from a discount to a premium to net asset value ('NAV').

Following the change in the distribution and dividend policy in July 2016 and subsequent strong investment performance, the Company's share price discount to NAV initially narrowed and then moved to a premium in the second half of 2017, signalling the increased appeal of the Company's shares. There has also been an encouraging broadening of our shareholder base. It was not necessary to buy back any shares during the period; indeed as a consequence of the share price trading at a premium to NAV, the Company reissued 1,825,000 shares from Treasury for a total consideration of £5,893,000. The shares have continued to command a premium to NAV in 2018, allowing the Company to continue reissuing shares; up to the time of writing, 2,515,000 shares have been reissued from Treasury in 2018 for a total consideration of £8,034,000.

As announced on 9th January 2018, the Board has issued £30 million fixed rate 30 year unsecured notes at an annual coupon of 2.93% to take advantage of current market conditions which we consider offer an attractive level of long term gearing. The previous £25 million loan under the revolving credit facility with National Australia Bank has been repaid. The notes are unsecured, which gives the Company increased flexibility to manage its borrowings in the future. There has been no change to the Company's overall gearing range of 5% net cash to 20% geared in normal circumstances. The Investment Managers decreased gearing levels during the half year from 6.3% at the start of the period to 1.0% at 31st December 2017.

The Investment Managers' report provides a detailed commentary on activity, performance and the market outlook. Global equity markets began 2018 strongly, but we have subsequently entered a period of turbulence in expectation of a possible acceleration in inflation and consequent increase in interest rates. After such a prolonged rise in markets it may be sensible to expect this period of consolidation to continue. That said, the Board believes that the Investment Managers' robust investment process and extensive research resources will continue to identify attractively priced high quality companies in which to invest.

For and on behalf of the Board

Nigel Wightman

Chairman                                                                                                                                        

28th February 2018

INVESTMENT MANAGERS' REPORT

Market Environment

Global equity markets continued on their positive trajectory over the second half of 2017. In general, it was a period characterised by positive economic data releases, strong corporate earnings and subdued volatility. Against this backdrop, central banks around the world continued to indicate a gradual reduction in monetary policy stimulus. Emerging markets outperformed developed markets, benefiting from a weaker US dollar and strong economic fundamentals in China.

Portfolio Review

The Company modestly outperformed the index over the six months, with stock selection the primary driver of performance. Strong performers in the portfolio included Chinese insurance company, Ping An Insurance; US shale gas producer, Diamondback Energy; and US health insurance provider, UnitedHealth Group. Ping An Insurance is well positioned to capitalise on the rapidly increasing demand for financial products in developing Asia, with a strong management team and impressive technology strategy. Other healthcare stocks, including Allergan and Shire Pharmaceuticals, detracted from performance. US and Russian supermarket chains, Kroger and Magnit, also underperformed and given the challenging environments these companies are facing, we sold our positions. Despite recent weak performance, we continue to hold US communications company, Dish Network, as the gap between the market value of the business and its true value remains significant.

Our positioning in technology continued to detract from performance as we remained underweight 'FAANG' stocks (Facebook, Amazon, Apple, Netflix, Google) - only owning Google. Our view remains that while they are great businesses, they are certainly not cheap and represent an ebullience/momentum which frequently leads to derating and disappointment.

Portfolio positioning and outlook

Given the risk that the market was already pricing in the most favourable scenarios after such a sustained bull run, we reduced net gearing to near zero over the summer. We saw such a market correction at the end of January and into February this year, arguably later than many had expected, as volatility rose sharply. The key question on investors' minds is whether this correction is par for the course or the start of something bigger. The evidence today would suggest the former - economic growth is looking healthier and more synchronised globally than it has for many years which should flow through to continued profits growth, while bond yields are normalising, rather than overshooting. If we think about monetary policy in terms of real rates, we have been through a period in the US of negative or zero real rates and it looks as though the US economy should be able to withstand modestly positive real rates, which would be a sign of underlying health. Given the well-flagged slow withdrawal of extraordinary monetary stimulus by central banks we should expect to see a rise in volatility from previously very compressed levels.

Our focus remains on company-specific valuation signals derived from intensive company research and long term cash flow models. We remain vigilant in ensuring that our analyst estimates are as reflective as possible of the changing environment and look to seize opportunities which heightened market volatility can offer us as active stock pickers. We have not made any significant changes to the overall shape of the portfolio which remains pro-cyclically positioned with a bias towards higher beta. Regionally, our bottom-up process continues to result in large positions in Europe and the UK whereas North America is an area in which we are underweight. In the latter region excessive valuation still prevents us from investing in bond equivalents and many other mega caps.

Jeroen Huysinga

Tim Woodhouse

Investment Managers                                                                                                                     

28th February 2018

INTERIM MANAGEMENT REPORT-

The Company is required to make the following disclosures in its half year report:

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; going concern; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Financial Statements for the year ended 30th June 2017.

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 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 twelve months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the financial statements.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' 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 2017, 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

Nigel Wightman

Chairman                                                                                                                                        

28th February 2018

STATEMENT OF COMPREHENSIVE INCOME 

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2017

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2017			31st December 2016			30th June 2017
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at
fair value through profit or loss	-	31,334	31,334	-	65,913	65,913	-	84,015	84,015
Net foreign currency (losses)/gains	-	(2,652)	(2,652)	-	4,619	4,619	-	1,051	1,051
Income from investments	2,493	-	2,493	1,829	-	1,829	6,715	-	6,715
Interest receivable and similar
income	43	-	43	50	-	50	65	-	65
Gross return	2,536	28,682	31,218	1,879	70,532	72,411	6,780	85,066	91,846
Management fee	(407)	(407)	(814)	(353)	(353)	(706)	(749)	(749)	(1,498)
Performance fee	-	(204)	(204)	-	(2,419)	(2,419)	-	(2,347)	(2,347)
Other administrative expenses	(242)	-	(242)	(278)	-	(278)	(561)	-	(561)
Net return on ordinary activities
before finance costs and
taxation	1,887	28,071	29,958	1,248	67,760	69,008	5,470	81,970	87,440
Finance costs	(77)	(77)	(154)	(85)	(85)	(170)	(162)	(162)	(324)
Net return on ordinary activities
before taxation	1,810	27,994	29,804	1,163	67,675	68,838	5,308	81,808	87,116
Taxation	(223)	-	(223)	(185)	-	(185)	(684)	-	(684)
Net return on ordinary
activities after taxation	1,587	27,994	29,581	978	67,675	68,653	4,624	81,808	86,432
Return per share (note 3)	1.28p	22.56p	23.84p	0.79p	54.73p	55.52p	3.74p	66.15p	69.89p

STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31ST DECEMBER 2017

	Called up		Capital
	share	Share	redemption	Capital 1	Revenue 1
	capital	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2017 (Unaudited)
At 30th June 2017	7,746	46,670	27,401	282,972	12,395	377,184
Issue of shares from Treasury	-	2,575	-	3,315	-	5,890
Net return on ordinary activities	-	-	-	27,994	1,587	29,581
Dividends paid in the period (note 4)	-	-	-	-	(6,477)	(6,477)
At 31st December 2017	7,746	49,245	27,401	314,281	7,505	406,178
Six months ended 31st December 2016 (Unaudited)
At 30th June 2016	7,746	46,670	27,401	201,167	17,170	300,154
Expenses in relation to share repurchases	-	-	-	(3)	-	(3)
Net return on ordinary activities	-	-	-	67,675	978	68,653
Dividends paid in the period (note 4)	-	-	-	-	(3,957)	(3,957)
At 31st December 2016	7,746	46,670	27,401	268,839	14,191	364,847
Year ended 30th June 2017 (Audited)
At 30th June 2016	7,746	46,670	27,401	201,167	17,170	300,154
Expenses in relation to share repurchases	-	-	-	(3)	-	(3)
Net return on ordinary activities	-	-	-	81,808	4,624	86,432
Dividends paid in the year (note 4)	-	-	-	-	(9,399)	(9,399)
At 30th June 2017	7,746	46,670	27,401	282,972	12,395	377,184

¹ The reserves form the distributable reserves of the Company and may be used to fund distribution of profits to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER 2017

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2017	31st December 2016	30th June 2017
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	410,109	381,659	400,972
Current assets
Derivative financial assets	1,048	4,787	2,037
Debtors	626	483	2,250
Cash and cash equivalents	24,360	7,308	6,131
	26,034	12,578	10,418
Current liabilities
Creditors: amounts falling due within one year	(25,587)	(1,108)	(1,796)
Derivative financial liabilities	(2,068)	(1,268)	(4,863)
Net current (liabilities)/assets	(1,621)	10,202	3,759
Total assets less current liabilities	408,488	391,861	404,731
Creditors: amounts falling due after more than one year	(200)	(25,200)	(25,200)
Provisions for liabilities and charges
Performance fee payable	(2,110)	(1,814)	(2,347)
Net assets	406,178	364,847	377,184
Capital and reserves
Called up share capital	7,746	7,746	7,746
Share premium	49,245	46,670	46,670
Capital redemption reserve	27,401	27,401	27,401
Capital reserves	314,281	268,839	282,972
Revenue reserve	7,505	14,191	12,395
Total equity shareholders' funds	406,178	364,847	377,184
Net asset value per share (note 5)	323.7p	295.0p	305.0p

STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31ST DECEMBER 2017

	(Unaudited)	(Unaudited)	(Unaudited)
	Six months ended	Six months ended	Year ended
	31st December 2017	31st December 2016	30th June 2017
	£'000	£'000	£'000
Net cash outflow from operations before dividend
and interest (note 6)	(1,066)	(432)	(1,651)
Dividends received	2,581	2,099	5,929
Interest received	24	36	45
Overseas tax recovered	3	79	181
Interest paid	(151)	(181)	(339)
Net cash inflow from operating activities	1,391	1,601	4,165
Purchases of investments	(120,821)	(113,092)	(288,237)
Sales of investments	142,762	109,846	283,686
Settlement of forward currency contracts	(4,514)	1,502	4,508
Net cash inflow/(outflow) from investing activities	17,427	(1,744)	(43)
Dividends paid	(6,477)	(3,957)	(9,399)
Issue of shares from Treasury	5,890	-	-
Expenses in relation to share repurchases	-	(3)	(3)
Net cash outflow from financing activities	(587)	(3,960)	(9,402)
Increase/(decrease) in cash and cash equivalents	18,231	(4,103)	(5,280)
Cash and cash equivalents at start of period	6,131	11,411	11,411
Exchange movements	(2)	-	-
Cash and cash equivalents at end of period	24,360	7,308	6,131
Increase/(decrease) in cash and cash equivalents	18,231	(4,103)	(5,280)
Cash and cash equivalents consist of:
Cash and short term deposits	4,265	475	287
Cash held in JPMorgan Sterling Liquidity Fund	20,095	6,833	5,844
Total	24,360	7,308	6,131

NOTES TO THE FINANCIAL STATEMENTS 

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2017

1.  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.

The figures and financial information for the year ended 30th June 2017 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which are unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in November 2014 and updated in January 2017.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2017.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th June 2017.

In the previous financial year, the Company elected not to prepare a Statement of Cash Flows, applying the exemption from disclosure available under FRS 102 Section 7.1A(c). The Company has since reviewed the application of the exemption and has resolved not to apply it this year as the inclusion of the Statement of Cash Flows supports fuller financial analysis for the benefit of all stakeholders.

3.  Return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2017	31st December 2016	30th June 2017
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	1,587	978	4,624
Capital return	27,994	67,675	81,808
Total return	29,581	68,653	86,432
Weighted average number of shares in issue	124,084,328	123,661,285	123,661,285
Revenue return per share	1.28p	0.79p	3.74p
Capital return per share	22.56p	54.73p	66.15p
Total return per share	23.84p	55.52p	69.89p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2017	31st December 2016	30th June 2017
	£'000	£'000	£'000
Unclaimed dividends refunded to the Company	(9)	-	-
2017 third interim dividend of 2.20p (2016 final: 3.20p)	2,721	3,957	3,957
2018 first interim dividend of 3.04p (2017: 2.20p)	3,765	-	2,721
2017 second interim dividend of 2.20p	-	-	2,721
Total dividends paid in the period/year	6,477	3,957	9,399

All dividends paid in the period/year have been funded from the revenue reserve.

A second interim dividend of 3.04p per share has been paid on 5th January 2018 for the financial year ending 30th June 2018, costing £3,798,000.

A third interim dividend of 3.04p per share has been declared for payment on 6th April 2018 for the financial year ending 30th June 2018.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2017	31st December 2016	30th June 2017
Net assets (£'000)	406,178	364,847	377,184
Number of shares in issue	125,486,285	123,661,285	123,661,285
Net asset value per share	323.7p	295.0p	305.0p

6.  Reconciliation of net return on ordinary activities before finance costs and taxation to net cash outflow from operations before dividends and interest

	(Unaudited)		(Unaudited)	(Unaudited)
	Six months ended		Six months ended	Year ended
	31st December 2017		31st December 2016	30th June 2017
	£'000		£'000	£'000
Net return on ordinary activities before finance costs and taxation	29,958		69,008	87,440
Less capital return on ordinary activities before finance costs and taxation		(28,071)	(67,760)	(81,970)
Decrease in accrued income and other debtors		330	452	73
(Decrease)/increase in accrued expenses		(74)	(22)	42
Management fee charged to capital		(407)	(353)	(749)
Overseas withholding tax		(255)	(182)	(844)
Dividends received		(2,581)	(2,099)	(5,929)
Interest received		(24)	(36)	(45)
Realised gains on foreign exchange transactions		58	560	331
Net cash outflow from operations before
dividends and interest	(1,066)		(432)	(1,651)

7.  Fair valuation of investments

The fair value hierarchy disclosures required by FRS 102 are given below:

	(Unaudited)		(Unaudited)		(Audited)
	Six months ended		Six months ended		Year ended
	31st December 2017		31st December 2016		30th June 2017
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Level 1	410,109	-	381,659	-	400,972	-
Level 2,1	1,048	(2,068)	4,787	(1,268)	2,037	(4,863)
Total	411,157	(2,068)	386,446	(1,268)	403,009	(4,863)

¹    Includes forward foreign currency contracts.

JPMORGAN FUNDS LIMITED

28th February 2018

For further information, please contact:

Divya Amin

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

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.

ENDS

A copy of the half year will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM 

The half year will also shortly be available on the Company's website at www.jpmglobalgrowthandincome.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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