Half-year Report to 31 December 2020

RNS Number : 3315R

JPMorgan Global Growth & Income PLC

05 March 2021

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

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

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST DECEMBER 2020

Legal Entity Identifier: 5493007C3I0O5PJKR078

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

While the global economy continued to be disrupted during the first half of the Company's financial year by the COVID-19 pandemic, the unprecedented fiscal and monetary support provided by governments and central banks helped to underpin global equity markets. As markets looked ahead to successful vaccine campaigns stock prices were generally firm; in the half year to 31st December 2020 the MSCI World All Countries Index (in sterling terms) - the Company's benchmark - rose by 12.1%.

Against this background I am pleased to report that, as a result of astute stock picking by the Investment Managers, the Company's total return on net assets over this period was +15.4% and the total return to shareholders including dividends reinvested was +17.1%.

The table below sets out these figures in more detail and highlights the success of stock selection over the period. The Investment Managers' Report provides a detailed commentary on market developments, portfolio activity and the outlook.

PERFORMANCE ATTRIBUTION

SIX MONTHS ENDED 31ST DECEMBER 2020

	%	%
Contributions to total returns
Benchmark return		12.1
Asset allocation	0.0
Stock selection	4.1
Currency effect	(0.2)
Gearing/cash	0.4
Investment Managers' contribution		4.3
Portfolio return		16.4
Management fee/other expenses	(0.3)
Performance fee	(0.7)
Net asset value return - prior
to structural effects		15.4
Structural effects
Share buy-backs/issuance	0.0
Net asset value return - Debt at par value		15.4
Impact of Fair Value Valuation of Debt		0.7
Net asset value return - Debt at fair value		16.1
Return to shareholders		17.1

Source: JPMAM and Morningstar.

All figures are on a total return basis.

This performance attribution analyses how the Company achieved its performance relative to its benchmark index. The Investment Managers' report provides a detailed commentary on these figures and discusses activity, performance and the market outlook.

The Company's shares continued to trade close to, or at a small premium to NAV during the half year and we were able to reissue 4,633,000 shares from Treasury for a total consideration of £16,707,000. Our shares have continued to trade at a premium to NAV in 2021, allowing us to continue reissuing them; up to the time of writing, a further 1,335,000 shares have been reissued from Treasury in 2021 for a total consideration of £5,248,000.

As a result of the rise in net asset value and issuance of new shares, shareholders' funds rose over the period from £478.8 million to £560.0 million.

The Board has agreed to issue £20 million fixed rate 15 year unsecured notes at an annualised coupon of 2.36%. The funding date is planned to be 12th March 2021 and these notes will be due to be repaid on 12th March 2036. After the issuance of these notes, the Company's total notes will amount to £50 million. The Board has agreed to issue the new notes to take advantage of current market conditions which we consider offer an attractive level of well-priced long term gearing. The Notes will be unsecured which gives the Company increased flexibility to manage its borrowings in the future. There has been no change in the Investment Managers' permitted gearing range, as previously set by the Board, which limits gearing within the range of 5% net cash to 20% geared in normal market conditions.

As has already been announced, I will be retiring from the Board at the end of the Annual General Meeting in October this year. I am delighted to announce that Tristan Hillgarth will then replace me as Chairman. Tristan joined the Board in November 2014 and is therefore eligible under the AIC Code of Corporate Governance to serve as Chairman. Gay Collins, who joined the Board in February 2012, will continue to serve as Senior Independent Director.  Sarah Whitney, who joined the Board in January 2020, will continue as Chairman of the Audit & Management Engagement Committee and will assume the role of Chairman of the Remuneration Committee from Tristan when he takes over as Chairman of the Board.

To fill the vacancy on the Board, we are pleased to announce the appointment of James Macpherson to the Board with effect from 1st April 2021. James was until recently Deputy CIO, Fundamental Active Equities at BlackRock where he lead the Global, Thematic, Natural Resources and Health Science strategies and Equity Closed-end funds. He was a senior fund manager at BlackRock and predecessor companies for 35 years, and was co-head of UK Equities from 2001-2016.

All directors are subject to election or re-election at the Annual General Meeting in October.

Global equity markets have been buoyed by fiscal and monetary support and by the remarkable speed at which a number of successful vaccines have been developed to combat COVID-19. While mass vaccination will take time, and maybe complicated by the arrival of virus mutations, our Investment Managers believe strongly that the return to some greater degree of normality will result in a global economic recovery and significant uptick in corporate earnings. As a result the portfolio has seen some adjustment away from those stocks that have done particularly well in the pandemic and towards those that should benefit from a cyclical rebound in economies.

Nigel Wightman

Chairman

5th March 2021

INVESTMENT MANAGERS' REPORT

"We will either find a way, or make one" - Hannibal Barca

As we look back on the events of the past six months, and indeed the whole of 2020, it seems important to be proud of the innovation and ingenuity that means there is light at the end of the COVID-19 tunnel. We saw two new mRNA vaccines, conceived of and brought to market in less than a year - a technology that had shown promise but had not been used at large scale until now. We can perhaps allow ourselves to be hopeful for many future treatments using this technology. A reminder, if ever we needed one, that humans are capable of a great deal, and that we will get through these challenging times.

Some of the ways in which we have learnt to adapt to the pandemic will last far into the future. Be it telemedicine, at-home fitness, video-conferencing, or online shopping - these are trends that are here to stay. Some others we believe will return with time - the consumer demand for travel and leisure being one such example. We have continued to focus on understanding which changes are temporary, and which ones are permanent.

As much as COVID-19 dominated our lives in the past few months, other major events have not gone unnoticed. We have seen the election of, and transition to, a new administration in the United States. This will have implications ranging from taxation to environmental policy, and we have already been thinking about how they are likely to impact the companies we invest in.

Through all this, markets have been strong. MSCI ACWI, the benchmark to which we compare your Company, rose 12% in the six months reporting period. This resilience is a reminder that there will always be opportunities, and we take our job in finding these for our shareholders very seriously. Short-term uncertainty, as we have written before, is part of investing, and should be embraced, not feared. By focusing on the long-term, and on structural forces, we can look through this short-term uncertainty to find the investments that will generate value for many years.

Portfolio Review and Spotlight on Stocks

That long-term approach was what drove a meaningful increase in our exposure to more cyclical names in the past six months. This approach worked very well, with the NAV of the Company rising 15.4%, and the share price rising 17.1%, versus the benchmark rise at 12.1%.

The top contributing sector to the strong performance of your Company was Pharma and Medtech. This was driven by a couple of names that rebounded strongly. The first was our position in Zimmer Biomet - a leading manufacturer of orthopaedic implants. They had been hit by the pandemic as hospitals did not have capacity for elective procedures, but we saw business recover through the second half of 2020. We believe that demand for their products is simply postponed, rather than destroyed, and therefore we expect earnings recovering quickly to previous levels. Another name that contributed in this sector was Alexion Pharmaceuticals, an innovative biotech company that develops drugs for rare blood disorders. This company was the subject of a bid to acquire them by AstraZeneca, which they accepted.

Within the Media sector, Lyft was our top contributing individual stock. The second largest rideshare provider in the US after Uber returned 60% in the six months to the end of December, driven by improving rider trends. They also accelerated their journey to profitability, taking advantage of weaker sales to optimise their costs, which in turn should allow for lower cost journeys for future riders. It is apparent to us that they will be an important player in both rideshare, and likely autonomous driving networks, for many years to come, and we continue to own the stock.

Our Semiconductor positioning brought with it both positives and negatives. We do not own Apple, not because it is not a great company - it is - but because we see more attractive opportunities elsewhere in the sector. One such name is Taiwan Semiconductor Manufacturing (TSMC). This was our second best contributing name in the past six months, and underscores our focus on finding areas of the electronics value chain that will deliver the best returns for you, our shareholders.

Our positions in the Energy sector detracted from performance. Despite a rebound in the oil price, our holdings did not bounce as much as we might have expected. Our belief that cash flow generation matters, and that these companies will eventually be rewarded for capital discipline, underpins our continued ownership of BP and ConocoPhillips.

Autos was a difficult sector for us in the past year. Whilst our returns in Volkswagen and Toyota have been respectable, they did not come close to matching the 227% return of Tesla over the past six months. There is no doubt that Tesla has changed the landscape of the auto market in the past few years, but we struggle to justify the current valuation. We believe the market for electric vehicles is about to get significantly more competitive - Volkswagen being a clear example of a company that has had numerous issues with developing their own, but are now close to marketing a compelling alternative. The market will grow significantly from here, and we prefer to invest in it via stocks where expectations are low, rather than those that are already assumed to have won.

Outlook and positioning

Pre-pandemic, we had spoken frequently of our concerns around where we were in the business cycle, and hence had kept gearing at zero. We could not have predicted the cause of the recession, but the outcome ultimately is that we believe we are at the start of a new cycle. Since the summer, we have meaningfully taken up gearing from those low levels. The portfolio currently has around 5.5% gearing, reflecting our confidence in the economic recovery ahead of us. This also leaves us adequate room to take it up further if we see any pullback in markets.

Our confidence in the economic recovery is over multiple years, but of course predicting the events in the coming months is difficult. Vaccine rollouts have begun, with some promising progress in some countries, and some difficulties in others. The emergence of new strains has raised questions with respect to the efficacy of the vaccines, but we have confidence that these are temporary issues that vaccine developers will be able to handle effectively, and as such retain our confidence that we are on a path to normalcy over the course of 2021.

This year has certainly reminded us of a couple of important lessons on investing that are tied to gearing and the vaccine. The first is that volatility is natural, and happens every year. On average, the S&P500 will fall 14% from a peak to a trough, but as we know, equities invariably have recovered those losses. It seems reasonable to expect that hiccups in the vaccine rollout could be one contributor to volatility as we go through this year, along with events that we are unable to predict. The second lesson is the importance of not only staying invested, but taking advantage of those dislocations. We will use gearing to take advantage of any such episodes, which is why we retain flexibility to add.

Our positive outlook on the economy is also reflected in our positioning in the portfolio. Industrial and Consumer Cyclical are currently the sectors where we have the largest overweight positions relative to our benchmark, with names including Booking.com, Airbus, and Volkswagen. More recently we have added exposure to Financials, including MasterCard and BNP Paribas.

There remain many names that investors remain nervous of, as they wait to see what the consumer does as they receive the vaccine. Our long-term philosophy means we are comfortable owning names like Ryanair and Lyft, as our desire to travel once it is safe will certainly return. American Express is another name that will benefit from a rebound in travel spending, with the added benefit that we don't mind if that spend is on an Airbnb 50 miles away, or a flight to the other side of the world - we are agnostic.

Throughout everything this past year, we have focused on our strengths - identifying structural trends, thinking long term, and finding great companies to invest in. Equities remain a great place to be, and we have never been more convinced of the merits of investing globally. The sheer size of the opportunity set gives us the best prospect to generate returns for you, our shareholders, by identifying the most compelling investments, regardless of where they are located.

We would like to thank you for your continued support, and look forward to continuing this partnership.

Helge Skibeli

Rajesh Tanna

Tim Woodhouse

Investment Managers

5th March 2021

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 2020.

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 2020, 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  

5th March 2021

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31ST DECEMBER 2020

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2020			31st December 2019			30th June 2020
	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	-	75,202	75,202	-	18,679	18,679	-	22,989	22,989
Net foreign currency gains	-	396	396	-	234	234	-	83	83
Income from investments	3,942	-	3,942	3,693	-	3,693	8,329	-	8,329
Interest receivable and similar
income	29	-	29	118	-	118	212	-	212
Gross return	3,971	75,598	79,569	3,811	18,913	22,724	8,541	23,072	31,613
Management fee	(261)	(782)	(1,043)	(479)	(479)	(958)	(953)	(953)	(1,906)
Performance fee
(charge)/writeback	-	(3,689)	(3,689)	-	38	38	-	(507)	(507)
Other administrative expenses	(308)	-	(308)	(292)	-	(292)	(565)	-	(565)
Net return before finance
costs and taxation	3,402	71,127	74,529	3,040	18,472	21,512	7,023	21,612	28,635
Finance costs	(113)	(338)	(451)	(236)	(236)	(472)	(449)	(449)	(898)
Net return before taxation	3,289	70,789	74,078	2,804	18,236	21,040	6,574	21,163	27,737
Taxation	(324)	-	(324)	(414)	-	(414)	(1,091)	-	(1,091)
Net return after taxation	2,965	70,789	73,754	2,390	18,236	20,626	5,483	21,163	26,646
Return per share (note 3)	2.07p	49.41p	51.48p	1.77p	13.54p	15.31p	4.00p	15.44p	19.44p

STATEMENT OF CHANGES IN EQUITY

for the six months ended 31ST DECEMBER 2020

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves 1	reserve 1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2020 (Unaudited)
At 30th June 2020	7,746	71,672	27,401	372,018	-	478,837
Issue of shares from Treasury	-	8,292	-	8,415	-	16,707
Net return	-	-	-	70,789	2,965	73,754
Dividends paid in the period (note 4)	-	-	-	(6,307)	(2,965)	(9,272)
At 31st December 2020	7,746	79,964	27,401	444,915	-	560,026
Six months ended 31st December 2019 (Unaudited)
At 30th June 2019	7,746	58,956	27,401	347,414	-	441,517
Issue of shares from Treasury	-	6,977	-	8,041	-	15,018
Net return	-	-	-	18,236	2,390	20,626
Dividends paid in the period (note 4)	-	-	-	(6,120)	(2,390)	(8,510)
At 31st December 2019	7,746	65,933	27,401	367,571	-	468,651
Year ended 30th June 2020 (Audited)
At 30th June 2019	7,746	58,956	27,401	347,414	-	441,517
Issue of shares from Treasury	-	12,716	-	15,420	-	28,136
Net return	-	-	-	21,163	5,483	26,646
Dividends paid in the year (note 4)	-	-	-	(11,979)	(5,483)	(17,462)
At 30th June 2020	7,746	71,672	27,401	372,018	-	478,837

¹   These reserves form the distributable reserve of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

at 31ST DECEMBER 2020

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2020	2019	2020
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	585,155	461,534	473,187
Current assets
Derivative financial assets	3,195	1,415	2,026
Debtors	869	593	12,410
Cash and cash equivalents	8,537	37,110	36,972
	12,601	39,118	51,408
Current liabilities
Creditors: amounts falling due within one year	(1,895)	(515)	(13,710)
Derivative financial liabilities	(2,780)	(1,289)	(1,636)
Net current assets	7,926	37,314	36,062
Total assets less current liabilities	593,081	498,848	509,249
Creditors: amounts falling due after more than one year	(30,035)	(30,029)	(30,032)
Provisions for liabilities and charges
Performance fee payable	(3,020)	(168)	(380)
Net assets	560,026	468,651	478,837
Capital and reserves
Called up share capital	7,746	7,746	7,746
Share premium	79,964	65,933	71,672
Capital redemption reserve	27,401	27,401	27,401
Capital reserves	444,915	367,571	372,018
Revenue reserve	-	-	-
Total shareholders' funds	560,026	468,651	478,837
Net asset value per share (note 5)	383.7p	341.4p	338.9p

STATEMENT OF CASH FLOWS

for the six months ended 31ST DECEMBER 2020

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2020	31st December 2019	30th June 2020
	£'000	£'000	£'000
Net cash outflow from operations before dividend
and interest	(1,419)	(940)	(2,363)
Dividends received	3,567	3,613	7,288
Interest received	16	120	201
Overseas tax recovered	143	42	55
Interest paid	(439)	(444)	(889)
Net cash inflow from operating activities	1,868	2,391	4,292
Purchases of investments	(250,848)	(166,137)	(462,896)
Sales of investments	212,948	181,571	472,116
Settlement of forward currency contracts	405	352	184
Net cash (outflow)/inflow from investing activities	(37,495)	15,786	9,404
Dividends paid	(9,272)	(8,510)	(17,462)
Issue of shares from Treasury	16,457	14,944	28,235
Utilisation of bank overdraft	8	-	-
Net cash inflow from financing activities	7,193	6,434	10,773
(Decrease)/increase in cash and cash equivalents	(28,434)	24,611	24,469
Cash and cash equivalents at start of period	36,972	12,499	12,499
Exchange movements	(1)	-	4
Cash and cash equivalents at end of period	8,537	37,110	36,972
(Decrease)/increase in cash and cash equivalents	(28,434)	24,611	24,469
Cash and cash equivalents consist of:
Cash and short term deposits	413	4,778	5,255
Cash held in JPMorgan Sterling Liquidity Fund	8,124	32,332	31,717
Total	8,537	37,110	36,972

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31st december 2020

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 2020 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 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, and updated in March 2018, has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2019.

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 2020.

3.  Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2020	31st December 2019	30th June 2020
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	2,965	2,390	5,483
Capital return	70,789	18,236	21,163
Total return	73,754	20,626	26,646
Weighted average number of shares in issue	143,271,068	134,639,111	137,054,495
Revenue return per share	2.07p	1.77p	4.00p
Capital return per share	49.41p	13.54p	15.44p
Total return per share	51.48p	15.31p	19.44p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2020	31st December 2019	30th June 2020
	£'000	£'000	£'000
2020 fourth interim dividend of 3.26p (2019: 3.13p)	4,599	4,154	4,154
2021 first interim dividend of 3.29p (2020: 3.26p)	4,673	4,356	4,356
2020 second interim dividend of 3.26p	-	-	4,428
2020 third interim dividend of 3.26p	-	-	4,524
Total dividends paid in the period/year	9,272	8,510	17,462

A second interim dividend of 3.29p has been paid on 8th January 2021 for the financial year ending 30th June 2021, costing £4,768,000.

A third interim dividend of 3.29p per share has been declared for payment on 1st April 2021 for the financial year ending 30th June 2021.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2020	31st December 2019	30th June 2020
Net assets (£'000)	560,026	468,651	478,837
Number of shares in issue	145,944,285	137,276,285	141,311,285
Net asset value per share	383.7p	341.4p	338.9p

JPMORGAN FUNDS LIMITED

5th March 2021

For further information, please contact:

Divya Amin

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

ENDS

A copy of the 2020 Half Year Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The 2020 Half Year Report will 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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