JPMorgan Funds. Audited Annual Report 30 June 2014

Transcription

1 JPMorgan Funds Audited Annual Report 30 June 2014

2 This report is an abridged version the audited annual report established in conformity with the Luxembourg Law 17 December 2010 on Undertakings for Collective Investment. The complete version is available on request from the Company s registered fice in Luxembourg and from JPMorgan Funds (Asia) Limited. This report does not constitute an fer shares. Subscriptions are only valid if made on the basis the current Hong Kong Offering Document which is available free charge on request, supplemented by the most recent audited annual report the Fund and any subsequent unaudited semi-annual report, from JPMorgan Funds (Asia) Limited. Certain the sub-funds the Fund are not authorised for fer or distribution in or from Hong Kong. Accordingly, no reference is made to these sub-funds in this audited annual report. The attention the investors is drawn to the fact that certain figures in this audited annual report are expressed on a consolidated basis and, thus, include the assets those sub-funds which are not registered in Hong Kong.

3 JPMorgan Funds Audited Annual Report Contents Board Directors 1 Management and Administration 2 Board Directors Report 3 Investment Managers Report 7 Audit Report 8 Financial Statements and Statistical Information Combined Statement 11 Combined Statement Operations and Changes in 20 Statement Changes in the Number Shares 29 Statistical Information 41 Notes to the Financial Statements 53 Schedules Investments JPMorgan Funds - America Equity Fund 70 JPMorgan Funds - Asia Local Currency Debt Fund 72 JPMorgan Funds - Asia Pacific Income Fund 75 JPMorgan Funds - Brazil Equity Fund 81 JPMorgan Funds - China Fund 82 JPMorgan Funds - Eastern Europe Equity Fund 83 JPMorgan Funds - Emerging Europe, Middle East and Africa Equity Fund 85 JPMorgan Funds - Emerging s Debt Fund 87 JPMorgan Funds - Emerging s Dividend Fund 93 JPMorgan Funds - Emerging s Equity Fund 96 JPMorgan Funds - Emerging s Investment Grade Bond Fund 99 JPMorgan Funds - Emerging s Local Currency Debt Fund 104 JPMorgan Funds - Emerging s Opportunities Fund 109 JPMorgan Funds - Emerging Middle East Equity Fund 112 JPMorgan Funds - Euroland Equity Fund 115 JPMorgan Funds - Euroland Select Equity Fund 118 JPMorgan Funds - Europe Dynamic Fund 121 JPMorgan Funds - Europe Equity Fund 124 JPMorgan Funds - Europe Small Cap Fund 127 JPMorgan Funds - Europe Technology Fund 130 JPMorgan Funds - Germany Equity Fund 133 JPMorgan Funds - Global Consumer Trends Fund 134 JPMorgan Funds - Global Convertibles Fund (EUR) 137 JPMorgan Funds - Global Dynamic Fund 141 JPMorgan Funds - Global Focus Fund 145 JPMorgan Funds - Global Government Bond Fund 148 JPMorgan Funds - Global Natural Resources Fund 152 JPMorgan Funds - Global Real Estate Securities Fund (USD) 154 JPMorgan Funds - Global Unconstrained Equity Fund 157 JPMorgan Funds - Greater China Fund 160 JPMorgan Funds - Hong Kong Fund 161 JPMorgan Funds - India Fund 162 JPMorgan Funds - Indonesia Equity Fund 163 JPMorgan Funds - Japan Equity Fund 164 JPMorgan Funds - Korea Equity Fund 166 JPMorgan Funds - Latin America Equity Fund 168 JPMorgan Funds - Russia Fund 170 JPMorgan Funds - Singapore Fund 171 JPMorgan Funds - Taiwan Fund 172 JPMorgan Funds - US Aggregate Bond Fund 173 JPMorgan Funds - US Dollar Money Fund 188 JPMorgan Funds - US Growth Fund 190 JPMorgan Funds - US High Yield Plus Bond Fund 192 JPMorgan Funds - US Small Cap Growth Fund 200 JPMorgan Funds - US Technology Fund 202 JPMorgan Funds - US Fund 203 Appendix: Unaudited Additional Disclosures Fund Total Expense Ratios 206 Summary Investment Objectives the Sub-Funds 219 Performance and Volatility 222 Interest Rate Received/(Charged) on Bank Accounts 235 Sub-Fund Share Classes Subject to Taxe d abonnement Rate Portfolio Turnover Ratio 236 Calculation Method the Risk Exposure 237 Historical Statements Changes in the Number Shares 239

4 JPMorgan Funds Board Directors Chairman Iain O.S. Saunders Duine, Ardfern Argyll PA31 8QN United Kingdom Directors Jacques Elvinger Elvinger, Hoss & Prussen 2, place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg Jean Frijns Antigonelaan 2 NL-5631 LR Eindhoven The herlands Berndt May JPMorgan Asset Management (Europe) S.à r.l. Austrian Branch Führichgasse 8 A-1010 Vienna Austria John Li How Cheong The Directors Office 19 rue de Bitbourg L-1273 Luxembourg Grand Duchy Luxembourg Peter Thomas Schwicht JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0JP United Kingdom Registered Office 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg 1

5 JPMorgan Funds Management and Administration Management Company, Registrar and Transfer Agent, Global Distributor and Domiciliary Agent JPMorgan Asset Management (Europe) S.à r.l. 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Investment Managers J.P. Morgan Investment Management Inc. 245 Park Avenue New York, NY United States America JPMorgan Asset Management (Japan) Limited Tokyo Building 7-3, Marunouchi 2 - Chome, Chiyoda-ku Tokyo Japan JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0JP United Kingdom JPMorgan Asset Management (Taiwan) Limited 20F, 1, Songzhi Rd, Xinyi Dist Taipei City 110 Taiwan (R.O.C.) JF Asset Management Limited 21st Floor, Chater House 8 Connaught Road Central Hong Kong JPMorgan Asset Management (Singapore) Limited 168 Robinson Road 17th Floor, Capital Tower Singapore Highbridge Capital Management, LLC 9 West 57th Street New York, NY United States America Custodian, Corporate, Administrative Agent and Paying Agent J.P. Morgan Bank Luxembourg S.A. 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Auditor PricewaterhouseCoopers, Société coopérative 400, Route d Esch B.P L-1014 Luxembourg Grand Duchy Luxembourg Legal Adviser Elvinger, Hoss & Prussen 2, place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg 2

6 JPMorgan Funds Board Directors Report Chairman Iain O.S. Saunders Independent Director and Chairman. A member the Board since November Mr Saunders graduated in Economics from Bristol University and joined Robert Fleming in He held several senior positions with the group in Hong Kong, Japan and the US, before returning to the UK in He was appointed Deputy Chairman Fleming Asset Management and retired in 2001 following the merger the Robert Fleming group with JP Morgan. Mr Saunders is currently Chairman several JPMorgan managed Luxembourg-domiciled investment funds and MB Asia Select Fund. Directors Jacques Elvinger Independent Director. A member the Board since January Mr Elvinger became a member the Luxembourg Bar in 1984 and has been a partner the Luxembourg law firm Elvinger, Hoss & Prussen since Mr Elvinger practices general corporate and banking law and specialises in the field investment and pension funds. He is a member the Board Directors the Luxembourg Fund Association (ALFI) and is currently Chairman the Regulation Advisory Board and Co-Chair the Legal Committee ALFI. He is also a member the Advisory Committees to the Luxembourg Commission for the Supervision the Financial Sector in the area investment funds, pension funds and investment companies in risk capital. Mr Elvinger currently holds a number pressional and board mandates with European organisations including several JPMorgan managed Luxembourg-domiciled investment funds. Jean Frijns Independent Director. A member the Board since September Mr Frijns studied Econometrics, attained a doctorate in Economics from the University Tilburg and was a lecturer at the Northern Illinois University. He joined the Dutch Central Planning Bureau (CPB), the economic think-tank the Dutch government in 1980 and, in 1983, was appointed as deputy director the CPB. Mr Frijns has held various posts including Chief Investment Strategist ABP, a Dutch pension fund, a pressorship in Investments from Vrije Universiteit (Amsterdam) and, since 2005 has served as Chairman the Monitoring Committee on Corporate Governance. Mr Frijns currently holds a number pressional and board mandates with European organisations including several JPMorgan managed Luxembourg-domiciled investment funds. John Li How Cheong Independent Director. A member the Board since June During the last 26 years Mr Li worked essentially in the financial sector auditing and advising clients such as banks, investment funds, insurance companies, etc. Clients also were from Europe, US, Japan and Asia fering Mr Li an extensive experience in dealing with international companies. Mr Li was a Partner at KPMG Luxembourg for more than 20 years during which he was Managing Partner for 8 years before taking on the role Chairman the Supervisory Board for 3 years. Mr Li was also a member the Investment Management Practice. Mr Li is a board member the Institut Luxembourgeois des Administrateurs. Mr Li currently holds a number board mandates with financial institutions including several JPMorgan managed Luxembourg-domiciled investment funds. Berndt May Connected Director. A member the Board since October Mr May has been an employee JPMorgan Asset Management since He serves as Country Head for Austria and Central Eastern Europe covering wholesale and retail distribution networks. During 2006 and 2007 he joined the boards several JPMorgan managed Luxembourg-domiciled Investment Funds. Since 2003 he has been a speaker the board for the Association International Funds in Austria (VAIÖ). Prior to his engagement by JPMAM he held positions in Asset Management and Private Banking by domestic and international Banks. He started working in the Financial Industry in Peter Thomas Schwicht Connected Director. A member the Board since June Mr Schwicht is Chief Executive Investment Management, EMEA and is also a director the firm s principal legal entities and funds boards in Europe. A J.P.Morgan employee since 1987, Mr Schwicht was Head the Continental Europe Institutional business until June 2013 and before that was Investment Management Country Head for Institutional and Retail business in Germany where he first developed the business and then went on to expand this throughout Continental Europe. Prior to this appointment, Mr Schwicht held a number positions on the securities side in Fixed Income trading, proprietary positioning and sales in Frankfurt and New York. In 1995, he was appointed Managing Director J.P. Morgan GmbH, responsible for global markets and Treasury. He relocated to Buenos Aires in 1998 to join J.P. Morgan Argentina to develop its business into local markets, returning to Frankfurt to head the German Asset Management operations in 1999 when he additionally became responsible for Switzerland, Austria, Nordics and Eastern Europe. He also served as a member the executive board and supervisory board J.P. Morgan AG, Frankfurt and as Executive Director for J.P. Morgan Asset Management (Europe) in Luxembourg. Mr Schwicht obtained his Business Economics degree from the University Mannheim in Germany after having studied Business, Tax and Accounting in Hamburg, Norway and the USA. Mr Schwicht is currently a Director several JPMorgan managed Luxembourg-domiciled investment funds. The Board Directors (the Board ) is pleased to present the Audited Annual Report for the year ended 30 June

7 JPMorgan Funds Board Directors Report (continued) Structure the Fund The Fund is a variable capital investment company, organised as a Société Anonyme, under the laws the Grand Duchy Luxembourg. The Board has appointed JPMorgan Asset Management (Europe) S.à r.l. (JPMAM) as Management Company the Fund. The Fund is organised as an umbrella with a number Sub-Funds each which has its own investment objective, policies and restrictions. The objective the Fund is to place the money available to it in transferable securities and other permitted assets any kind, in accordance with the Fund s Prospectus, with the purpose spreading investment risks and affording shareholders the results the management their portfolios. The Fund qualifies as an Undertaking for Collective Investment in Transferable Securities (UCITS) under the EC Directive 2009/65/EC 13 July 2009 and is subject to the Luxembourg law 17 December 2010 on undertakings for collective investment. The Fund may therefore be fered for sale in European Union Member States, subject to notification in countries other than the Grand Duchy Luxembourg. In addition, applications to register the Fund and its Sub-Funds may be made in other countries. As at the year end the Fund had 122 Sub-Funds. All the Sub-Funds and Share Classes are registered for fer and distribution in the Grand Duchy Luxembourg and a number the Sub-Funds and Share Classes are registered for distribution in the following jurisdictions: Austria, Bahrain, Belgium, Chile, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Jersey, Korea, Macau, The herlands, herlands Antilles, Norway, Peru, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom. Role and Responsibility the Board The responsibility the Board is governed exclusively by Luxembourg law. With respect to the annual accounts the Fund, the duties the Directors are governed by the law 10 December 2010 on, inter alia, the accounting and annual accounts undertakings for collective investment and by the law 17 December 2010 relating to undertakings for collective investment. A management agreement between the Fund and JPMorgan Asset Management (Europe) S.à r.l sets out the matters over which the Management Company has authority under Chapter 15 the Law 17 December This includes management the Fund s assets and the provision administration, registration, domiciliation agent and marketing services. All other matters are reserved for approval by the Board and a schedule setting out such matters for clarity is in place between the Board and the Management Company. The matters reserved for the Board include determination each Sub-Fund s investment objective and policies, investment restrictions and powers, amendments to the Prospectus, reviewing and approving key investment and financial data, including the annual accounts, as well as the appointment, and review the services provided by, the Management Company, Auditor and custodian. Prior to each Board meeting the Directors receive detailed and timely information allowing them to be prepared for the items under discussion during the meeting. For each quarterly meeting the Board requests, and receives, reports from, amongst others, the Management Company, the investment managers, risk management as well as proposals for changes to existing Sub-Funds or proposals to launch new ones as appropriate. Senior representatives each these functions attend Board meetings by invitation to enable the Directors to question the reports presented to it. The Directors take decisions in the interests the Fund and its shareholders as a whole and refrain from taking part in any deliberation or decision which creates a conflict interest between their personal interests and those the Fund and its shareholders. The subject conflicts interest is documented in the Prospectus and the Management Company s policy on conflicts interest is available for inspection on the website: The Board can take independent pressional advice if necessary and at the Fund s expense. Board Composition The Board is chaired by Mr. Saunders and consists four Independent Directors and two Connected Directors. The Board defines a Connected Director as someone who is employed by JPMorgan Chase & Co or any its affiliates. All Board meetings require a majority Independent Directors to be in attendance and as such the Board acts independently from the Management Company. The Board as a whole has a breadth investment knowledge, financial skills, as well as legal and other experience relevant to the Fund s business. Directors are elected annually by shareholders at the Annual General Meeting. The Board does not limit the number years Directors service and it does take into account the nature and requirements the fund industry and the Fund s business when making recommendation to shareholders that Directors be elected. The terms each Director s appointment are set out in a contract for services and these are available at the Fund s registered fice for inspection. Board Remuneration The Board believes that the remuneration its members should reflect the responsibilities and experience the Board as a whole and be fair and appropriate given the size, complexity and investment objectives the Fund. The Board reviews the remuneration paid on an annual basis. As a result the Board is proposing to increase the remuneration payable for the 2014 accounting year from EUR 38,320 to EUR 43,337 for the Chairman and from EUR 35,324 to EUR 40,337 for the other Directors. The Connected Directors continue to waive their right to remuneration. The above proposal will be tabled for shareholders consideration at the next Annual General Meeting the Company to be held on 19 November Board Meetings and Committees The Board meets quarterly but if necessary additional meetings will be arranged. Given the scope and nature the business the Fund, the Board does not currently consider it necessary to have a formal Audit or Remuneration Committee or indeed any other standing committees. However, this is kept under review. All Board related matters are therefore currently approved by the Board or, where there are specific matters that need further consideration, a Sub-Committee the Board could be formed for this specific purpose. Such circumstances could be where the Board requests some amendments to the Prospectus and where it is not appropriate to wait till the next quarterly Board meeting for this to be approved. These Sub-Committee meetings are usually formed a minimum two Directors. There were five Board meetings held during the year. Four these were the quarterly Board meetings where, amongst other matters, the agenda included those items highlighted under the section above called Role and Responsibility the Board. The fifth was an additional Board meeting to consider and approve the annual report and accounts. There were two Sub-Committee meetings the Board held during the year. In addition to the Board meeting where the Auditors present the report on the audit the Fund accounts, the Independent Directors also meet with them annually without the Connected Directors being in attendance. 4

8 JPMorgan Funds Board Directors Report (continued) Internal Control Investment management and all administrative services are provided by the Management Company and custody assets is provided by J.P. Morgan Bank Luxembourg S.A. The Board s system internal control therefore mainly comprises monitoring the services provided by the Management Company and the Custodian, including the operational and compliance controls established by them to meet the Fund s obligations to shareholders as set out in the Prospectus, Articles Incorporation as well as all relevant regulations. The Management Company formally reports to the Board on a quarterly basis on the various activities it is responsible for and in addition shall inform the Board without delay any material administrative or accounting matters. Corporate Governance and ALFI Code Conduct The Board is responsible for ensuring that a high level corporate governance is met and considers that the Fund has complied with the best practices in the Luxembourg funds industry. In particular the Board has adopted the ALFI Code Conduct (the Code ) which sets out principles good governance. These principles were amended in August 2013 and are set out below: 1. The Board should ensure that high standards corporate governance are applied at all times; 2. The Board should have good pressional standing and appropriate experience and use best efforts to ensure that it is collectively competent to fulfil its responsibilities; 3. The Board should act fairly and independently in the best interests the investors; 4. The Board should act with due care and diligence in the performance their duties; 5. The Board should ensure compliance with all applicable laws and regulations and with the Fund s constitutional documents; 6. The Board should ensure that investors are properly informed, are fairly and equitably treated, and receive the benefits and services to which they are entitled; 7. The Board should ensure that an effective risk management process and appropriate internal controls are in place; 8. The Board should identify and manage fairly and effectively, to the best its ability, any actual, potential or apparent conflict interest and ensure appropriate disclosure; 9. The Board should ensure that shareholder rights are exercised in a considered way and in the best interests the Fund; 10. The Board should ensure that the remuneration the Board members is reasonable and fair and adequately disclosed. The Board considers that the Fund has been in compliance with the principles the Code in all material aspects throughout the financial year ended 30 June The Board undertakes an annual review ongoing compliance with the principles the Code. Proxy Voting Policy The Board delegates responsibility for proxy voting to the Management Company. The Management Company manages the voting rights the shares entrusted in a prudent and diligent manner, based exclusively on the reasonable judgement what will best serve the financial interests clients. So far as is practicable, the Management Company will vote at all the meetings called by companies in which they are invested. A copy the proxy voting policy is available from the Fund s registered fice upon request or on the website: Directors and Officers Indemnity Insurance The Fund s Articles Incorporation indemnify the Directors against expenses reasonably incurred in connection with any claim against them arising inthe course their duties or responsibilities as long as they have not acted fraudulently or dishonestly. To protect shareholders against any such claim, the Board has taken out Directors and Officers Indemnity Insurance which indemnifies the Directors against certain liabilities arising in the course their duties and responsibilities but does not cover against any fraudulent or dishonest actions on their part. Independent Auditor PricewaterhouseCoopers, Société coopérative, has been the Fund s Auditor since February The provision audit services was last put to competitive tender in The Board reviewed the services PwC last year and decided that, subject to any other influencing factor, they should continue to be proposed to the Shareholders to be appointed as Auditor for the next three years. At the conclusion this period the Board will consider again whether to put the provision audit services out to competitive tender. Annual General Meeting The next Annual General Meeting the Company will be held on 19 November 2014 at the Registered Office the Company to consider matters relating to the year ending on 30 June At this meeting shareholders will, amongst other matters, be requested to consider the usual matters at such meetings including: 1. the adoption the financial statements and approval the allocation the results; 2. the approval Directors fees; 3. the election the Directors, all whom wish to stand for election; 4. the election the Auditor; No special business is being proposed by the Board. 5

9 JPMorgan Funds Board Directors Report (continued) Events during the Year During the year, the total net assets the Fund increased from USD 69.8 billion to USD 92.2 billion at year end. The Board agreed the following corporate actions relating to Sub-Funds during the year: a) Launches JPMorgan Funds - US Dollar Money Fund was launched on 6 June b) Liquidations Shareholders in the following Sub-Funds were informed the decision the Board to liquidate the Sub-Funds as set out below: - JPMorgan Funds - Global Mining Fund on 30 August 2013; - JPMorgan Funds - Japan Small Cap Fund on 30 August 2013; - JPMorgan Funds - Pacific Technology Fund on 30 August c) Currency Changes With effect from 2 December 2013, the base currency the Sub-Fund JPMorgan Funds - Japan Equity Fund changed from USD to JPY. The following other significant amendments to Sub-Funds were also approved by the Board during the year: a) Performance Fees With effect from 1 July 2013 performance fees were no longer charged on JPMorgan Funds - Emerging s Local Currency Debt Fund. Board Directors Luxembourg, 14 October

10 JPMorgan Funds Investment Managers Report Review The 12 months to the end June 2014 saw most major asset classes deliver positive returns. While developed market equities were among the strongest performers, particularly in the first half the period, increased uncertainty brought about by an evolving monetary policy environment, geopolitical concerns and some weaker-than-expected economic data led to unexpected gains for international bond markets in the latter half. For the period as a whole, strong investor appetite for risk led to double-digit equity market returns in the developed markets, with the MSCI World Index up 18.4 (source for all returns is Factset, 30 June 2014, total return, gross). Emerging market equities lagged their developed peers, as the US Federal Reserve (Fed) gradually moved towards less accommodative monetary policy - which emerging markets have been among the main beneficiaries - and concerns grew about the strength public finances and increased currency volatility in many emerging economies. In the bond markets, emerging market bonds continued to provide investors with solid positive returns. By comparison, investment grade bond returns in developed markets were relatively muted, mainly due to a large sellf in US Treasuries in 2013 sparked by speculation about the tapering Fed asset purchases. However, the Barclays Global Aggregate Index gained 2 for the period as a whole. Marking a divergence from previous periods, the year under review saw the developed world s major central banks begin to head in slightly different monetary policy directions. Although interest rates remained at record lows in the US, the eurozone, Japan and the UK, the Fed began to wind down its USD 85 billion programme monthly asset purchases in January, in a move towards eventual rate increases. In the UK, faster-than-anticipated improvement in key economic indicators stoked expectations that the Bank England (BoE) would raise rates sooner than it had initially indicated - perhaps as early as late In contrast, the Bank Japan (BoJ) expanded its asset purchases, while there was speculation that the European Central Bank (ECB) would embark on a bond buying programme its own. The actions the Fed, the ECB, the BoE and the BoJ were driven by changes in economic conditions, both domestically and globally. The US economic recovery stumbled slightly in the first three months 2014, with weather-related issues causing an unexpected contraction in GDP. However, the recovery appeared on track towards the end the review period. US manufacturing reached the highest levels activity since 2010 in June, and data releases since March showed improvements in business and consumer sentiment, alongside strengthening jobs growth. The rate UK economic recovery continued to race ahead expectations, with unemployment falling to 6.6 in the three months to April. In contrast, the outlook for the eurozone remained sluggish. Although meaningful progress has been made in terms both economic and financial sector reform, the ECB made it clear in June that it is prepared to act further to support the eurozone economic recovery. Inflation remains worryingly low, unemployment continues to hover at a very high level relative to history and concerns are ongoing about the health the banking sector, particularly in the eurozone s peripheral states. The future action, or indeed, inaction, the ECB is therefore likely to come under scrutiny, and will provide an indication the extent to which the regional economic recovery might be self sustaining. In Japan, meanwhile, the actions prime minister Shinzo Abe under the guise Abenomics, his comprehensive programme economic reform aimed at ending decades deflation, had a mixed impact on the country s prospects. The implementation a consumption tax increase in April provided a much-needed boost to prices, but also served to dampen consumer spending. While the Bank Japan continued to maintain its highly accommodative monetary policy stance, Japanese equities delivered relatively lacklustre returns in the second half the period, following very strong gains in In emerging markets, the dominant theme remained the prospect a hard economic landing in China, which the increasingly accommodative stance monetary authorities appeared to have helped avert. The Chinese economy continued to transition away from an export-led model growth towards a more consumer-driven one - the domestic, regional and global impact which remains to be seen over the long term. Elsewhere, the electoral victory Narendra Modi in India provided a meaningful boost to asset prices, amid high expectations his government and its market-friendly policy orientation. Outlook Investors should be monitoring the pace the global economic recovery even more closely than usual in the second half 2014 and considering the implications for monetary policy. Although the US economy had a major stumble in the first quarter, signs are that the recovery on both sides the Atlantic is progressing. A combination loose monetary policy and slow-but-continued growth explains why nearly every asset class has delivered positive returns in the first half even core fixed income, which most analysts had expected to suffer. Volatility has fallen to very low levels. Part the decline reflects a reduction in real world risk and uncertainty. However, investors would be right to expect something to disturb the calm in the second half the year. Many point to China as a potential source trouble. We think China could see a sharper-than-expected slowdown in its economy, but we do not see this as posing a major risk to global markets. To us, the more potent, and possibly more likely, surprises may be provided by the bond markets. volatility could result from investors revising their view future interest rate rises from the Fed. This seems to us highly likely, given how low future interest rate expectations have gone. The path short and long-term rates built into US futures markets is not consistent with even the most mediocre economic recoveries. And the recovery we are seeing in the US is at least in the mediocre category - even if growth for 2014 as a whole is going to be slower than hoped. Investment Managers 14 October 2014 The information contained in this report is historical and not necessarily indicative future performance. 7

11 Audit Report To the Shareholders JPMorgan Funds We have audited the accompanying financial statements JPMorgan Funds and each its Sub-Funds, which comprise the Combined Statement and the Schedule Investments as at 30 June 2014 and the Combined Statement Operations and Changes in for the year then ended, and a summary significant accounting policies and other explanatory notes to the financial statements. Responsibility the Board Directors the SICAV for the financial statements The Board Directors the SICAV is responsible for the preparation and fair presentation these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation the financial statements and for such internal control as the Board Directors the SICAV determines is necessary to enable the preparation financial statements that are free from material misstatement, whether due to fraud or error. Responsibility the Réviseur d entreprises agréé Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the judgment the Réviseur d entreprises agréé, including the assessment the risks material misstatement the financial statements, whether due to fraud or error. In making those risk assessments, the Réviseur d entreprises agréé considers internal control relevant to the entity s preparation and fair presentation the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose expressing an opinion on the effectiveness the entity s internal control. An audit also includes evaluating the appropriateness accounting policies used and the reasonableness accounting estimates made by the Board Directors the SICAV, as well as evaluating the overall presentation the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view the financial position JPMorganFunds and each its Sub-Funds as 30 June 2014, and the results their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation the financial statements. Other matters Supplementary information included in the annual report has been reviewed in the context our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observation to make concerning such information in the context the financial statements taken as a whole. PricewaterhouseCoopers, Société coopérative Luxembourg, 14 October 2014 Represented by Régis Malcourant PricewaterhouseCoopers, Société coopérative, 400 Route d Esch, B.P. 1443, L-1014 Luxembourg T: , F: , Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n ) R.C.S. Luxembourg B TVA LU

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14 JPMorgan Funds Combined Statement JPMorgan Funds Combined USD America Equity Fund USD Asia Local Currency Debt Fund USD Investments in Securities at 90,400,138,929 1,401,154,669 26,893,084 Acquisition Cost: 82,599,601,021 1,183,889,299 27,976,497 Investment in TBAs at * 297,106, Cash at Bank and at Brokers 1,367,678, ,105 2,306,624 Time Deposits and Cash Equivalents 257,189, Amounts Receivable on Sale Investments 615,853, Amounts Receivable on Sale TBAs * 12,852, Amounts Receivable on Subscriptions 451,907,137 2,332,348 - Interest and Dividends Receivable, 391,398, , ,113 Tax Reclaims Receivable 19,198,650 13,085 - Fee Waiver** 873,087-14,295 Other Receivables 453, Unrealised Gain on Forward Foreign Exchange Contracts 81,031, ,403 23,636 Unrealised Gain on Financial Futures Contracts 823, Derivatives Instruments at 8,613, Total 93,905,117,869 1,404,738,276 29,480,752 Liabilities Bank and Broker Overdraft 72,069,860 1,276,277 - Open Short Positions on TBAs * 12,981, Amounts Payable on Purchase Investments 703,222, ,723 Amounts Payable on Purchase TBAs * 295,434, Amounts Payable on Redemptions 412,564,271 2,939,357 - Management and Advisory Fees Payable 82,683,167 1,695,082 13,417 Performance Fees 27,953, Other Payables*** 18,355, ,536 18,275 Unrealised Loss on Forward Foreign Exchange Contracts 26,077, Unrealised Loss on Financial Futures Contracts 2,879, Derivatives Instruments at 4,837, Total Liabilities 1,659,059,469 6,073, ,415 Total 92,246,058,400 1,398,665,024 28,948,337 Historical Total 30 June ,768,444, ,368,811 46,989, June ,476,484, ,441,808 35,646,851 * Please refer to Note 2l). ** Please refer to Note 7a). *** Other Payables are principally comprised Directors fees, audit and tax related fees and expenses, registration, publication, mailing, printing, legal and marketing expenses. The accompanying notes form an integral part these Financial Statements. 11

15 JPMorgan Funds Combined Statement (continued) Asia Pacific Income Fund USD Brazil Equity Fund USD China Fund USD Eastern Europe Equity Fund EUR Emerging Europe, Middle East and Africa Equity Fund USD Emerging s Debt Fund USD 2,716,649, ,024,187 1,741,215, ,013, ,411,770 1,900,690,065 2,644,188, ,841,970 1,600,501, ,301, ,249,635 1,856,612, ,494,357 1,986,845 15,334,157 46,386 1,800,952 20,377, ,666,082 16,549,849 24,991,725 1,541,128 7,023,470 5,255, ,697,095 1,280,076 4,799, ,579 7,997,710 8,021,904 19,600, , ,236,841 1,235,284 29,952, , , ,711 18,137 7, , , ,776, , ,798,326, ,659,984 1,786,342, ,455, ,487,435 1,970,084,872 1,994, , ,085, ,171 26,075, , ,940 17,871, ,884,234 14,831,325 3,675,587 3,361, ,325 12,086,042 3,442, ,915 2,503, , ,398 1,344, , ,570 4,256, , , ,348 2,933, , ,097,270 16,208,981 36,511,069 5,285,426 1,642,018 32,085,537 2,730,229, ,451,003 1,749,831, ,169, ,845,417 1,937,999,335 4,549,560, ,868,248 2,082,791, ,552, ,872,234 1,534,463,913 97,564, ,029,937 2,309,935, ,673, ,112, ,838,358 12

16 JPMorgan Funds Combined Statement (continued) Emerging s Dividend Fund USD Emerging s Equity Fund USD Emerging s Investment Grade Bond Fund USD Emerging s Local Currency Debt Fund USD Emerging s Opportunities Fund USD Emerging Middle East Equity Fund USD 132,414,461 5,114,637, ,779,605 3,347,971,536 2,771,980, ,178, ,171,895 3,875,409, ,670,116 3,461,100,964 2,617,751, ,066, ,241,187 15,617,902 8,448,975 55,935,355 19,059,962 3,096, ,191 15,743,579 1,425,000 11,053,861-3,970, ,513 8,091,729 1,252,915 13,871,086 5,352, , ,271 9,768,866 6,247,946 72,790,097 13,809, , , , ,054 1, ,762 1,774-52, ,259 2,994,728-49, ,235, ,903,175 5,164,235, ,151,024 3,502,962,826 2,810,253, ,825, ,863 24,647, ,407, ,875,289 1,676, ,084 40,837,099 25,445, ,410 8,005, ,786 8,059,529 2,861,035 1,209,981 74,770 3,730, ,114 2,107,148 2,175, , , ,013 61, , , , ,019,452-1, , ,178,330 14,159,617 1,336,111 80,369,538 30,927,191 7,114, ,724,845 5,150,075, ,814,913 3,422,593,288 2,779,326, ,710, ,908,453 5,175,815, ,856,852 3,965,144,539 1,683,905, ,587,342-5,878,841, ,100,089 1,440,961, ,331, ,037,653 13

17 JPMorgan Funds Combined Statement (continued) Euroland Equity Fund EUR Euroland Select Equity Fund EUR Europe Dynamic Fund EUR Europe Equity Fund EUR Europe Small Cap Fund EUR Europe Technology Fund EUR 294,531,797 74,284,703 1,511,593, ,290, ,176, ,879, ,437,852 62,470,783 1,440,862, ,536, ,288, ,879, ,341 1,674,450 10,106,983 2,420, , , ,012-3,885, ,099 10,212,999 17, ,231 79,163 4,477, ,422 3,001,313 1,115,047 14,329 35,099 3,001, , , , , ,881 1,286, , , , ,701-2,409-1, ,500 4,785 15, ,452,151 76,188,081 1,534,370, ,440, ,983, ,445, , ,141-2,029, ,340 6,518, ,076 58,615 4,379, ,260 5,689, , ,485 60,257 1,609, , , , ,877 15, ,281 76,222 96,356 35,555 2,526-1,376,574 1,351-4, , ,958, ,157 9,874,964 2,196,624 13,320, , ,493,947 76,053,924 1,524,495, ,244, ,663, ,849, ,198,844 61,111, ,920, ,527, ,163,852 93,016, ,389,167 44,596, ,477, ,636, ,922,589 87,185,706 14

18 JPMorgan Funds Combined Statement (continued) Germany Equity Fund EUR Global Consumer Trends Fund EUR Global Convertibles Fund (EUR) EUR Global Dynamic Fund USD Global Focus Fund EUR Global Government Bond Fund EUR 271,895,950 88,413,111 2,394,710,819 1,235,032,371 1,360,011, ,980, ,322,727 86,222,153 2,275,098,457 1,026,576,381 1,107,119, ,533, , , ,411 1,198,053 5,477,741 3,693, ,844, ,729 15,372,466-3,439, , ,804 23,627, ,345 2,886,255 1,708,377 37, ,132 5,913,679 1,597,774 1,322,407 1,781, ,248 6, ,473 2,282, , , ,048 13,119, ,346 2,257, , ,575,801 90,008,065 2,453,220,109 1,239,212,697 1,377,677, ,171, ,284, , ,023,243-56,990,187-10,703,271 1,272, , ,196 3,805,907 1,007,316 1,550, , , ,677 2,357, ,538 1,560,830 59, ,763 25, , , ,366 35, , ,124, ,154 76,651,319 1,889,764 13,951,535 1,735, ,451,400 89,730,911 2,376,568,790 1,237,322,933 1,363,726, ,435, ,771, ,915,856 1,474,704,995 1,048,266,705 1,304,518, ,419, ,416, ,021,057 1,108,872, ,386,579 1,234,679, ,024,391 15

19 JPMorgan Funds Combined Statement (continued) Global Natural Resources Fund EUR Global Real Estate Securities Fund (USD) USD Global Unconstrained Equity Fund USD Greater China Fund USD Hong Kong Fund USD India Fund USD 818,025, ,089, ,119,409 1,450,133, ,726,067 1,495,321, ,780, ,307, ,800,627 1,226,707, ,743,772 1,020,540, ,380,641 5,253, ,052 8,211, ,037 8,498, ,000,113 1,296,425 67,885 1,411, ,932 10,045, ,959,981 3,931,315 25,767 24,637,376 1,234 4,669, , ,009 1,109,709 6,033, ,078 2,894,251-8,090 41, , , ,574 5, , , ,221, ,937, ,794,751 1,489,015, ,361,805 1,544,428, ,281, ,841,100 7,090,024 2,073, ,142 77,166 16,001, ,200,607 54, ,352 24,963, ,455 9,205,818 1,057, , ,664 1,427, ,036 2,246, ,027 32,576 66, ,634 52, , ,313,786 7,285,604 2,472,350 27,186, ,488 30,090, ,907, ,652, ,322,401 1,461,829, ,915,317 1,514,337, ,799, ,555, ,701,432 1,118,025, ,901,783 1,602,620,888 1,602,850,013 65,477, ,255, ,446, ,375,667 1,803,777,287 16

20 JPMorgan Funds Combined Statement (continued) Indonesia Equity Fund USD Japan Equity Fund (1) JPY Korea Equity Fund USD Latin America Equity Fund USD Russia Fund USD Singapore Fund USD Taiwan Fund USD 335,494,895 86,021,970, ,377,492 1,472,448, ,751, ,507, ,395, ,444,113 81,293,059, ,676,831 1,303,290, ,237, ,188, ,768, ,763, ,341,155 3,826,550 28,420,563 4,971, ,815 9,033,667 16,063,080-28,008, ,870-1,076,858 22,281 6,207,912 4,523,100 3,350, , ,846,741 97,704 1,564,629 3,521,887 35,867 2,006, ,233 72,185, ,981 1,426,111 2,749,966 43, , ,221 2, ,882-13,956 2,255 20, , ,768,201 86,917,367, ,644,677 1,503,882, ,225, ,356, ,280, ,354, ,591, ,652 8,015, ,901, , ,441,239 1,834,604 5,961,130 5,956,820 1,079, ,327 17,143 79,430, ,066 1,407, , , , ,857 11,021,214 50, , ,675 37, ,380-40,959, , ,816, ,852,520 2,751,140 15,658,864 6,769,456 3,633,373 4,001, ,951,845 86,629,515, ,893,537 1,488,223, ,455, ,723, ,279, ,489, ,691, ,915,662 1,463,869, ,561, ,252, ,132,355 2,947, ,739, ,018,691 1,434,536,865 1,096,241, ,824, ,348,394 (1) This Sub-Fund changed its base currency to JPY on 2 December

21 JPMorgan Funds Combined Statement (continued) US Aggregate Bond Fund USD US Dollar Money Fund (2) USD US Growth Fund USD US HighYield Plus Bond Fund USD US Small Cap Growth Fund USD US Technology Fund USD US Fund USD 1,010,402, ,248,119 1,495,763, ,736, ,365, ,869,944 3,971,561, ,671, ,248,119 1,117,644, ,681, ,363, ,749,778 3,114,499, ,937 93,925,065 1,025,288 2,434,053 1,963,940 4,882,343 5,127,943-17,000, , , ,923 1,836,803 3,532, ,407, ,090 5,855, , ,760 3,381,302 13,666,750 4,969,215 38, ,685 3,968,854 56,525 85,220 2,314, ,920 10,611-26,456 62,292 1,508 82, , , , ,261, ,021,613, ,715,546 1,504,358, ,063, ,831, ,777,420 3,994,994, , , ,549, ,183-1,209, ,483,447 1,410,966 10,987,326-1,302,106 6,481,543 7,919, ,337 55,054 1,031,542 82, , ,720 3,576, ,393 66, ,227 46,026 32,667 71, , ,481,305 1,532,196 12,147,095 2,678,180 2,326,133 7,200,032 13,004,607 1,009,131, ,183,350 1,492,211, ,384, ,505, ,577,388 3,981,989,997 2,209,832,008-1,496,668, ,578, ,079, ,225,870 2,604,696,046 2,179,090,916-1,051,921,584 20,600, ,521, ,732,557 1,326,685,426 (2) This Sub-Fund was launched on 6 June

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23 JPMorgan Funds Combined Statement Operations and Changes in JPMorgan Funds Combined USD America Equity Fund USD Asia Local Currency Debt Fund USD at the Beginning the Year * 70,473,946, ,368,811 46,989,118 Income Dividend Income, 1,105,476,520 9,102,767 - Interest Income, 1,021,639,711 17,525 1,274,489 Securities Lending Income 7,947, Bank Interest 966, Interest on Swap Transactions 4,348, Other Income 19,415, Total Income 2,159,794,433 9,121,273 1,274,876 Expenses Management and Advisory Fees 914,807,200 16,378, ,613 Custodian, Corporate, Administration and Domiciliary Agency Fees 65,101, , ,544 Registrar and Transfer Agency Fees 11,139, ,839 28,082 Taxe d abonnement 32,962, ,493 12,907 Overdraft Interest 165, Interest on Swap Transactions 9,187, Sundry Fees** 44,747, ,235 78,468 1,078,111,904 18,144, ,422 Less: Fee Waiver *** 12,704,101 6, ,687 Total Expenses before Performance Fees 1,065,407,803 18,138, ,735 Performance Fees 27,955, Total Expenses 1,093,363,414 18,138, ,735 Investment Income/(Loss) 1,066,431,019 (9,016,966) 1,016,141 Realised Gain/(Loss) on Sale Investments 2,749,778, ,332,494 (1,201,976) Realised Gain/(Loss) on Forward Foreign Exchange Contracts 78,868,407 1,397,611 (181,050) Realised Gain/(Loss) on Financial Futures Contracts (46,358,624) - - Realised Gain/(Loss) on Foreign Exchange (32,034,901) (147,735) (81,775) Realised Gain/(Loss) on TBAs (2,452,349) - - Realised Gain/(Loss) on Derivatives Instruments 28,707, Realised Gain/(Loss) for the Year 2,776,508, ,582,370 (1,464,801) Change in Unrealised Gain/(Loss) on Investments 6,077,274, ,468, ,476 Change in Unrealised Gain/(Loss) on Forward Foreign Exchange Contracts 243,192,387 1,493,694 (36,848) Change in Unrealised Gain/(Loss) on Financial Futures Contracts (12,527,943) - - Change in Unrealised Gain/(Loss) on Foreign Exchange 6,302, ,545 Change in Unrealised Gain/(Loss) on TBAs 1,650, Change in Unrealised Gain/(Loss) on Derivatives Instruments 10,477, Change in Unrealised Gain/(Loss) for the Year 6,326,369, ,962, ,173 Increase/(Decrease) in as a Result Operations 10,169,308, ,528, ,513 Movements in Share Capital Subscriptions 71,780,490,217 1,478,891,735 2,759,359 Redemptions (59,558,480,089) (1,070,073,772) (21,128,028) Increase/(Decrease) in as a Result Movements in Share Capital 12,222,010, ,817,963 (18,368,669) Dividend Distribution (619,207,043) (49,882) (82,625) at the End the Year 92,246,058,400 1,398,665,024 28,948,337 * The opening balance was combined using the foreign exchange rates as at 30 June The same net assets when combined using the foreign exchange rate ruling as at 30 June 2013 reflected a figure USD 69,768,444,706. ** Sundry Fees are principally comprised Directors fees, audit and tax related fees and expenses, registration, publication, mailing, printing, legal and marketing expenses. *** Please refer to Note 7a). The accompanying notes form an integral part these Financial Statements. 20