Annual Report JPMorgan Global Convertibles Income Fund Limited

Annual Report JPMorgan Global Convertibles Income Fund Limited Annual Report & Accounts period ended 30th June JPMorgan Global Convertibles Income Fund Limited

Features Contents 1 Financial Results 2 Chairman s Statement 5 Investment Managers Report 8 Portfolio Analyses 10 Business Review 15 Board of Directors 17 Corporate Governance Framework 21 Directors Report 24 Directors Remuneration Report (Unaudited) 26 Statement of Directors Responsibilities 27 Independent Auditor s Report Financial Statements 29 Statement of Comprehensive Income 30 Statement of Changes in Equity 31 Statement of Financial Position 32 Cash Flow Statement 33 Notes to the Accounts Shareholder Information 48 Notice of Annual General Meeting 51 Glossary of Terms and Definitions 53 Information about the Company Investment Objective The Company aims to deliver dividend income with the potential for long term capital growth, from investing in a globally diversified portfolio of convertible securities. Investment Policies The Company will invest in a globally diversified portfolio of convertible securities and other suitable instruments exhibiting convertible or exchangeable characteristics. The portfolio is expected to be broadly diversified across sectors, geography and market capitalisations and, while there are no specific limits placed on exposure to any sector, country or market capitalisation, the Company will at all times invest and manage the portfolio in a manner consistent with spreading investment risk. The Company will have no restrictions with respect to the credit ratings of any issuer, or any securities, in which it may invest and the issuers of convertible securities may be located in any country, including emerging market countries. Benchmark The Company s benchmark is the MSCI World Index, (in Sterling terms) for reference purposes but will not be benchmark-driven in its asset allocation. Capital Structure At 30th June, there were 160,499,999 ordinary shares in issue. Management Company The Company employs JPMorgan Funds Limited ( JPMF or the Manager ) to manage its assets. Prior to 1st July the Company employed JPMorgan Asset Management (UK) Limited to manage its assets. Administrator The Company employs JPM Administration Services (CI) Limited as its administrator. Website The Company s website, which can be found at www.jpmconvertiblesincome.co.uk, includes useful information on the Company, such as daily prices, factsheets and will include current and historic half year and annual reports. FCA regulation of non-mainstream pooled investments The Company currently conducts its affairs so that the shares issued by the Company can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority ( FCA ) s rules in relation to non-mainstream pooled investment products and intends to continue to do so for the foreseeable future. The shares are excluded from the FCA s restrictions which apply to non-mainstream investment products because they are shares in an investment company, which if it were domiciled in the United Kingdom, would currently qualify as an investment trust.

Financial Results (for the period from the date the Company began investing on 11th June 2013 to 30th June ) Total returns (includes dividends reinvested) +14.6% Return to shareholders on issue price 1 +12.3% 4.5p Return on net assets 2 Dividend Summary of Results 30th June 11th June 2013 Total returns for the period from 11th June 2013 to 30th June 3 Return to shareholders on issue price 1 +14.6% Return on net assets 2 +12.3% % change Net asset value, share price and premium Shareholders funds ( 000) 173,260 133,566 4 +29.7 Net asset value per share 108.0p 98.2p +10.0 Ordinary shares in issue 160,499,999 136,000,000 +18.0 Share price 112.3p 103.0p 5 +9.0 Share price premium to net asset value per share 4.0% 4.9% Revenue for the period from 11th June 2013 to 30th June 3 Net revenue profit attributable to shareholders ( 000) 6,658 Revenue profit per share 4.33p Dividend per share 4.50p Gearing/(net cash) 6 (1.7%) Ongoing Charges 7 1.1% A glossary of terms and definitions is provided on page 51. 1 Source: Morningstar. Issue price 1.00. 2 Source: J.P. Morgan. 3 Dealings in the Company s shares began on 11th June 2013 and the Company began investing on that date. 4 Based on gross proceeds less accrued expenses as at 11th June 2013. The gross proceeds less actual expenses totalled 133.8m. 5 Opening mid market price on the first day of trading. 6 Gearing represents the excess amount above shareholders funds of total assets expressed as a percentage of the shareholders funds. Total assets include total investments and net current assets/liabilities less cash/cash equivalents and excluding bank loans of less than one year. If the amount calculated is negative, this is shown as a net cash position. 7 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. The Ongoing Charges are calculated in accordance with guidance issued by the Association of Investment Companies in May 2012. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 1

Chairman s Statement The Company This is the Company s first Annual Report, covering the period from incorporation on 7th May 2013 to 30th June. The Company was admitted to trading on the London Stock Exchange on 11th June 2013, raising net proceeds of 133.8 million. As at the date of this statement a further 74.4 million has been raised through the issue of shares. Investment Performance For the period from admission to 30th June, the Company recorded a total return on net assets of +12.3%. Shares in the Company have also traded strongly and the total return for shareholders who subscribed for shares in the initial issue has been +14.6% over the same period. The Investment Managers report reviews the Company s performance and gives a detailed commentary on the investment strategy and portfolio construction, and their outlook for the sector. Dividends The Board declared a first interim dividend of 2.25p per share, which was paid on 28th March. The Board has now declared a second interim dividend of 2.25p per share, payable on 31st October to shareholders on the register on 17th October. This means that the total dividend payable in respect of the period ended 30th June amounts to 4.50p per share, in keeping with the Company s target of paying in the Company s first financial year an initial gross dividend yield of 4.5% based on the initial issue price of 100p per share. The Board will seek to maintain this level of annual dividend, although now that the Company is fully invested it intends to start paying quarterly dividends instead of semi-annual dividends. Accordingly, the Board expects to declare in November an interim dividend in respect of the three months to 30th September. The Board has considered at length the emphasis which the Investment Managers should attribute to the relative merits of revenue returns versus total returns and, while the Board is committed to providing shareholders with a dividend income, it is cognisant that this should not be to the detriment of long term capital growth. The Board has concluded, therefore, that it is in the best interests of shareholders that the Investment Managers should continue to operate on a total return basis where possible. Accordingly, there may be times when, for example, the Company holds convertible bonds with lower coupons where there is a greater expectation of capital return. The law applicable to the Company as a Guernsey incorporated entity is such that this treatment need not impact the Company s ability to meet its dividend ambitions. Manager Evaluation The Management Engagement Committee carried out an evaluation of the Manager in May. The current investment management team comprises Antony Vallee, Natalia Bucci and Robin Dunmall of JPMorgan Asset Management (UK) Limited ( JPMAM ). The Board will of course continue to monitor investment performance closely, but I am pleased to report that having taken all factors into account, including investment performance and other services provided to the Company and its shareholders, it has 2 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

concluded that the Manager should remain as the Company s Manager and that its ongoing appointment remains in the best interests of shareholders. Please note the section on Alternative Investment Fund Managers Directive below. Gearing The Company may employ gearing up to a maximum of 20% of Net Asset Value at the time of borrowing. Significant gearing has not been employed to date, but this is a matter of regular review. Placing Programme On 20th September 2013 the Company issued a prospectus in respect of up to 150 million shares to be issued pursuant to a Placing Programme. The prospectus permitted the issuance of new shares for a period of 12 months following publication and, accordingly, the prospectus and the remaining capacity thereunder lapsed on 19th September. Following the lapse of the prospectus the Company is still able to issue in the region of 20.5 million shares by relying on certain customary Prospectus Rule exemptions. Share Issuance At admission on 11th June 2013, the Company issued 136,000,000 ordinary shares at a price of 100p per share raising, after issue expenses, 133.8 million. To date a further 69,500,000 shares have been issued at a premium to Net Asset Value(of which 54,500,001 shares were issued pursuant to the placing programme) resulting in net proceeds of 74.4 million. Share issuance has always taken place at a premium to the prevailing cum-income Net Asset Value per share and so is accretive to the returns of existing shareholders. If conditions are appropriate, the Company will continue to issue new shares which, as well as assisting with premium management, will also enhance liquidity and continue to underpin the Company as an attractive investment. Alternative Investment Fund Managers Directive ( AIFMD or Directive ) Further to legal advice received by the Company from Dickson Minto WS, I can report that JPMorgan Funds Limited, which has been approved by the Financial Conduct Authority as an Alternative Investment Fund Manager, has been appointed as Manager and Company Secretary to the Company, from 1st July. This change of entity does not in any way affect the actual management of the portfolio which will continue to be managed under a delegated authority by JPMAM. The Company Secretarial and administration support will also continue to be conducted by the same individuals from the office in London and via the Guernsey Administrator, JPM Administrative Services (CI) Limited. No extra fees are being charged by any JPMorgan entity as a result of the Company s AIFMD obligations. Although JPMorgan Chase Bank, N.A. will continue as the Company s custodian, the new requirements of a depositary function will be undertaken by Bank of New York Mellon ( BNYM ). BNYM will be paid a fee of 0.017% of the Company s gross assets per annum. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 3

Chairman s Statement continued As a Guernsey domiciled investment company, the Company had the option of adopting a lighter-touch approach to the implementation of the Directive that would have avoided the need to appoint an entity that takes on the full obligations of a depositary under the Directive, However, the Board and the Manager have taken the view that full compliance with the Directive and the appointment of BNYM as Depositary provides additional protections to the Company and ultimately to investors. Board of Directors The Board has procedures in place to ensure that the Company complies fully with the AIC Code on Corporate Governance and the UK and Guernsey Codes ofcorporate Governance. The only exceptions are those that the Board considers to be inappropriate for a company of this nature. These are detailed in the Corporate Governance report, on page 17. In accordance with the Company s Articles of Association, all Directors will be retiring and seeking election by the shareholders at the Company s first Annual General Meeting. The Board has carried out a satisfactory evaluation of its performance and accordingly supports the election of all Directors. Annual General Meeting The Company s first Annual General Meeting will be held on Tuesday, 4th November at 12.00 noon at 1st Floor, Les Echelons Court, Les Echelons, South Esplanade, St Peter Port, Guernsey GY1 1AR. If you have any detailed or technical questions, it would be helpful if you could raise these in advance of the meeting with the Company Secretary at the Guernsey address above, or via the Ask the Chairman link on the website. Shareholders who are unable to attend the Annual General Meeting are encouraged to use their proxy votes. Outlook There remain attractive opportunities, and the Board considers that the main drivers of the Company s strong performance remain intact. The investment managers have a sufficiently large universe of securities to meet the Company s return target for the current year. This is in part a result of a strong market for the issue of convertible shares. The Board continues to view the convertible bond market as an attractive opportunity to combine a stable income with capital appreciation. The equity sensitivity of the convertible bond market should act as a mitigating factor were interest rates to rise. Simon Miller Chairman 30th September 4 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Investment Managers Report The portfolio is constructed to provide an attractive yield while also being positioned to benefit from positive equity performance. This has been achieved through holdings in bond-like and balanced convertibles. While bond-like convertibles combine yield generation and a stable return profile, high-coupon balanced convertibles have more equity sensitivity and a greater potential for capital gains. The convertible market offers particular exposure to mid-capitalisation issuers, and the portfolio s structure as a closed-ended vehicle enables it to fully capitalise on these opportunities by focusing on these high-coupon securities. Antony Vallee In the period covered by this first annual report our investment activities produced a total return, before costs, of 20.217 million. Following the Company s accounting policies, 8.179 million of this return has been classified as revenue and 12.038 million as capital. The capital component of return shows the net result of the changes in value of our convertible holdings in their local currencies, a loss of 1.751 million, netted off against the effects of a currency hedging programme designed to protect the value of the portfolio from changes in the relative values of the currencies in which holdings are denominated in sterling. As sterling strengthened over the period, from $1.56 when the Company was launched to $1.71 at the year end, the gain on the hedging transactions is quite substantial. Natalia Bucci The chart on page 7 shows how the various factors that influence the pricing of convertible securities have contributed to the returns shareholders have earned over the period. Major contributing factors to performance over the period have been the equity effect; the increase in convertible prices as the issuers share price has risen over the period, the income effect; the income received from the portfolio of convertibles and the credit effect; the positive effect on the pricing of convertible bonds and prevailing interest rates have fallen. Other effects, which include the costs of the initial launch of the Company and management and other fees borne over the period have detracted from performance. Strong equity performance in the second half of 2013 was driven by the emergence of the eurozone from recession and indications that the Federal Reserve was willing to delay the withdrawal of asset purchases. Positive momentum continued into the fourth quarter of 2013 as economic data showed signs of a sustained global recovery. Although fixed income assets were generally weak in the latter part of the year as markets contemplated an eventual increase in interest rates, convertibles were largely insulated from this impact by their equity sensitivity. Robin Dunmall While there was additional volatility at the start of, the negative impact of this was largely confined to January and continued improvements in economic data helped developed equity markets to overcome any potential downturn in investor sentiment. Strong earnings releases and an upturn in merger and acquisitions activity also helped to drive equity markets higher over the first half of. This backdrop of strong equity performance necessitated active profit-taking on securities that had appreciated significantly in price in order to maintain the risk profile of the portfolio and support the yield being generated. As equity indices performed well, the overall equity sensitivity of the convertible bond market JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 5

Investment Managers Report continued increased and a number of previously bond-like convertibles have become more balanced. There continues to be significant opportunities to add yield to the portfolio, and a resurgent primary market has helped to maintain the size of the opportunity set for this strategy even as the overall yield on the secondary market has tightened. New convertible issuance is typically balanced and offers some of the best opportunities to combine equity sensitivity and attractive yields, and has been spurred on by three primary factors. Firstly, the strong performance of equity markets, which makes issuing convertibles at a premium to the current stock price more attractive for issuers. Secondly, an upturn in merger and acquisition activity, since convertible bond issuance is often used for financing. Thirdly, concerns about an imminent increase in interest rates, which provides an incentive for companies to issue debt in advance at lower rates. There was approximately $58 billion of new convertible issuance in the second half of 2013, which is a significant increase on the $38 billion over the same period in 2012, and $22 billion over the latter half of 2011. As interest rates do inevitably start to increase, it is anticipated that convertible issuance will become increasingly attractive for issuers, since the relative interest saving versus issuing non-convertible debt will become more significant. In the absence of any significant market shock, this could indicate a strong backdrop for continued convertible issuance that will support the opportunity set for an income-focused convertible strategy. The increased allocation towards high-coupon balanced convertibles over bond-like equivalents has led to an increase in the equity sensitivity of the portfolio since inception. This has helped to ensure participation in the strong performance of equity markets over the past year, and also limit the portfolio s exposure to the impact of an eventual increase in interest rates. The portfolio s US allocation has been increased over the second quarter of to take advantage of the relative strength of economic growth in the region. This allocation also helps to protect the portfolio from the fallout of geopolitical tensions in Europe and renewed weakness in economic data partially related to the introduction of various economic sanctions. Whilst the situation in Europe does pose some risks to ongoing equity performance, the US has so far brushed off much of these concerns and a correction in Europe may help to provide selective opportunities for the portfolio. Correspondingly, risk has been reduced within more cyclical sectors, but the team remain prepared to capitalise on opportunities to add yield as and when they arise. Antony Vallee Natalia Bucci Robin Dunmall Investment Managers 30th September 6 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Contributing Factors to NAV Share Price Performance 16.00% NAV Effect Share Price 14.00% 1.90% 0.40% 0.60% 1.70% 2.30% 14.60% 12.00% 4.20% 12.30% 10.00% 8.00% 8.10% 6.00% 4.00% 2.00% 0.00% Equity Effect Income Credit Effect Interest Rate Effect Time Decay Effect Other Effects NAV Effects Discount Effect Share price total return These estimated sub-category returns have been calculated using an internal JPMAM analytical model and should be considered indicative only. The factors comprising net asset return are: Equity Effect = impact of changes in the price of issuing entity s equity on the value of the convertible security. Credit Effect = impact of changes in credit spreads on the price of convertible. The credit spread is the difference between the bond s value and a Treasury security that is equivalent in all respects except for credit quality. Interest Rate Effect = impact on changes in the risk-free rate of interest on the valuation of the convertible. Income Effect = coupon income; the cash received when underlying convertibles make their regular payments to investors. Time Decay Effect = a combination of the decline in the value of the embedded option in convertible securities with the passing of time and the pull-to-par of the bond. Other Effects = residual effects including the ongoing charges of the Company, other costs incurred in the issuance of shares and the differences between the theoretical model used to price convertibles securities and their observed market prices. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 7

Portfolio Analyses at 30th June Sector 30th June Portfolio % 1 Diversified Financials 14.7 Real Estate 13.7 Capital Goods 12.1 Energy 11.9 Materials 9.6 Transportation 5.3 Banks 5.1 Consumer Services 5.0 Automobiles & Components 4.7 Telecommunication Services 3.5 Technology Hardware & Equipment 2.9 Food Beverage & Tobacco 2.6 Semiconductors & Semiconductor Equipment 2.4 Software & Services 2.1 Utilities 1.5 Pharmaceuticals & Biotechnology 1.4 Liquidity Fund 1.5 Total 100.0 1 Based on total portfolio of 165.0m. United North Developed Kingdom America Europe Asia Australia Total Geographic % % % % % % 1 Convertibles 9.2 36.5 27.6 13.3 1.0 87.6 Fixed interest 2.9 2.9 5.8 Preference 2.6 2.6 Convertible Preference 2.5 2.5 Liquidity Fund 1.5 1.5 Total 9.2 44.5 32.0 13.3 1.0 100.0 1 Based on total portfolio of 165.0m. 8 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Portfolio Disclosure Holdings representing 1.5% of the Portfolio Value or more at 30th June Holding as Time to a percentage maturity of portfolio Region Country Currency Sector Rating (years) Investment 1 3.1% Europe France EUR Consumer, Cyclical NR 5.25 Investment 2 2.8% Europe France EUR Consumer, Cyclical B- 4.96 Investment 3 2.7% Americas United States USD Communications B+ 6.38 Investment 4 2.6% Europe Spain EUR Industrial NR 1.84 Investment 5 2.5% Europe United Kingdom GBP Financial NR 4.89 Investment 6 2.5% Americas United States USD Financial BB- Perpetual Investment 7 2.4% Americas United States USD Financial BBB- Perpetual Investment 8 2.4% Americas United States USD Financial NR 3.71 Investment 9 2.4% Americas United States USD Financial NR 3.79 Investment 10 2.3% Europe Spain EUR Industrial B+ 2.60 Investment 11 2.2% Europe France EUR Technology NR 4.22 Investment 12 2.1% Europe Sweden SEK Consumer, Cyclical B- 0.75 Investment 13 2.1% Asia Singapore SGD Financial NR 5.97 Investment 14 2.0% Americas United States USD Financial NR 8.79 Investment 15 2.0% Americas United States USD Financial NR 3.34 Investment 16 2.0% Asia India USD Basic Materials BB 2.04 Investment 17 1.9% Americas United States USD Financial BBB 5.79 Investment 18 1.9% Europe United Kingdom GBP Financial NR 1.93 Investment 19 1.9% Europe Luxembourg USD Basic Materials B+ 1.54 Investment 20 1.9% Americas United States USD Energy NR 5.42 Investment 21 1.8% Europe Italy EUR Communications B+ 2.38 Investment 22 1.8% Europe United Kingdom USD Energy NR 0.75 Investment 23 1.8% Europe Russia USD Basic Materials BB+ 3.24 Investment 24 1.8% Asia Hong Kong USD Consumer, Cyclical NR 1.87 Investment 25 1.8% Europe Spain EUR Energy BBB- 2.40 Investment 26 1.7% Europe United Kingdom GBP Financial NR 4.96 Investment 27 1.7% Americas United States USD Financial BBB 4.54 Investment 28 1.7% Americas United States USD Financial BBB 4.54 Investment 29 1.7% Europe Germany EUR Consumer, Cyclical BBB 1.36 Investment 30 1.6% Americas Mexico EUR Consumer, Non-cyclical NR 3.82 Investment 31 1.5% Americas United States USD Consumer, Cyclical CCC 4.79 Investment 32 1.5% Asia China USD Communications NR 4.46 66.2% 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. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 9

Business Review Business Model JPMorgan Global Convertibles Income Fund Limited is a Guernsey domiciled investment company and its investment objective is set out below. The strategy the Board follows to achieve that objective is to set investment policy and risk guidelines, together with investment limits, and to monitor how they are applied. These are also set out below and have been approved by shareholders. The business model the Company has adopted to achieve its objective has been to contract investment management and administration to appropriate external service providers, who are subject to oversight by the Board. With effect from 1st July the principal service providers are: JPMorgan Funds Limited ( JPMF or the Manager ) to manage the portfolio in accordance with the Board s strategy and provide fund accounting, compliance and company secretarial services; and JPM Administration Services (CI) Limited ( JPMAS(CI) ) to provide general administration services. Prior to 1st July, the principal service providers were: JPMorgan Asset Management (UK) Ltd to manage the portfolio in accordance with the Board s strategy and provide fund accounting, compliance and company secretarial services: and JPMAS(CI) to provide general administration services. The Company was incorporated on 7th May 2013 under the Companies (Guernsey) Law, 2008, and launched as an income fund on 11th June 2013. Business of the Company The Company is a Registered closed-ended investment scheme registered pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended and The Registered Collective Investment Scheme Rules, 2008 issued by the Guernsey Financial Services Commission (the Commission ). Investment Objective and Policies The Company s investment objective is to provide investors with a dividend income combined with the potential for long term capital growth from investing in a diversified portfolio of emerging market investments. The Board seeks to manage the Company s risk by imposing various investment limits and restrictions. The Company predominantly invests in convertible bonds, but has the flexibility also to invest in other types of securities, including, but not limited to, unlisted equities, convertible securities, preference shares, derivatives, participation notes, debt securities, cash and cash equivalents. Investments in participation notes are limited to a maximum of 5% of the Company s assets. The Company can invest in any particular market, sector or country in the global emerging markets universe. It may also invest in securities issued by companies based in or operating in emerging markets but listed or traded on the stock exchanges of developed markets and in the securities of issuers based in developed markets that have substantial exposure to emerging markets. There are no fixed limits on portfolio construction with regard to region, country, sector or market capitalisation. The Company typically invests at least 80% of its gross assets in listed securities, but other security types may be used in the event of adverse equity market conditions or where they represent a more efficient means of obtaining investment income for the purposes of making dividend payments. In the event of adverse equity market conditions, the Company may hold fixed income securities of any kind to a maximum of 50% of its gross assets. Despite the absence of specific region, country, sector or market capitalisation limits, the Company manages its assets in a manner that is consistent with spreading investment risk. No more than 15% of gross assets may be invested in the securities of any one company or group at the time the investment is made. No more than 10% of the gross assets may be invested in unlisted securities or in other listed closed-end investment funds at the time the investment is made. The Company may undertake option writing in respect of up to 10% of the Company s net assets. The Company may invest in derivative instruments for the purposes of efficient portfolio management. Gearing may be used when appropriate in order to increase potential returns to shareholders. Such gearing will operate within a range of 10% net cash to 20% geared. Compliance with the Board s investment restrictions and guidelines is monitored continuously by the Manager and is reported to the Board on a monthly basis. 10 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Management of the Company The Manager and Secretary is JPMF. JPMF is a wholly owned subsidiary of JPMorgan Chase Bank which, through other subsidiaries, also provides banking, dealing and custodial services to the Company. The Manager has delegated the management of portfolio to JPMorgan Asset Management (UK) Limited ( JPMAM ). The Board has evaluated the performance of the Manager and confirms that it is satisfied that the continuing appointment of the Manager is in the best interests of shareholders as a whole. In arriving at this view, the Board considered the investment strategy and process of the Manager, noting the support that the Company receives from JPMF. Such a review will be carried out on an annual basis. Management Fee JPMF is employed under a contract which is subject to six months notice of termination, such notice not to be given prior to two years following the date of admission to trading. If the Company wishes to terminate the contract on less than six months notice, the balance of the six months remuneration is payable by way of compensation. Under the terms of the Management Agreement, the management fee is charged at the rate of 0.75% per annum of the Company s net asset value. The fee is calculated and paid monthly in arrears. Investments made by the Company in investment funds on which the Manager or a member of its group earns a fee are excluded from the calculation and therefore attract no management fee. Performance In the period ended 30th June, the Company produced a total return to shareholders of +14.6% and a total return on net assets of +12.3%. As at 30th June, the gross value of the Company s investment portfolio was 165.0 million. The Investment Managers Report on pages5to7includes a review of developments during the period as well as information on investment activity within the Company s portfolio. Total Return, Revenue and Dividends Gross total income amounted to 20.2 million and net total profit after deducting administrative expenses, finance costs and taxation, amounted to 18.3 million. An interim dividend of 2.25p per share has been paid during the period, amounting to 3,589,000. The Directors have declared a second interim dividend of 2.25p per share be paid on 31st October to shareholders on the register at the close of business on 17th October. This distribution will absorb 3,611,000. Key Performance Indicators ( KPIs ) The Board uses a number of financial KPIs to monitor and assess the performance of the Company. The principal KPIs are: Performance The principal objective is to provide investors with a dividend income combined with the potential for long term capital growth. However, the Board also monitors performance compared with a benchmark index and a broad range of competitor funds. The chart below shows the performance of the share price and NAV since the Company s initial public offering compared to the MSCI World Index (in sterling terms). As the Company s approach to managing the portfolio is not benchmark driven, this chart is provided for reference purposes only. The Directors and Manager are of the view that there is currently no appropriate convertible bond benchmark against which the performance of the Company might be more appropriately measured. As the portfolio is invested in convertible securities and the benchmark is a global index of equity securities, investors should expect material divergence between the Company s share price and NAV performance and that of the benchmark. JGCI Performance: Share Price & Cum-income NAV v. Benchmark Rebased: Inception date of 11 June 2013 = 100 120 115 110 105 100 95 11/06/13 11/07/13 11/08/13 11/09/13 11/10/13 JPMorgan Global Convertibles MISCI World Index (in sterling). JPMorgan Global Convertibles Share Price. JPMorgan Global Convertibles Cum-income NAV. 11/11/13 11/12/13 11/01/14 11/02/14 11/03/14 11/04/14 11/05/14 11/06/14 11/07/14 11/08/14 11/09/14 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 11

Business Review continued Share price premium/discount to net asset value per share The Board recognises that the possibility of a widening premium or discount can be a disadvantage of investment trusts that can discourage investors and influence the liquidity of the Company s shares. The Board therefore has a share issuance and repurchase programme that seeks to address imbalances in supply of and demand for the Company s shares within the market and thereby reduce the volatility and absolute level of the discount or premium to NAV at which the Company s shares trade. No shares have been repurchased for cancellation during the period. The Company s shares have traded at a premium or close to the NAV per share throughout. 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 period. The Ongoing Charges for the period ended 30th June were 1.1%. The Board reviews each year an analysis which shows a comparison of the Company s Ongoing Charges and its main expenses with those of its peers. Share Capital On 11th June 2013, 136,000,000 ordinary shares were issued fully paid pursuant to a placing and offer for subscription, for gross proceeds of 136.0 million. During the period a further 24,499,999 ordinary shares were issued to satisfy demand, for gross proceeds of 25.0 million. Further details are given in note 16 on page 39. Since the period end, the Company has issued a further 45,000,001 new ordinary shares for total consideration of 48,917,000. All new ordinary shares have been issued at a premium to NAV. The Company has the authority to repurchase shares in the market for cancellation. However, no shares were repurchased during the period. Resolutions to renew the authority to repurchase shares and to issue new shares will be put to shareholders at the forthcoming Annual General Meeting. More details are given on pages 21 and 22 and the full text of the resolutions is set out in the Notice of Meeting on pages 48 and 49. Principal Risks With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly into the following categories: Investment and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company s benchmark index and peer companies, resulting in the Company s shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines, which are monitored and reported on. the Manager provides the Directors with timely and accurate management information, including performance data and attribution analysis, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager who attends all Board meetings, and reviews data which show statistical measures of the Company s risk profile. The Investment Manager is free to employ the Company s gearing tactically, within a strategic range set by the Board. Foreign Currency: Certain of the Company s assets, liabilities and income are denominated in currencies other than sterling (the Company s functional currency and the currency in which it reports). As a result, movements in exchange rates may affect the sterling value of these items. The Company may, and does, engage in currency hedging to mitigate this risk. Financial: The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 22 on page 41. Accounting, Legal and Regulatory: The Company is a registered closed-ended investment scheme as set out on page 10. The exempt status for Guernsey tax purposes is renewed annually by the Administrator and the results reported to the Board. The Company must also comply with Guernsey law and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure and Transparency Rules ( DTRs ). A breach of the law could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA 12 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Listing Rules or DTRs could result in the Company s shares being suspended from listing. The Board relies on the services of its Company Secretary and the Administrator to ensure compliance with Guernsey company law and the UKLA Listing Rules and DTRs. Corporate Governance and Shareholder Relations: Details of the Company s compliance with Corporate Governance best practice, are set out on pages 17 to 20. Information on relations with shareholders is set out on page 22. Operations: Disruption to, or failure of, the Manager s accounting, dealing or payments systems or the custodian s records could prevent accurate reporting and monitoring of the Company s financial position. Details of how the Board monitors the services provided by the Manager and the Administrator and their associates and the key elements designed to provide effective internal control are included below. Internal Control The Code requires the Directors, at least annually, to review the effectiveness of the Company s system of internal control and to report to shareholders that they have done so. This encompasses a review of all controls, which the Board has identified as including business, financial, operational, compliance and risk management controls. The Directors are responsible for the Company s system of internal control, which is designed to safeguard the Company s assets, maintain proper accounting records and ensure that financial information used within the business, or published, is reliable. However, such a system can only be designed to manage rather than eliminate the risk of failure to achieve business objectives and therefore can only provide reasonable, but not absolute, assurance against fraud, material mis-statement or loss. Since investment management, custody of assets and all administrative services are provided to the Company by the Manager and Administrator and their associates and the Depositary, the Company s system of internal control mainly comprises monitoring the services provided by the Manager and Administrator and their associates and the Depositary, including the operating controls established by them, to ensure they meet the Company s business objectives. The Company does not have an internal audit function of its own, but relies on the internal audit department of the Manager, and the Board reviews this arrangement annually. The same arrangements will apply in respect of the Depositary, with effect from 1st July. The key elements designed to provide effective internal control are as follows: Financial Reporting Regular and comprehensive review by the Board of key investment and financial data, including management accounts, revenue projections, analysis of transactions and performance comparisons. Management Agreement Appointment of a manager and custodian regulated by the FCA, whose responsibilities are clearly defined in a written agreement. Management Systems The Manager s system of internal control includes organisational agreements which clearly define the lines of responsibility, delegated authority, control procedures and systems. These are monitored by JPMF s Compliance Department which regularly monitors compliance with FCA rules. Investment Strategy Authorisation and monitoring of the Company s investment strategy and exposure limits by the Board. The Board, either directly or through the Audit Committee, keeps under review the effectiveness of the Company s system of internal control by monitoring the operation of the key operating controls of the Manager and Administrator and their associates, and the Depositary with effect from 1st July, as follows: the Board, through the Management Engagement Committee, reviews the terms of the management agreement and receives regular reports from the Manager s Compliance department; the Board reviews the report on the internal controls and operations of its custodian, JPMorgan Chase Bank, which is itself independently reviewed; and the Directors review every six months an independent report on the internal controls and the operations of the Manager. By means of the procedures set out above, the Board confirms that it has reviewed the effectiveness of the Company s system JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 13

Business Review continued of internal control for the period ended 30th June, and to the date of approval of this Annual Report and Accounts. During the course of its review of the system of internal control, the Board had not identified nor been advised of any failings or weaknesses which it has determined to be significant. Employees, Social, Community and Human Rights Issues The Company has a management contract with the Manager. It has no employees and all of its Directors are non-executive. The day to day activities are carried out by third parties. There are therefore no disclosures to be made in respect of employees. The Board notes the Manager s policy statements in respect of Social, Community and Environmental and Human Rights issues, as highlighted in italics: Social, Community, Environmental and Human Rights JPMF believes that companies should act in a socially responsible manner. Although our priority at all times is the best economic interests of our clients, we recognise that, increasingly, non-financial issues such as social and environmental factors have the potential to impact the share price, as well as the reputation of companies. Specialists within the Manager s environmental, social and governance ( ESG ) team are tasked with assessing how companies deal with and report on social and environmental risks and issues specific to their industry. The Manager is also a signatory to the United Nations Principles of Responsible Investment, which commits participants to six principles, with the aim of incorporating ESG criteria into their processes when making stock selection decisions and promoting ESG disclosure. Our detailed approach to how we implement the principles is available on request. Future Developments The future development of the Company depends on the success of the Company s investment strategy. The Investment Managers discuss the outlook in their report on pages 5 to 7. By order of the Board Juliet Dearlove, for and on behalf of JPMorgan Funds Limited, Secretary 30th September 14 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Board of Directors Simon Miller (Chairman and chair of the Remuneration and Nomination Committee and Management Engagement Committee) A Director since May 2013. Appointed Chairman in May 2013. Simon Miller is chairman of Dunedin LLP. Mr Miller is also chairman of Brewin Dolphin plc, Artemis Alpha Trust plc, Blackrock North America Income Trust plc, Amati VCT plc and a non-executive director of Scottish Friendly Assurance Limited. He was previously chairman of JPMorgan Elect plc. He will retire as chairman and director of Artemis Alpha Trust plc in early October. Mr Miller is resident in the United Kingdom. Shareholding in Company: 25,000. Philip Taylor FCA (Chair of the Audit Committee) A Director since May 2013 Philip Taylor is Chairman of Hawksford Holdings Limited, The States of Jersey Treasury Advisory Panel and The Jersey International Business School Limited, Non-Executive Director of Royal Bank of Scotland International Limited and City Merchants High Yield Trust Limited, a Member of the Audit Committee of the States of Jersey and a Member of the Conduct Committee of the Financial Reporting Council. Formerly, he was a Partner of PricewaterhouseCoopers United Kingdom and Channel Islands firms and Senior Partner of PricewaterhouseCoopers Channel Islands from 1998 to 2007. Mr Taylor is resident in Jersey. Philip Taylor is Chairman of Hawksford International Limited. Simon Miller is Chairman of Dunedin LLP, which is manager of Dunedin Buyout Fund 2 and Equity Harvest Fund, which together own 49 per cent. of the shares in Hawksford International Limited. Dunedin LLP does not itself hold any interest in Hawksford International Limited. Shareholding in Company: 25,000. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 15

Board of Directors continued Charlotte Valeur A Director since May 2013 Charlotte Valeur is the Managing Director of GFG Ltd, which she founded in 2011. Prior to GFG, Ms Valeur was the Managing Partner of Brook Street Partners Ltd from 2003. Ms Valeur is the Chairman of the Board of Brevan Howard Credit Catalysts Limited, Kennedy Wilson Europe Real Estate plc and Blackstone/GSO Loan Financing Limited. She also serves on boards and committees of a number of listed and unlisted fund management and investment companies. Ms Valeur has in excess of 30 years experience in the financial markets. Prior to Brook Street Partners, Ms Valeur was a Director in Capital Markets at S.G.Warburg and Co, BNP Paribas, Societe Generale and Commerzbank. Ms Valeur began her career in Copenhagen in 1982 with Nordea A/S. In 1991 she moved to the London office of Nordea A/S as Head of the UK Fixed Income sales group. Ms Valeur is a member of The Institute of Directors and is regulated by the Jersey Financial Services Commission in the conduct of Trust Company business. Ms Valeur is resident in Jersey. Shareholding in Company: 25,000. Paul Meader A Director since May 2013 Mr Meader is an independent director of investment companies, insurers and investment funds. Until the autumn of 2012 he was Head of Portfolio Management for Collins Stewart based in Guernsey, prior to which he was Chief Executive of Corazon Capital. He has 28 years experience in financial markets in London, Dublin and Guernsey holding senior positions in portfolio management and trading. Prior to joining Corazon he was Managing Director of Rothschild's Swiss private-banking subsidiary in Guernsey. Mr Meader is a Chartered Fellow of the Chartered Institute of Securities & Investments, a past Commissioner of the Guernsey Financial Services Commission and past Chairman of the Guernsey International Business Association. Mr Meader is a resident of Guernsey. Shareholding in Company: 30,000. All Directors are members of the Audit Committee, the Remuneration and Nomination Committee, and the Management Engagement Committee and are considered independent of the Manager 16 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts

Corporate Governance Framework The Company is committed to high standards of corporate governance. This statement, together with the Statement of Directors Responsibilities on page 26, indicates how the Company, as a Guernsey incorporated company listed on the London Stock Exchange has applied the principles of good governance of the Financial Reporting Council s UK Corporate Governance Code (the Code ).The Company is also required to comply with the Code of Corporate Governance issued by the Guernsey Financial Services Commission ( GFSC ). The Company is a member of the Association of Investment Companies (the AIC ) and by complying with the AIC s Code of Corporate Governance (the AIC Code ), it is deemed to comply with both the UK and Guernsey Codes of Corporate Governance. The GFSC issued The Financial Sector Code of Corporate Governance ( Guernsey Code ), effective 1st January 2012. The Guernsey Code requires an assurance statement from companies confirming that the Directors have considered the effectiveness of their corporate governance practices and are satisfied with their degree of compliance. The Board has considered the principles and recommendations of the Code and the AIC Code and considers that the Company has complied with the best practice provisions of the Code, insofar as they are relevant to the Company s business, the AIC Code, and the Guernsey Code throughout the period under review except for the provisions relating to: Role of the CEO; Executive Director remuneration; Internal Audit function; and Nomination of Senior Independent Director. As an investment company with no executive directors, the Board believes that compliance with these provisions is not appropriate. Role of the Board A management agreement between the Company and JPMF, and an administration agreement between the Company and JPM Administration Services (CI) Limited set out the matters which have been delegated to the Manager and the Administrator. This includes management of the Company s assets and the provision of accounting, company secretarial, administration, and some marketing services. All other matters are reserved for the approval of the Board. A formal schedule of matters reserved to the Board for decision has been approved. This includes determination and monitoring of the Company s investment objectives and policy and its future strategic direction, gearing policy, management of the capital structure, appointment and removal of third party service providers, review of key investment and financial data and the Company s corporate governance and risk control arrangements. The Board has procedures in place to deal with potential conflicts of interest and confirms that the procedures have operated effectively during the period under review. The Board meets on at least four occasions during the year and additional meetings are arranged as necessary. Full and timely information is provided to the Board to enable it to function effectively and to allow Directors to discharge their responsibilities. The Board has carried out on-site visits to the Manager in London and the Administrator in Guernsey. There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company s expense. This is in addition to the access that every Director has to the advice and services of the Company Secretary, which is responsible to the Board for ensuring that Board procedures are followed and for compliance with applicable rules and regulations. Board Composition The Board, chaired by Simon Miller, consists of four non-executive Directors, all of whom are regarded by the Board as independent of the Company s Manager, including the Chairman. The Chairman s other significant commitments are set out in his biography on page 15. The Directors have a breadth of investment, business and financial skills and experience relevant to the Company s business. Brief biographical details of each Director are set out on pages 15 and 16. A review of Board composition and balance is included as part of the annual performance evaluation of the Board, details of which may be found below. The Board has considered whether a senior independent director should be appointed and has concluded that, as the Board is composed entirely of non-executive directors, this is unnecessary at present. However, the Chairman of the Audit Committee leads the evaluation of the performance of the Chairman and is available to shareholders if they have concerns that cannot be resolved through discussion with the Chairman. Board Diversity When recruiting a new Director, the Board s policy is to appoint individuals on merit. Diversity is important in bringing an appropriate range of skills, knowledge and experience to the Board. At 30th June, there were three male Directors and one female Director on the Board. JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts 17

Corporate Governance Framework continued Tenure Directors are initially appointed until the following Annual General Meeting when, under the Company s Articles of Association, it is required that they be reappointed by shareholders. Thereafter, a Director s appointment runs for a term of one year. In the light of the performance evaluation carried out each year, the Board will decide whether it is appropriate for the Director to seek an additional term. The Board does not believe that length of service in itself necessarily disqualifies a Director from seeking reappointment but, when making a recommendation, the Board will take into account the ongoing requirements of the Code, including the need to refresh the Board and its Committees. As an investment company with no executive directors the Board believes that compliance with these provisions is not appropriate. The Company s Articles of Association require that Directors stand for reappointment at each Annual General Meeting. The terms and conditions of Directors appointments are set out in formal letters of appointment, copies of which are available for inspection on request at the Company s registered office and at the Annual General Meeting. Meetings and Committees The Board delegates certain responsibilities and functions to Committees. Details of membership of Committees are shown with the Directors profiles on pages 15 and 16. The table below details the number of Board and Audit and Nomination Committee meetings attended by each Director. During the period under review there were four quarterly Board meetings and one Audit Committee and one Remuneration and Nomination Committee meeting. In addition, there were several other ad hoc Board meetings to deal with various corporate initiatives. Audit and Nomination Board Committee Meetings Meeting Director Attended Attended Simon Miller 4/4 1/1 Philip Taylor 4/4 1/1 Charlotte Valeur 4/4 1/1 Paul Meader 4/4 1/1 One Audit Committee meeting was held during the inaugural year, since the second, year-end, meeting was held after the conclusion of the first full financial reporting period in order to review the outcomes of that reporting period. Training and Appraisal On appointment, the Manager and Company Secretary provide all Directors with induction training. Thereafter regular briefings are provided on changes in regulatory requirements that affect the Company and Directors. Directors are encouraged to attend industry and other seminars covering issues and developments relevant to investment companies. The Board has agreed procedures for the formal evaluation of the Manager, its own performance and that of the Audit and Remuneration and Nomination Committee and individual Directors. Questionnaires, drawn up by the Board, are completed by each Director. The responses are collated and then discussed at a meeting of the Remuneration and Nomination Committee. The evaluation of individual Directors is led by the Chairman, on the basis of the questionnaires, and the Audit Committee Chairman leads the evaluation of the Chairman s performance. Board Committees The Committees each have written terms of reference which are available on the Company s website, www.jpmconvertiblesincome.co.uk Audit Committee The Audit Committee, chaired by Philip Taylor, consists of all of the Directors and meets at least twice each year. The members of the Audit Committee consider that they have the requisite skills and experience to fulfil the responsibilities of the Committee. At least one member of the Committee has recent and relevant financial experience and the qualifications of the members of the Audit Committee are disclosed on pages 15 and 16. The Board has taken the decision that Simon Miller should be a member of the Audit Committee. This is permitted under corporate governance rules because the Chairman was deemed to be independent on appointment. The Committee reviews the actions and judgements of the Manager in relation to the half year and annual accounts and the Company s compliance with the UK Corporate Governance Code. During its review of the Company s financial statements for the year ended 30th June, the Audit Committee considered the following significant issues, including those communicated by the Auditors during their reporting: 18 JPMorgan Global Convertibles Income Fund Limited. Annual Report & Accounts