Interim Report & Accounts (Unaudited) JPMorgan Fund II ICVC

Transcription

1 Interim Report & Accounts (Unaudited) JPMorgan Fund II ICVC 31 May 2017

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3 Contents Authorised Corporate Director s (ACD) Report 2-6 Investment Adviser s Report for the six months ending 31 May JPM America Equity Fund 8-13 JPM Balanced Managed Fund JPM Europe Smaller Companies Fund JPM Global Allocation Fund JPM Global Bond Opportunities Fund JPM Income Fund JPM UK Equity Income Fund JPM UK Equity Plus Fund JPM UK Smaller Companies Fund JPM US Smaller Companies Fund Accounting policies 79 This material should not be relied on as including sufficient information to support an investment decision. The opinions and views expressed in this document are those held by J.P. Morgan Asset Management as at 14 July 2017, which are subject to change and are not to be taken as or construed as investment advice. For up-to-date performance information please contact J.P. Morgan Asset Management using the numbers shown on the back of this document. You should remember that past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. The level of tax benefits and liabilities will depend on individual circumstances and may change in the future. The investment objective of a fund may allow some flexibility in terms of portfolio composition. Funds that invest predominantly in a single market, asset class or sector may be subject to greater volatility than those funds with a more diversified portfolio. The information in this booklet is based on our understanding of law, regulation and HM Revenue & Customs practice as at 14 July

4 Authorised Corporate Director s (ACD) Report Board of Directors of JPMorgan Funds Limited ( JPMF ), the Authorised Corporate Director ( ACD ) of JPMorgan Fund II ICVC Chairman Daniel Watkins Connected director. A member of the ACD since January Dan Watkins, Managing Director, is the Deputy CEO of IM Europe and Global Head of IM Client Services and Business Platform. An employee since 1997, Dan oversees the business infrastructure of Investment Management in Europe and Asia including client services, fund administration, product development, and RFP. Dan also performs the role of Deputy CEO of GIM EMEA, acting as a director of all the regulated legal entities across the region. Previously, he was head of Europe COO and Global IM Operations, head of the European Operations Team, head of the European Transfer Agency, head of Luxembourg Operations, manager of European Transfer Agency and London Investment Operations; and manager of the Flemings Investment Operations Teams. Dan is currently a director of several JPMorgan managed Luxembourg domiciled Investment Funds. Dan obtained a BA in Economics and Politics from the University of York and is a qualified Financial Advisor. Directors Jasper Berens Connected director. A member of the ACD since January Jasper Berens, Managing Director, is Head of UK Retail Business including the Investment Trusts. An employee since 1997, he was previously Head of UK Sales from 2005 to 2012 and, prior to that, Head of Asset Management Sales. Jasper draws on over 20 years experience within sales and utilises this experience to oversee the fund strategies and marketing activities of JPMF. Jasper is a Director of several J.P. Morgan managed UKdomiciled investment funds. Tanaquil McDowall Connected director. A member of the ACD since January Tanaquil McDowall, Executive Director, is the European Financial Controller in the Asset Management finance team, based in London. Employed by J.P. Morgan since 2008, she is responsible for statutory and regulatory reporting (both local and US) of the European legal entities. She also currently serves on various J.P. Morgan boards. Prior to this, she spent ten years working at Citigroup in a range of roles, including product control, financial regulation and legal entity control and two years working at Schroders. She is a chartered accountant who trained with Coopers & Lybrand, working in the Reading and Hamburg offices. Tanaquil is a director of a number of J.P. Morgan s regulated entities. Tanaquil holds a joint honours degree in Physics and Music from the University of Reading and an MBA from Cass Business School. Mike O Brien Connected director. A member of the ACD since December Mike O Brien, Managing Director, is the Chief Executive of J.P. Morgan Investment Management, EMEA and the Co-Head of the Global Investment Management Solutions (GIM Solutions), based in London. As CEO, Mike partners with the global investment, business and function heads to develop the business priorities in EMEA. A key area of his responsibility is ensuring the firm remains in line with the regulatory requirements and within a framework of appropriate risk management. Mike is also a director of the firm s principle legal entities and funds boards in Europe. In his role as Co-Head of GIM Solutions, Mike oversees the Firm s Multi-Asset, Retirement, Pensions & Insurance Advisory and ETF businesses globally. Prior to this he was responsible for the firm s Global Institutional Business. An employee since 2010, he is also a member of the J.P. Morgan Asset Management Operating Committee, as well as the J.P. Morgan Global Investment Management Operating Committee. Mike is a director of a number of J.P. Morgan s regulated entities. Previously he worked at BlackRock/BGI where he was Head of Institutional Business for EMEA. During his decade-long tenure at BGI and then BlackRock, he led a team of institutional client advisors responsible for some of the firm s largest clients located across 12 regional markets. Prior to that, he worked at Towers Perrin for 14 years where he oversaw their UK and European investment consulting practice, managing all aspects of pension planning financial management, and developing new products and service offerings, such as pension financial risk modeling for UK and US corporations. Mike holds a bachelor s degree in Applied Mathematics from Limerick University in Ireland. He is an Actuary ( FIA ) and a CFA charter holder and is an advisor to the Investment Committee of the UK s Pension Protection Fund. 2

5 Authorised Corporate Director s (ACD) Report continued Ruston Smith Independent Director of the ACD since December Ruston has over 30 years experience in the pension fund and investment industry complemented by broader commercial experience. He has held senior corporate positions with responsibility for strategy, Investment, governance, communication and operations for a wide range of UK and international defined benefit and defined contribution schemes and provident funds also acting as a Trustee and Chairman. His experience includes over a decade as the Group Pensions and Insurable Risk Director at Tesco, where the award winning UK scheme has over 200,000 employed members where he was also the CEO of Tesco Pension Investment their FCA approved in house investment manager with 12bn of assets under management. Ruston has a breadth of experience which has included responsibility for executive reward and benefits, employee relations, HR systems, payroll, global mobility and health & wellness. Before joining Tesco, Ruston was a Director and Company Secretary at PZ Cussons, where he was also responsible for their group pensions, property, legal and insurance. Ruston is a non executive director and the immediate past Chairman of the Pensions and Lifetime Savings Association, Non Executive Chairman of the Tesco Pension Trustee Board and the Tesco DC Governance Committee, Non Executive Chairman of Tesco Pension Investment Limited, non executive director of JPMorgan Asset Management International Limited, a Director of Standard Life s Master Trust Company, a Trustee Director of The People s Pension, a Governor of the Pensions Policy Institute, Chairman of National Grocers Benevolent Fund and is on the MBA Advisory Board of the Manchester Metropolitan University s Business School. He has an MBA, is a Fellow of the Pensions Management Institute and a Fellow of the Institute of Management. Background JPMorgan Funds Limited ( JPMF ) is the Authorised Corporate Director ( ACD ) of JPMorgan Fund ICVC (the Company ) and is the sole Director of JPMorgan Fund II ICVC (the Board ). The Board is pleased to present the Interim Report and Accounts for the period ended 31 May Authorised Status JPMorgan Fund II ICVC is an Open-Ended Investment Company ( Company ) with variable capital, authorised under Regulation 12 of the OEIC Regulations by the Financial Conduct Authority ( FCA ) on 29 August The Company was launched as a UCITS Retail Scheme on the same date and is organised as an umbrella company comprising of ten Funds each of which has its own investment objective, policies and restrictions. The objective of the Company is to place the money available to it in transferable securities and other permitted assets of any kind, in accordance with the Prospectus of the Company and applicable FCA rules, with the purpose of spreading investment risks and affording shareholders the results of the management of their portfolios. Its registration number is IC127 and its registered address is 60 Victoria Embankment, London, EC4Y 0JP. Structure & Liabilities The assets of each Fund are treated as separate from those of every other Fund and are invested in accordance with the investment objective and investment policies applicable to that Fund. Details of the investment objective, the policies for achieving these objectives, the performance record and a review of the investment activities for each of the Funds can be found in this report. The ACD report includes the following in relation to each fund: Investment objective and policy Risk profile Fund review Fund outlook Portfolio statement Portfolio movements Shareholders are not liable for the debts of the Company. Shareholders are not liable to make any further payment to the Company after the purchase of their shares is paid for. Role and Responsibility of the Board JPMF is authorised and regulated by the FCA and its principle activity is investment management. The responsibility of the ACD is governed by the Companies Act 2006 and the FCA. With respect to the annual accounts of the Company, it is also required to comply with the prospectus and any applicable accounting standards and also with the latest Statement of Recommended Practice issued by The Investment Association. The matters reserved for the Board include determination of 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 and semiannual accounts, as well as the appointment of and review of the services provided by the depositary and auditor. Prior to each meeting the Board receives 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 investment managers, risk management, compliance, as well as proposals for changes to existing funds or proposals to launch new ones as appropriate. Senior representatives of each of these functions attend Board meetings by invitation to enable the Board to question the reports presented to them. In addition the Board reviews on an annual basis all service providers. The Board takes decisions in the interests of the Company and its shareholders as a whole and refrains from taking part in any deliberation or decision which creates a conflict of interest between personal interests and those of the Company and its shareholders. JPMF and its affiliates provide a variety of different services to the Company and receives compensation for these services. JPMF and its affiliates therefore need to balance the desire to be compensated for these services with the requirement to act in the best interests of the Company. JPMF and its affiliates also face conflicts of interest where these services are provided to other funds or clients, and, from time to time, make decisions that differ from and/or negatively impact those made on behalf of the Company. The Board can take independent professional advice if necessary. 3

6 Authorised Corporate Director s (ACD) Report continued Board Composition JPMF is chaired by Mr Watkins, and consists of four connected directors and one independent director. All Board meetings require a quorum of two directors to be in attendance. Induction and Training All new directors of JPMF will receive a full induction incorporating relevant information regarding the Company and its duties and responsibilities as the ACD of the Company. In addition, JPMF takes active steps to keep up to date with developments relevant to the Company and have ensured that a formal training programme is in place. Board Evaluation The Board carries out a biennial review of its performance. Board Meetings and Committees The Board meets quarterly but if necessary additional meetings will be arranged. Given the scope and nature of the business of the Company, the Board does not currently consider it necessary to have a formal Audit 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 of 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 formed of a minimum of two directors of JPMF. There were twelve Board meetings held during the year. Four of these were quarterly Board meetings where, amongst other matters, the agenda included those items highlighted under the section above called Role and Responsibility of the Board. Corporate Governance The Board is responsible for ensuring that a high level of corporate governance is met and considers that the Fund has complied with the best practices in the UK funds industry. Proxy Voting Policy JPMF delegates responsibility for proxy voting to the Investment Adviser. The Investment Adviser manages the voting rights of the shares entrusted in a prudent and diligent manner, based exclusively on the reasonable judgement of what will best serve the financial interests of clients. So far as is practicable, the Investment Adviser will vote at all of the meetings called by companies in which they are invested. A copy of the proxy voting policy is available from the Company s registered office upon request or on the website: corporate-governance Remuneration Disclosure JPMF is part of the J.P. Morgan Chase & Co. group of companies. In this section, the terms J.P. Morgan or Firm refer to that group, and each of the entities in that group globally, unless otherwise specified. Remuneration Policy A disclosure of the current remuneration policy for JPMF (the Remuneration Policy ) can be found at en/asset-management/gim/per/legal/emearemuneration-policy. This policy includes details of how remuneration and benefits are calculated, including the financial and nonfinancial criteria used to evaluate performance, the responsibilities and composition of the Firm s Compensation and Management Development Committee, and the measures adopted to avoid or manage conflicts of interest. A copy of this policy can also be requested free of charge from the UK-based Investor Services team on The Remuneration Policy applies to all employees of JPMF, including individuals whose professional activities may have a material impact on the risk profile of JPMF or the funds it manages ( Identified Staff ). The Identified Staff include members of the Board, senior management, the heads of relevant control functions, and holders of other key functions. Individuals are notified of their identification and the implications of this status on at least an annual basis. The Board reviews and adopts the Remuneration Policy on an annual basis, and oversees its implementation, including the classification of Identified Staff. The Remuneration Policy, and its implementation, is designed to foster proper governance and regulatory compliance. The remuneration structure as described in the Remuneration Policy is designed to contribute to the achievement of short-term and long-term strategic and operational objectives, while avoiding excessive risk-taking inconsistent with the risk management strategy. This is intended to be accomplished, in part, through a balanced total compensation program comprised of a mix of fixed remuneration (including base salary), and variable remuneration in the form of cash incentives and long-term, equity based or fund-tracking incentives that vest over time. A balanced assessment of employees performance is undertaken taking account of business and financial results, risk and control outcomes, client/customer goals, and other priorities including people and leadership objectives as appropriate. The compensation governance practices contain a number of measures to avoid conflicts of interest, including independent oversight and control of the remuneration policy, and the assessment of employees in Control Functions against independent objectives linked to their functions. 4

7 Authorised Corporate Director s (ACD) Report continued Quantitative Disclosures The table below provides an overview of the aggregate 2016 total remuneration paid to staff of JPMF and the number of beneficiaries. These figures include the remuneration of all staff of JP Morgan Asset Management (UK) Ltd (the relevant employing entity) and the number of beneficiaries, both apportioned to JPMF on an AUM weighted basis. Due to the Firm s operational structure, the information needed to provide a further breakdown of remuneration attributable to the Company is not readily available and would not be relevant or reliable. However, for context, the Management Company manages 31 AIFs and 2 UCITS (with 41 Funds), with a combined AUM as at 31 December 2016 of 12,163m and 13,627m respectively. All staff ($ 000s) Fixed remuneration 16,270 Variable remuneration 10,174 Total remuneration* 26,445 Number of beneficiaries 131 * No carried interest or performance fees were paid to any staff by the Company in the year. Directors and Officers Indemnity Insurance The Company s Articles of Incorporation indemnify the directors against expenses reasonably incurred in connection with any claim against them arising in the course of 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 ACD against certain liabilities arising in the course of their duties and responsibilities but does not cover against any fraudulent or dishonest actions on their part. Auditor PricewaterhouseCoopers LLP, has been the Company s Auditor since January The Board reviewed the services of PwC in 2016 and decided that, subject to any other influencing factor, they should continue to be appointed as Auditor for a further 8 years. Mailing of Report and Accounts With effect from 22 November 2016 the FCA has dispensed with the requirement to produce and send Short Form accounts to shareholders. This decision was made after feedback received during an industry consultation showed that these accounts did not meet the original aim of providing timely, clear and focused information. As a result Short Form accounts will no longer be produced and sent to clients. However, the Long Form Accounts, which contain additional disclosures will still be available at and up to date information about each sub-fund can be found at asset-management/gim/per/products/fundexplorer. Liquidation of JPM Global Allocation Fund The ACD approved the liquidation of JPM Global Allocation Fund on 2 December 2016 and the Fund was terminated on 17 February 2017; the liquidation proceeds were paid to shareholders on 22 February Liquidation of JPM Income Fund The ACD approved the liquidation of JPM Income Fund on 6 March The liquidation commenced on 24 May 2017 and liquidation proceeds were paid to shareholders on 30 May Changes to the Prospectus Amendments published on 9 December 2016 In relation to JPM Global Bond Opportunities Fund to reflect the expected increase in level of aggregate use of derivatives for the fund from 100% to 400% following a difference from the expected level for the past four consecutive quarters. To inform investors that the Company and the Funds are deemed to be controlled by JPMorgan Chase & Co. and so have a risk associated with U.S. federal banking laws including the U.S. Bank Holding Company Act of 1956, and section 13 (the Volcker Rule ). Investors are informed that the Volcker Rule restricts JPMorgan acquiring or retaining or sponsoring a covered fund and prohibits certain transactions with such funds. To avoid funds being treated as covered funds, JPMorgan may be required to reduce its ownership in the relevant Funds at the end of the permitted seeding period which could adversely impact such funds. To add a disclosure around China Interbank Bond Market so to cover the risks relating to Chinese onshore renminbi denominated bond markets. Amendment published on 1 February 2017 To state that share price publications in the Financial Times will cease with effect from 1 January Prices will continue to be available in other national newspapers and are available via the J.P. Morgan website: To allow funds that currently invest in China A-Shares via the Shanghai-Hong Kong Stock Connect programme to invest in the Shenzhen-Hong Kong Stock Connect programme. 5

8 Authorised Corporate Director s (ACD) Report continued Amendments published 6 April 2017 To add a disclosure to inform shareholders of the procedure for the correction of pricing errors and the materiality threshold used to determine whether a pricing error is deemed material. All Funds within JPMorgan Fund II ICVC have a materiality threshold of 0.50% of price per share. Conflicts of Interest disclosures updated. Amendment published on 5 June 2017 To remove reference to net share classes in JPM Global Bond Opportunities Fund. Amendments published on 11 July 2017 To add a general risk disclosure on cyber security which will inform investors that measures have been developed to reduce the risks associated with cyber security but that there remains a risk associated with cyber security regardless of these measures. Eligible Securities Markets list updated to include Egypt and Saudi Arabia. Changes to the Instrument of Incorporation and the Prospectus Amendments published on 9 December 2016 To allow the ACD to effect compulsory conversions of shares in one class of a fund for another class of the same fund, upon reasonable written notice to affected shareholders and to state that compulsory conversions will only be undertaken where the ACD reasonably considers it is in the best interests of affected shareholders. By way of example, the ACD may effect a compulsory conversion where the ACD reasonably believes it is in the best interests of shareholders to reduce the number of available share classes. Amendment published on 31 May 2017 The inclusion of the JPM UK Equity Income Fund. Statement of Cross Holdings There are no holdings of Funds of JPMorgan Fund II ICVC by other Funds of the Company. Management and Administration Authorised Corporate Director JPMorgan Funds Limited 3 Lochside View, Edinburgh Park, Edinburgh, EH12 9DH (Authorised and regulated by the Financial Conduct Authority) Custodian and Bankers: JPMorgan Chase Bank, N.A. London Branch 25 Bank Street, Canary Wharf, London, E14 5JP (Authorised and regulated by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) Depositary National Westminster Bank plc 135 Bishopsgate, London, EC2M 4RB (Authorised and regulated by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) Independent Auditors PricewaterhouseCoopers LLP Atria One, 144 Morrison Street, Edinburgh, EH3 8EX Investment Adviser JPMorgan Asset Management (UK) Limited 25 Bank Street, Canary Wharf, London, E14 5JP (Authorised and regulated by the Financial Conduct Authority) Registrar International Financial Data Services Limited IFDS House, Saint Nicholas Lane Basildon, Essex, SS15 5FS (Authorised and regulated by the Financial Conduct Authority) By order of the Authorised Corporate Director, Dan Watkins Director JPMorgan Funds Limited 14 July 2017 Ruston Smith Director JPMorgan Funds Limited 14 July

9 Investment Adviser s Report for the six months ending 31 May 2017 Market review Global equity markets delivered positive returns in the six months to 31 May 2017, boosted by an improving global economy. The MSCI World Index was up 5.0%, the S&P 500 rose 3.2%, the MSCI Europe gained 11.1% and the FTSE All-Share ended 8.1% higher (all performance in sterling terms, total return net, 1 December May 2017, source: J.P. Morgan Asset Management). Equity markets had a strong six months. At the start of the review period, the US election and the associated hopes for tax cuts, increased public spending and regulatory reform sparked a rally in the US stock market, which was also supported by a recovery in US business and consumer confidence surveys. Meanwhile, a synchronised global recovery appeared to take hold, with strong soft data and some bright spots in the hard data out of most developed economies: purchasing managers indices and sentiment measures hit consistent highs, while GDP figures confirmed the momentum in US and Europe. The eurozone showed signs of improvement in particular, with business surveys rising to their highest levels in over five years, consumer confidence reaching a post-crisis high, and the 19-country bloc s unemployment rate falling to its lowest level since Market outlook In the second half of the year, investors are likely to focus on tightening monetary policy, particularly in the US. We have already had two interest rate hikes from the Federal Reserve (Fed) in 2017 and we may see another before the end of the year. However, it s the reduction in the Fed s balance sheet that might grab headlines. In its June meeting, Fed officials gave a detailed plan of how they would reduce the balance sheet and indicated that they would likely begin doing so at some point this year. The Fed going from being a net buyer to being a net seller of bonds is likely to put upwards pressure on yields. The Fed might not be alone in tightening monetary policy over the next 12 months. Stronger global growth overseas may also see other central banks, including the Bank of England and the European Central Bank, gradually tighten monetary policy. How investors adapt to the beginning of tighter global monetary policy may be a key focal point in late 2017 and into JPMorgan Asset Management (UK) Limited June 2017 Politics were also a dominant theme. In Europe, elections rejected anti-euro politicians. In April and May, all eyes were on the French presidential elections, which saw a victory for centrist candidate Emmanuel Macron over farright Marine Le Pen. This, combined with the victory for the incumbent prime minister in the Netherlands in March, led to a wave of relief among investors. In the UK, Prime Minister Theresa May unexpectedly called a June general election. The result saw the Conservatives lose a majority, relying on support from the DUP in Northern Ireland. Despite an initial sell-off in sterling, markets eventually reacted well to the news as it was perceived to increase the likelihood of a softer Brexit. Meanwhile, in the US, the equity market experienced headwinds towards the end of the period, as the US administration failed to make any significant headway on its reflationary reform agenda. 7

10 JPM America Equity Fund Investment objective and policy To provide long term capital growth by investing primarily in a concentrated portfolio of Equity Securities of US companies. US companies are companies that are incorporated under the laws of, and have their registered office in, the US, or that derive the predominant part of their economic activity from the US, even if listed elsewhere. The Fund may also invest in Canadian companies. Other instruments as permitted in the stated investment and borrowing powers of the Company including, but not limited to, fixed interest securities, cash and cash equivalents, may be held on an ancillary basis, as appropriate. The Fund may also use Financial Derivative Instruments (derivatives) for the purpose of Efficient Portfolio Management, including hedging, where appropriate (see section 11.7 of the Prospectus for risking warnings on derivatives). Subject to at least 60 days written notice to shareholders, the Fund may use derivatives for investment purposes which may change the risk profile of the Fund. The Fund will invest predominantly in assets denominated in US Dollar. However, assets may be denominated in other currencies and non-sterling currency exposure will not normally be hedged back to Sterling. Risk profile The value of your investment may fall as well as rise and you may get back less than you originally invested. The value of Equity Securities and Equity-Linked Securities may fluctuate in response to the performance of individual companies and general market conditions. The Fund is aggressively managed meaning volatility may be high as the Fund may take larger position sizes, may have high turnover of holdings and at times may have a significant exposure to certain areas of the market. The Fund may be concentrated in a limited number of securities and, as a result, may be more volatile than more broadly diversified funds. The single market in which the Fund primarily invests, in this case the US, may be subject to particular political and economic risks and, as a result, the Fund may be more volatile than more broadly diversified funds. Movements in currency exchange rates can adversely affect the return of your investment. Please refer to Part 11 of the Prospectus for details of the general risk factors affecting this Fund in addition to the specific risk factors above. Fund review The Fund generated a positive return but underperformed its benchmark for the six-month period under review. The portfolio s underperformance was driven by sector allocation, rather than stock selection. In particular, our overweight allocation to the financials sector and underweight allocation to the consumer staples sector proved lacklustre. Stock selection in the financials and real estate sectors also detracted from performance. The largest detractor in the financials sector was our position in Capital One Financials, as the company reported a core earnings-per-share miss on higher provisions. In addition, management adjusted guidance for net charge-offs upwards, which has weighed on the stock in the near term. In our view, Capital One Financials has an attractive asset-liability mix in addition to a strong and growing deposit base. The largest detractor in the real estate space was Kimco Realty, a shopping centre real estate investment trust. Amid the growing chorus of negativity in the retail sector, shopping centres have been hit hardest. On the positive side, stock selection in information technology added value, with positions in Electronic Arts and Facebook being some of the largest positive contributors. The healthcare sector also contributed positively, with overweight positions in Vertex Pharmaceuticals and Intuitive Surgical adding value. Fund outlook Our fundamental outlook for continued US economic expansion and associated growth in corporate earnings remains intact. However, we would be remiss not to address the risks currently facing US equity markets. The pace of nominal growth has moderated and this has been reflected in the market leadership, which we will continue to monitor closely. From the US presidential election up to the end of last year, the financials, telecom and energy sectors were the top performers. Those same three sectors are now this year s worst performers. It therefore appears to be safe to say that the Trump rally has now reversed. Six month performance to 31 May 2017 Net asset value per share Net asset value per share % Return JPM America Equity Fund A-Class Acc % JPM America Equity Fund B-Class Acc % JPM America Equity Fund C-Class Acc % Benchmark Index 7.08% You should remember that past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. 8

11 12 month performance^ to 31 May from launch JPM America Equity Fund A-Class Acc 33.8% 3.8% 18.8% 2.7% JPM America Equity Fund B-Class Acc 34.4% 4.3% 19.5% 2.8% JPM America Equity Fund C-Class Acc 34.8% 4.6% 19.7% 2.9% Benchmark Index 32.0% 6.3% 22.5% 6.4% Fund statistics Risk and Reward Profile 6 (6 at 30 November 2016) Fund size Benchmark Index 19.2m S&P 500 Index (Net of 15% withholding tax) Fund charges and expenses A-Class B-Class C-Class Initial charge (max.) 3.00% Nil Nil Exit charge Nil Nil Nil Ongoing charge (comprises) 1.68% 1.18% 0.93% Annual management fee 1.50% 1.00% 0.75% Fixed expenses 0.18% 0.18% 0.18% Top ten holdings % Alphabet, Inc. C 6.56 Amazon.com, Inc Apple, Inc Facebook, Inc. A 4.16 UnitedHealth Group, Inc American International Group, Inc DISH Network Corp. A 3.18 T Rowe Price Group, Inc Loews Corp Mastercard, Inc. A 3.04 Sector breakdown % Information Technology Financials Consumer Discretionary Health Care 9.22 Energy 6.29 Industrials 5.96 Real Estate 3.55 Materials 3.54 Utilities 2.24 Consumer Staples 1.48 Net other assets 3.94 Highest/lowest share price and distribution record Financial year to 30 November Highest share price Lowest share price Distribution per share (net) A-Class Accumulation Shares A p 48.34p 0.00p p 54.46p 0.00p p 54.83p 0.00p 2017 B 86.54p 77.48p 0.00p A-Class Income Shares A p 48.34p 0.00p p 54.46p 0.00p p 54.83p 0.00p 2017 B 86.54p 77.48p 0.00p B-Class Accumulation Shares A p 96.78p 0.00p p 109.4p 0.00p p 110.8p 0.00p 2017 B 175.8p 157.2p 0.00p C-Class Accumulation Shares A p 96.82p 0.11p p 109.6p 0.07p p 111.3p 0.13p 2017 B 177.1p 158.3p 0.00p C-Class Income Shares A p 96.78p 0.11p p 109.5p 0.07p p 111.1p 0.13p 2017 B 176.7p 157.8p 0.00p A A-Class Accumulation Shares, A-Class Income Shares, B-Class Accumulation Shares, C-Class Accumulation Shares and C-Class Income Shares were launched on 31 January B To 31 May Portfolio turnover rate % % The portfolio turnover rate (PTR) reflects the total of security purchases and sales, less the total of share issues and cancellations, expressed as a percentage of the average daily net asset values over the period. For specific risks, including the risk and reward profile, please refer to the Key Investor information Document (KIID) available on the following website ^ Performance returns are calculated using the dealing prices of the accumulation shares which are calculated using market prices and foreign exchange rates available at 12 noon. The benchmark returns, which are based on close of business prices, may reflect variances to the Fund performance that are due to timing differences. Performance returns are in Sterling. Source: J.P. Morgan. 9

12 Net asset values and Ongoing charges Date Net asset value per share class Number of shares Net asset value per share Ongoing charges* A-Class Accumulation Shares ,082 1,886, p 1.68% ,588 2,488, p 1.68% ,252 2,817, p 1.68% ,686 1,990, p 1.68% A-Class Income Shares C 730 1,272, p 1.68% C 879 1,378, p 1.68% C 1,196 1,495, p 1.68% , p 1.68% B-Class Accumulation Shares , p 1.18% , p 1.18% , , p 1.18% , p 1.18% C-Class Accumulation Shares ,347 1,165, p 0.93% ,946 1,504, p 0.93% ,063 1,875, p 0.93% ,808 1,616, p 0.93% C-Class Income Shares C 17,103 14,831, p 0.93% C 15,239 11,801, p 0.93% C 13,788 8,465, p 0.93% ,905 8,029, p 0.93% C The net asset value and the net asset value per income share are shown ex-dividend at the financial year end. * The Ongoing charges takes into account the ACD fee, the fixed expenses and any expenses paid to an affiliate in respect of stocklending activities, expressed as a percentage of the average daily net asset values over the period. 10

13 Portfolio statement As at 31 May 2017 Investment Holding Market value Total net assets % Investment Holding Market value Total net assets % Equities 96.06% (93.24%) Consumer Discretionary 18.00% (20.71%) Distributors 0.00% (1.87%) Household Durables 1.62% (0.00%) Mohawk Industries, Inc. 1, Internet & Direct Marketing Retail 7.38% (9.43%) Amazon.com, Inc. 1, Priceline Group, Inc. (The) , Media 3.18% (2.94%) DISH Network Corp. A 12, Multiline Retail 2.07% (1.27%) Kohl s Corp. 13, Specialty Retail 3.75% (5.20%) AutoZone, Inc Bed Bath & Beyond, Inc. 8, Best Buy Co., Inc. 3, Consumer Discretionary total 3, Consumer Staples 1.48% (1.79%) Beverages 0.00% (1.79%) Food & Staples Retailing 1.48% (0.00%) Walgreens Boots Alliance, Inc. 4, Consumer Staples total Energy 6.29% (6.22%) Oil, Gas & Consumable Fuels 6.29% (6.22%) Concho Resources, Inc. 3, Kinder Morgan, Inc. 26, Marathon Petroleum Corp. 10, , Energy total 1, Financials 21.49% (20.78%) Banks 2.89% (3.14%) Wells Fargo & Co. 13, Capital Markets 6.58% (3.06%) Charles Schwab Corp. (The) 14, S&P Global, Inc. 2, T Rowe Price Group, Inc. 10, , Consumer Finance 5.23% (6.01%) Ally Financial, Inc. 32, Capital One Financial Corp. 8, , Insurance 6.79% (8.57%) American International Group, Inc. 14, Loews Corp. 15, , Financials total 4, Health Care 9.22% (9.88%) Biotechnology 2.15% (5.16%) Vertex Pharmaceuticals, Inc. 4, Health Care Equipment & Supplies 1.96% (2.49%) Intuitive Surgical, Inc Health Care Providers & Services 5.11% (2.23%) Acadia Healthcare Co., Inc. 8, UnitedHealth Group, Inc. 5, Health Care total 1, Industrials 5.96% (6.13%) Airlines 2.52% (2.34%) Delta Air Lines, Inc. 12, Commercial Services & Supplies 1.49% (0.00%) Waste Connections, Inc. 3, Machinery 1.95% (2.09%) Stanley Black & Decker, Inc. 3, Road & Rail 0.00% (1.70%) Industrials total 1, Information Technology 24.29% (19.88%) Electronic Equipment, Instruments & Components 0.00% (1.39%) Internet Software & Services 10.72% (10.55%) Alphabet, Inc. C 1,660 1, Facebook, Inc. A 6, , IT Services 3.04% (6.97%) Mastercard, Inc. A 6, Semiconductors & Semiconductor Equipment 2.17% (0.00%) NVIDIA Corp. 3, Software 4.05% (0.97%) Electronic Arts, Inc. 6, ServiceNow, Inc. 2, Technology Hardware, Storage & Peripherals 4.31% (0.00%) Apple, Inc. 6, Information Technology total 4, Materials 3.54% (3.58%) Construction Materials 0.00% (1.52%) Containers & Packaging 3.54% (2.06%) Ball Corp. 10, WestRock Co. 7, Materials total Real Estate 3.55% (2.17%) Equity Real Estate Investment Trust (REIT) 3.55% (2.17%) Kimco Realty Corp. 21, Rayonier, Inc. 17, Real Estate total Utilities 2.24% (2.10%) Electric Utilities 2.24% (2.10%) Xcel Energy, Inc. 11, Utilities total Equities total 18, Investment assets 18, Net other assets Net assets 19, The comparative percentage figures in brackets are as at 30 November

14 Portfolio movements For the six months ending 31 May 2017 Total of all purchases for the period 8,319 Total of all sales for the period 10,957 Major purchases Cost Apple, Inc. 803 Charles Schwab Corp. (The) 481 Electronic Arts, Inc. 459 Concho Resources, Inc. 455 Kimco Realty Corp. 445 AutoZone, Inc. 418 Stanley Black & Decker, Inc. 378 Kohl s Corp. 363 Ball Corp. 353 Bed Bath & Beyond, Inc. 350 Walgreens Boots Alliance, Inc. 341 ServiceNow, Inc. 315 Mohawk Industries, Inc. 315 NVIDIA Corp. 308 Acadia Healthcare Co., Inc. 297 Waste Connections, Inc. 280 UnitedHealth Group, Inc. 273 Alphabet, Inc. C 271 S&P Global, Inc. 240 Vertex Pharmaceuticals, Inc. 150 Major sales Proceeds Mastercard, Inc. A 717 Facebook, Inc. A 688 Ulta Salon Cosmetics & Fragrance, Inc. 656 Gilead Sciences, Inc. 640 Amazon.com, Inc. 583 Pioneer Natural Resources Co. 525 Priceline Group, Inc. (The) 462 Caterpillar, Inc. 458 Genuine Parts Co. 404 PayPal Holdings, Inc. 401 Kansas City Southern 371 Monster Beverage Corp. 370 Martin Marietta Materials, Inc. 345 Intuitive Surgical, Inc. 334 Arrow Electronics, Inc. 326 Capital One Financial Corp. 321 American International Group, Inc. 305 Vertex Pharmaceuticals, Inc. 295 Alphabet, Inc. C 292 Loews Corp

15 Financial statements Statement of total return (Unaudited) For the six months ending 31 May Income Net capital gains/(losses) 1,184 (205) Revenue Expenses (101) (86) Net revenue before taxation 7 12 Taxation (16) (14) Net expense after taxation (9) (2) Total return before distributions 1,175 (207) Distributions 2 (2) Change in net assets attributable to shareholders from investment activities 1,177 (209) Balance sheet (Unaudited) As at Assets: 31 May November 2016 Investments 18,465 19,898 Current assets: Debtors Cash and bank balances 581 1,311 Total assets 19,350 21,369 Liabilities: Creditors: Distribution payable (11) Other creditors (128) (17) Total liabilities (128) (28) Net assets attributable to shareholders 19,222 21,341 Statement of change in net assets attributable to shareholders (Unaudited) For the six months ending 31 May Restated Opening net assets attributable to shareholders 21,341 20,483 Amounts receivable on issue of shares 1, Amounts payable on cancellation of shares (4,545) (4,916) (3,296) (4,092) Change in net assets attributable to shareholders from investment activities (see above) 1,177 (209) Closing net assets attributable to shareholders 19,222 16,182 As the comparatives in the above table are for the previous interim period, the net assets at the end of that period will not agree to the net assets at the start of the current period. 13

16 JPM Balanced Managed Fund Investment objective and policy The Fund aims to provide long-term capital growth by investing in a global portfolio of assets. The Fund will primarily invest in Equity and Equity-Linked Securities (which may include smaller companies and Participation Notes) and Debt Securities (which may include Below-Investment Grade Bonds and Unrated Securities). Issuers of securities may be located in any country, including Emerging Markets and the Fund may invest in assets denominated in any currency. The Fund may use Financial Derivative Instruments (derivatives) and forward transactions for investment purposes and Efficient Portfolio Management, including hedging, where appropriate. The Fund may use Financial Derivative Instruments (derivatives) and forward transactions for investment purposes and Efficient Portfolio Management, including hedging, where appropriate. Other instruments as permitted in the stated investment and borrowing powers of the Company including, but not limited to, cash and cash equivalents may be held on an ancillary basis, as appropriate. To enhance investment returns, the Investment Adviser may use Long and Short positions (achieved through the use of derivatives) to vary asset, currency and market allocations in response to market conditions and opportunities. As a result the Fund may have net long or net short exposure to certain markets, sectors or currencies from time to time. Although most of the non-sterling securities will be hedged back into Sterling, the Investment Adviser will also use opportunities in the foreign exchange market to maximise returns. Risk profile The value of your investment may fall as well as rise and you may get back less than you originally invested. The value of Equity and Equity-Linked Securities may fluctuate in response to the performance of individual companies and general market conditions. Furthermore, Participation Notes run the risk of counterparty default which may result in the loss of the full market value of the Note. The value of Bonds and other Debt Securities may change significantly depending on market, economic and interest rate conditions as well as the creditworthiness of the issuer. Issuers of Bonds and other Debt Securities may fail to meet payment obligations (default) or the credit rating of Bonds and other Debt Securities may be downgraded. These risks are typically increased for Below-Investment Grade Bonds and certain Unrated Securities which may also be subject to higher volatility and be more difficult to sell than Investment Grade Bonds. Bonds and other Debt Securities with a lower credit rating may have a higher risk of defaulting which may in turn have an adverse effect on the performance of Funds which invest in them. The Fund may use Financial Derivative Instruments (derivatives) and/or forward transactions for investment purposes. The value of derivatives can be volatile. This is because a small movement in the value of the underlying asset can cause a large movement in the value of the derivative and therefore, investment in derivatives may result in losses in excess of the amount invested by the Fund. Emerging Markets may be subject to increased political, regulatory and economic instability, less developed custody and settlement practices, poor transparency and greater financial risks. Emerging Market currencies may be subject to volatile price movements. Emerging Market securities may also be subject to higher volatility and be more difficult to sell than non-emerging Market securities. The Fund invests in securities of smaller companies which may be more difficult to sell, more volatile and tend to carry greater financial risk than securities of larger companies. To the extent that any underlying assets of the Fund are denominated in a currency other than Sterling and are not hedged back to Sterling, movements in currency exchange rates can adversely affect the return of your investment. The currency hedging that may be used to minimise the effect of currency fluctuations may not always be successful. The Fund s asset allocation is actively managed. There is a risk that the performance of the Fund will suffer if the allocation to any particular asset class is low when that asset class is outperforming or high when that asset class is underperforming. Please refer to Part 11 of the Prospectus for details of the general risk factors affecting this Fund in addition to the specific risk factors above. Fund review Global activity data continued to show broad-based strength over the period, with reflation broadening out beyond the US. The period saw a synchronised upswing in global economic data across developed and emerging markets. While data demonstrated a broadening out of reflation beyond the US, housing and labour market data as well as business and consumer confidence surveys in the world s largest economy were robust. This backdrop enabled the Federal Reserve (Fed) to raise interest rates at its December and March meetings. However, the path for fiscal stimulus looked less certain. Doubts over the new Trump administration came to the forefront as its healthcare reform bill failed to reach a vote in the House, raising concerns about its ability to deliver tax reform. Following a soft start to April, markets rebounded in the second half of the month, helped by increased market focus on continued strong global data and a favourable outcome in the first round of the French election. Against this backdrop, the underlying fund delivered a positive return but underperformed its benchmark. Active asset allocation detracted from relative performance. As markets focused on the political agenda the US dollar moved lower, and currency was our biggest detractor, with negative returns coming predominantly from our long US dollar vs. short the Australian dollar and Korean won strategies. Over the period we maintained an overweight to equities, which contributed positively to relative performance. In particular, signs of improvement in emerging market (EM) growth and the pause in the upward trajectory of the US dollar since the start of the year provided a good backdrop for our overweight EM equity positioning. In fixed income, our asset allocation detracted, as we maintained our underweight duration relative to the benchmark, which accommodates the improved growth outlook. Elsewhere, security selection within our equity allocation was positive. However, this was offset by security selection in our fixed income allocation. You should remember that past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. 14