Half-year Report to 31 December 2016

RNS Number : 5884X

JPMorgan Global Growth & Income PLC

22 February 2017

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

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

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST DECEMBER 2016

Legal Entity Identifier: 5493007C3I0O5PJKR078

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

The second half of 2016 proved to be a rewarding period for the shareholders of the Company. Despite continuing political uncertainties in Europe and the surprise election victory of Donald Trump in the United States, global equity markets were strong, led higher by Wall Street. At the same time sterling remained weak against other currencies. The combination of these two factors meant that our benchmark, the MSCI AC World Index expressed in sterling terms, returned +15.3%.

At the same time the investment style of our Investment Manager, Jeroen Huysinga, moved strongly back into favour. As he discusses in his Report, several of Jeroen's stock picks performed very well. As a result the return on the Company's net assets, at +23.0%, was well ahead of the benchmark. Gearing levels rose slightly, from 3.1% to 4.6%. Following the change in the distribution and dividend policy announced at the start of the financial year, the Company's share price discount to net asset value narrowed significantly, from 14.4% at the start of the financial year to 6.5% at 31st December 2016. The Board's decision to move to a higher distribution and to quarterly dividends seems to have been well received by investors; I am pleased to note that the Board did not feel it necessary to buy back any shares during the period.

The combination of a strong rise in net assets and a significant narrowing of the discount meant that the total return to shareholders over the six month period was +36.8%.

The Company has made a steady start to 2017. As ever, the investment outlook is mixed. Expectations for future economic growth and therefore company earnings are generally being revised upwards. However, Europe faces a series of key elections this year and the erratic start to his presidency by Donald Trump is a cause for concern. Investors should remain wary of the risks associated with this period of political uncertainty and keep their expectations measured. Having said that, the Board believes that the Manager's robust investment process and extensive internal research resources will continue to be able to identify attractively priced high quality companies in which to invest.

For and on behalf of the Board

Nigel Wightman

Chairman                                                                                                                                        

22nd February 2017

INVESTMENT MANAGER'S REPORT

Market environment

The MSCI All Countries World index staged a strong recovery in the second half of 2016, up 15.3% in sterling terms. Equity markets rallied sharply from the lows reached at the end of June after the surprise UK referendum result amid expectations that the Brexit vote would not trigger a broader crisis. Positive economic data-points and a solid corporate earnings season contributed to a noted improvement in investor sentiment. This was expressed in a rotation away from the more defensive 'bond proxy' areas of the market into more economically sensitive, cyclical areas, which had lagged considerably earlier in the year.

Investor sentiment and equity markets received a further boost following the election of Republican candidate, Donald Trump, as US president and news that the Republicans had won majorities in both the House of Representatives and the Senate. The rotation into more cyclical areas of the equity market continued amid anticipation that Trump's stated pro-growth policies (less regulation, tax reform and higher fiscal spending) would significantly boost economic growth and inflation prospects in the US. Banks, technology - semi conductors and autos were some of the strongest performing sectors, while consumer non durables, utilities and healthcare all lagged. Bond yields rallied, with the US 10 year Treasury yield moving above 2%, as investors started to focus on the prospect of a world with stronger economic growth and inflation. Towards the end of the period, the US Federal Reserve (Fed) increased interest rates, which, while widely anticipated, ignited speculation around further rate increases to come.

Portfolio Review

During the six months to December 2016 your Company significantly outperformed the benchmark, following challenging performance over the previous year.

In my previous comments regarding the disappointing performance we delivered for the financial year ended June 2016, I wrote: 'Quantitative easing and other manifestations of unconventional monetary policy have driven the relative valuation of bond equivalents to stratospheric levels. Our core belief is that low and negative interest rates are unlikely to be a permanent condition and our strategy continues to be positioned accordingly.'

During this unprecedented environment, we remained committed to our investment process and added to positions in many of the companies which had reached extreme valuations, while avoiding many of the (increasingly) expensive 'bond proxy' names. As investor sentiment started to reverse and shift towards company fundamentals once again, the second half of 2016 became a very constructive backdrop for our stock-picking process.

Examples of companies which contributed to performance include: Outokumpu, Morgan Stanley and Suzuki Motor. Shares in Outokumpu, a global stainless steel producer listed in Finland, rallied more than 100%. The company is finally seeing all of its divisions report positive earnings, much of which is attributable to earlier restructuring and the actions of an impressive new management team. Amid a backdrop of improving industry dynamics, Outokumpu remains a key portfolio holding given the company's dedication to cutting costs and managing production and the potential for strong long-term earnings growth.

Shares in Morgan Stanley rallied to levels not seen since 2008, as the company reported a surge in fixed income trading revenues and has continued to reduce costs. Though it still has a way to go, the results show that the company is on track to creating higher sustainable returns. The stock features a decent dividend (~2%) and net buyback yield (~4%) remains strong.

Suzuki, the Japan-listed auto manufacturer, has benefited from continued strength in the company's Indian operations where demand for vehicles remains high. Through its 56% stake in Maruti, Suzuki controls nearly half the auto market in India, which now rivals China in terms of economic growth.

Portfolio positioning and outlook

The political surprises last year in the US and Europe have given governments a clear mandate to reflate their economies. Investors are now expecting significant fiscal stimulus and a continued move away from the reliance on monetary policy to reinvigorate economic growth and inflation. Renewed fiscal stimulus should benefit equity markets globally, with a direct effect on some cyclical sectors. The current backdrop has provided a powerful catalyst for investors to refocus on the historically high levels of dispersion in company valuations across sectors and regions globally. While we have started to see a rotation within equity markets, there still remains a dislocation in valuations across a number of sectors, with the difference between undervalued and overpriced stocks still wide by historical standards.

This positive backdrop is not without its risks, however. Political uncertainty is set to continue in 2017, with a number of important elections in Europe, the start of Brexit negotiations and uncertainty over the impact of Trump's policies on US economic and foreign policy. Investors will be following events closely and, we believe that, selectivity will remain key. Our focus remains, as ever, on underlying company fundamentals and our dedicated team of highly experienced research analysts continue to identify attractive investment opportunities around the world.

Jeroen Huysinga

Investment Manager                                                                                                                  

22nd February 2017

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 Accounts for the year ended 30th June 2016.

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 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 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 2016, 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                                                                                                                                    

22nd February 2017

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 2016			31st December 2015			30th June 2016
	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	-	65,913	65,913	-	723	723	-	14,343	14,343
Net foreign currency gains	-	4,619	4,619	-	272	272	-	1,143	1,143
Income from investments	1,829	-	1,829	1,710	-	1,710	5,669	-	5,669
Interest receivable and similar
income	50	-	50	30	-	30	89	-	89
Gross return	1,879	70,532	72,411	1,740	995	2,735	5,758	15,486	21,244
Management fee	(353)	(353)	(706)	(289)	(289)	(578)	(593)	(593)	(1,186)
Performance fee (charge)/writeback	-	(2,419)	(2,419)	-	551	551	-	1,672	1,672
Other administrative expenses	(278)	-	(278)	(262)	-	(262)	(572)	-	(572)
Net return on ordinary activities
before finance costs and
taxation	1,248	67,760	69,008	1,189	1,257	2,446	4,593	16,565	21,158
Finance costs	(85)	(85)	(170)	(92)	(92)	(184)	(184)	(184)	(368)
Net return on ordinary activities
before taxation	1,163	67,675	68,838	1,097	1,165	2,262	4,409	16,381	20,790
Taxation	(185)	-	(185)	(139)	-	(139)	(407)	-	(407)
Net return on ordinary
activities after taxation	978	67,675	68,653	958	1,165	2,123	4,002	16,381	20,383
Return per share (note 4)1	0.79p	54.73p	55.52p	0.79p	0.97p	1.76p	3.24p	13.27p	16.51p

¹ Comparative figures for the period ended 31st December 2015 have been restated following the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on 8th January 2016.

STATEMENT OF CHANGES IN EQUITY 

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	Reserves1	Reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2016 (Unaudited)
At 30th June 2016	7,746	46,670	27,401	201,167	17,170	300,154
Repurchase of shares into Treasury	-	-	-	(3)	-	(3)
Net return on ordinary activities	-	-	-	67,675	978	68,653
Dividend paid in the period	-	-	-	-	(3,957)	(3,957)
At 31st December 2016	7,746	46,670	27,401	268,839	14,191	364,847
Six months ended 31st December 2015 (Unaudited)
At 30th June 2015	6,814	9,317	27,401	208,191	17,402	269,125
Repurchase of shares into Treasury	-	-	-	(12,339)	-	(12,339)
Exercise of Subscription shares into Ordinary shares	(39)	39	-	-	-	-
Issue of Ordinary shares on exercise of
Subscription shares	970	37,336	-	-	-	38,306
Net return on ordinary activities	-	-	-	1,165	958	2,123
Dividend paid in the period	-	-	-	-	(4,240)	(4,240)
At 31st December 2015	7,745	46,692	27,401	197,017	14,120	292,975
Year ended 30th June 2016 (Audited)
At 30th June 2015	6,814	9,317	27,401	208,191	17,402	269,125
Repurchase of shares into Treasury	-	-	-	(23,405)	-	(23,405)
Exercise of Subscription shares into Ordinary shares	(39)	39	-	-	-	-
Issue of Ordinary shares on exercise of
Subscription shares	971	37,314	-	-	-	38,285
Net return on ordinary activities	-	-	-	16,381	4,002	20,383
Dividend paid in the year	-	-	-	-	(4,234)	(4,234)
At 30th June 2016	7,746	46,670	27,401	201,167	17,170	300,154

¹ These 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 2016

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	381,659	318,075	309,325
Current assets
Derivative financial assets	4,787	3,521	6,429
Debtors	483	525	5,855
Cash and cash equivalents	7,308	577	11,411
	12,578	4,623	23,695
Current liabilities
Creditors: amounts falling due within one year	(1,108)	(731)	(2,199)
Derivative financial liabilities	(1,268)	(2,826)	(5,467)
Net current assets	10,202	1,066	16,029
Total assets less current liabilities	391,861	319,141	325,354
Creditors: amounts falling due after more than one year	(25,200)	(25,200)	(25,200)
Provisions for liabilities and charges
Performance fee payable	(1,814)	(966)	-
Net assets	364,847	292,975	300,154
Capital and reserves
Called up share capital	7,746	7,745	7,746
Share premium reserve	46,670	46,692	46,670
Capital redemption reserve	27,401	27,401	27,401
Capital reserves	268,839	197,017	201,167
Revenue reserve	14,191	14,120	17,170
Total equity shareholders' funds	364,847	292,975	300,154
Net asset value per share (note 5)1	295.0p	226.9p	242.7p

¹ Comparative figures for the period ended 31st December 2015 have been restated following the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on 8th January 2016.

NOTES TO THE FINANCIAL STATEMENTS 

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2016

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 2016 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.

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 2016.

The Company has elected not to prepare a Statement of Cash Flows for the current period on the basis that substantially all of its investments are liquid and carried at market value.

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 2016.

3.  Dividends paid¹

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
Unclaimed dividends refunded to the Company	-	-	(6)
2016 Final dividend of 3.2p (2015: 3.2p2)	3,957	4,240	4,240
Total dividends paid in the period/year	3,957	4,240	4,234

1     All dividends paid in the period/year have been funded from the Revenue Reserve.

2     The dividend rate has been restated following the sub-division of each existing ordinary share of 25p into 5p each on 8th January 2016.

A first interim dividend of 2.2p has been paid on 6th January 2017 for the financial year ending 30th June 2017, costing £2,721,000. A second interim dividend of 2.2p has been declared for payment on 7th April 2017 for the financial year ending 30th June 2017.

4.  Return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	978	958	4,002
Capital return	67,675	1,165	16,381
Total return	68,653	2,123	20,383
Weighted average number of shares in issue	123,661,285	120,405,510	123,434,710
Revenue return per share	0.79p	0.79p	3.24p
Capital return per share	54.73p	0.97p	13.27p
Total return per share	55.52p	1.76p	16.51p

Comparative figures for the period ended 31st December 2015 have been restated following the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 8th January 2016.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2016	31st December 2015	30th June 2016
Net assets (£'000)	364,847	292,975	300,154
Number of shares in issue	123,661,285	129,145,685	123,661,285
Net asset value per share	295.0p	226.9p	242.7p

Comparative figures for the period ended 31st December 2015 have been restated following the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on 8th January 2016.

6.  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 2016		31st December 2015		30th June 2016
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Level 1	381,659	-	318,075	-	309,325	-
Level 21	4,787	(1,268)	3,521	(2,826)	6,429	(5,467)
Total	386,446	(1,268)	321,596	(2,826)	315,754	(5,467)

1     Includes forward foreign currency contracts.

JPMORGAN FUNDS LIMITED

22nd February 2017

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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