JPMorgan Investment Funds

Transcription

1 JPMorgan Investment Funds Audited Annual Report 31 December 2008

2 This report is an abridged version the audited annual report established in conformity with the Luxembourg Law 20 December 2002 on Undertakings for Collective Investment as amended. 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 Investment Funds Audited Annual Report Contents Board Directors 1 Management and Administration 2 Board Directors Report 3 Investment Managers Report 4 Independent Auditor s Report 5 Financial Statements and Statistical Information Combined Statement 6-7 Combined Statement Operations and Changes in 8-9 Statement Changes in the Number Shares Statistical Information Notes to the Financial Statements Schedule Investments JPMorgan Investment Funds -Europe Select Equity Fund 20 JPMorgan Investment Funds -Europe Select Mega Cap Fund 23 JPMorgan Investment Funds -Global Balanced Fund (USD) 26 JPMorgan Investment Funds -Global Bond Fund (USD) 34 JPMorgan Investment Funds -Global Capital Preservation Fund (USD) 39 JPMorgan Investment Funds -Global Enhanced Bond Fund 43 JPMorgan Investment Funds -Global Financials Fund 48 JPMorgan Investment Funds -Global Short Duration Fund 51 JPMorgan Investment Funds -Highbridge Statistical Neutral Fund 53 JPMorgan Investment Funds -Japan 50 Equity Fund 56 JPMorgan Investment Funds -Japan Behavioural Finance Equity Fund 58 JPMorgan Investment Funds -JF Asia ex-japan Fund 60 JPMorgan Investment Funds -US Bond Fund 61 Appendix: Unaudited Additional Disclosures Fund Expense Ratios and Capped Expense Ratios 67 Summary Investment Objectives the Sub-Funds 69 Performance and Volatility 70 Interest Rate Received/(Charged) on Bank Accounts 72 Sub-Fund Share Classes Subject to Taxe d Abonnement Rate Portfolio Turnover Ratio 72 Historical Statements Changes in the Number Shares 73 For additional information please consult No subscriptions can be received solely on the basis this report.subscriptions are only valid if made on the basis the current prospectus, the current simplified prospectus, supplemented by the latest audited annual report and, if published thereafter, the latest unaudited semi-annual report. The current prospectus, the current simplified prospectus, the unaudited semi-annual reports, as well as the audited annual report can be obtained free charge from the registered fice the SICAV and from local paying agent.

4 JPMorgan Investment Funds Board Directors Chairman Iain O.S. Saunders Banker Duine, Ardfern Argyll PA31 8QN United Kingdom Directors André Elvinger (until 31 December 2008) Partner Elvinger, Hoss & Prussen 2, Place Winston Churchill L-2014 Luxembourg Grand Duchy Luxembourg Jean Frijns Pressor, Finance and Investments Antigonelaan 2 NL-5631 LR Eindhoven The herlands Berndt May Managing Director JPMorgan Asset Management (Europe) S.à r.l. Austrian Branch Führichgasse 8 A-1010 Vienna Austria Deputy Chairman Pierre Jaans Economist 3, rue de Kahler L-8356 Garnich Grand Duchy Luxembourg Jacques Elvinger (from 1 January 2009) Partner Elvinger, Hoss & Prussen 2, place Winston Churchill L-2014 Luxembourg Grand Duchy Luxembourg Andrea L. Hazen Managing Director JPMorgan Asset Management (UK) Limited 20 Finsbury Street London EC2Y 9AQ United Kingdom Robert Van der Meer Pressor Finance 9A Lange Vijverberg NL-2513 AC The Hague The herlands Changes to the Composition the Board Directors On 31 December 2008, Mr André Elvinger resigned from the Board Directors.In his place Mr Jacques Elvinger was co-opted as a Director on 1 January Registered Office European Bank & Business Centre 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg 1

5 JPMorgan Investment Funds Management and Administration Management Company, Registrar and Transfer Agent, Global Distributor and Domiciliary Agent JPMorgan Asset Management (Europe) S.à r.l. European Bank & Business Centre 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 20 Finsbury Street London EC2Y 9AQ United Kingdom JF Asset Management Limited 21st floor, Chater House 8 Connaught Road Central, Hong Kong Highbridge Capital Management LLC, 9 West 57th Street New York, NY United States America American Century Global Investment Management Inc. 666 Third Avenue New York, NY United States America JF Asset Management (Singapore) Limited 168 Robinson Road 17th Floor, Capital Tower Singapore Custodian, Corporate and Administrative Agent J.P. Morgan Bank Luxembourg S.A. European Bank & Business Centre 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Independent Auditor PricewaterhouseCoopers S.à r.l. Réviseur d entreprises 400, route d Esch BP 1443 L-1014 Luxembourg Grand Duchy Luxembourg Legal Adviser Elvinger, Hoss & Prussen 2, place Winston Churchill L-2014 Luxembourg Grand Duchy Luxembourg 2

6 JPMorgan Investment Funds Board Directors Report The Board Directors is pleased to present the Audited Annual Report for the year ended 31 December Structure and Size the Fund The Fund is a variable capital investment company with multiple Sub-Funds, organised as a "société anonyme", under the laws the Grand Duchy Luxembourg, organised as an "umbrella" with a number Sub-Funds, each which has its own investment policy and restrictions. At the year end the Fund had issued shares in 42 Sub-Funds. During the year the following Sub-Funds changed their names: JPMorgan Investment Funds - JF Asia Diversified Fund was renamed JPMorgan Investment Funds - JF Asia ex-japan Fund During the year a number Sub-Funds were liquidated and details these are given in Note 13 on page 35.This Note also gives the dates on which the change names listed above took place. During the year, the total net assets the Fund decreased from USD 21.4 billion to USD 12.5 billion at year end. The Board Directors decided to open on 31 December as an additional business day to deal in the fund. The Fund qualifies as an Undertaking for Collective Investments in Transferable Securities under the amended EC Directive 85/ December 1985 and may therefore be fered for sale in European Union Member States, subject to registration 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. The Fund and the Sub-Funds are currently registered for fer and distribution in the Grand Duchy Luxembourg and in the following jurisdictions: Austria, Belgium, Chile, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Macau, The herlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan and United Kingdom. Fair Valuation In managing the daily priced funds the Board's principle is to ensure that portfolios are appropriately valued to give equal treatment to Shareholders and in this context the Management Company has implemented a special Fair Committee (FVC) to address valuation concerns arising from the current market and liquidity events.the Committee considers on a daily basis; current market information on the portfolio securities held, including last trading prices taking into account Senior Management views on the reliability such information, indirect exposure through Over the Counter credit derivatives, and the estimated timing asset disposal to meet anticipated investor redemptions. In response to a deterioration the market conditions pertaining to a small number asset classes / debt instruments over the last year and in particular widening spreads on asset-backed and corporate securities and a sharp decline in market liquidity, the regular pricing basis for the Sub-Funds - using the last available price for securities as supplied by independent price providers - had become an unreliable estimate the realizable value those instruments. In view this the FVC implemented pricing adjustments for the following Sub-Funds as disclosed in note 2 a) : JPMorgan Investment Funds Global Bond Fund (USD) JPMorgan Investment Funds - Global Enhanced Bond Fund, JPMorgan Investment Funds - Global Short Duration Fund, and JPMorgan Investment Funds - US Bond Fund. Responsibility the Directors The responsibility the Directors the Fund is governed by Luxembourg law.with respect to the annual accounts the Fund, the duties the Directors are governed by general corporate law and the law 19 December 2002 on, inter alia, the accounting and annual accounts undertakings and by the law 20 December 2002 relating to undertakings for collective investments. Changes to the Board Directors On 31 December 2008, Mr André Elvinger resigned as a Director the Fund.The Board would like to take this opportunity to thank Mr Elvinger for his service to the Fund. Mr Jacques Elvinger was co-opted as a Director with effect from 1 January 2009 and his appointment will be approved by Shareholders at the forthcoming Annual General Meeting. Annual General Meeting The next Annual General Meeting the Company will be held on 24 April The Board Directors Luxembourg, 13 March

7 JPMorgan Investment Funds Investment Managers Report For the year ended 31 December 2008 review 2008 For the vast majority investors 2008 has been a terrible year.global stock markets plummeted as bad newsflow shocks, tight credit conditions and rapidly deteriorating economic data caused high levels volatility and risk aversion.the situation was compounded as investors rushed to safety, hedge funds experienced large redemptions and there was a general trend global deleveraging. While 2008 was very negative for most investors, it was also the year smashed records.stock market volatility, as measured for the S&P 500 by the Volatility Index (VIX), reached a record high almost 90, the price gold and oil reached new highs and the euro achieved an all-time high against the US dollar and sterling.some financial companies also wrote down record losses, while many US, UK and eurozone economic data releases reached record lows and some central banks cut interest rates with unprecedented speed. During the first half the year sentiment was dominated by worries about rising inflation as commodity prices surged.this situation was reversed, however, as ongoing concerns about the risks weaker economic growth came to fruition and economic data releases in the US, UK and eurozone tumbled.all three regions recorded negative real Gross Domestic Product growth in the third quarter.commodity prices fell, particularly the price oil, which eventually fed through into lower inflation rates and some observers even started to worry about the prospect deflation.this opened the door for the European Central Bank (ECB) and the Bank England, which both target inflation levels about 2, to ease monetary policy and cut interest rates, to reach 2.0 in the UK and 2.5 in the eurozone in December. The US Federal Reserve had cut interest rates aggressively throughout the year, reaching 1.0 in October, while, among others, the Reserve Bank Australia, the Bank Canada, the Swedish Riksbank and the Bank Japan also reduced interest rates in Equity markets were under pressure in March when Bear Stearns, the US investment bank, suffered a crisis confidence, before it was quickly rescued by JPMorgan in a deal facilitated by the US Federal Reserve.September was also a highly dramatic month and equity prices tumbled before the US government rescued mortgage giants Fannie Mae and Freddie Mac.Then, just one week later, the collapse investment banking giant, Lehman Brothers, and the sale Merrill Lynch to Bank America sent shock waves through the global financial system.in addition, insurance giant AIG received a USD 85 billion rescue package from the Fed.Also in September, Halifax Bank Scotland agreed to be taken over by Lloyds TSB, Bradford & Bingley was nationalised, Goldman Sachs and Morgan Stanley, the last remaining US investment banks, became regulated banks, and Fortis received support from the Benelux authorities. With the global financial system in dire straits, the Troubled Asset Relief Program, worth USD 700 billion, was passed by the US Congress at the start October as a facility to buy up bad debt from banks.meanwhile in the UK, the government announced a package enabling it to inject up to GBP 50 billion into the biggest banks, guarantee up to GBP 250 billion banks debt instruments and fer at least GBP 200 billion in short-term lending support.in addition, the UK and US introduced temporary bans on the short selling financial stocks to try to relieve pressure on their share prices.in November the two countries took further action: the Fed announced the USD 800 billion Term Asset Backed Securities Loan Facility to buy up mortgage debt and support consumer loans, while the UK cut VAT from 17.5 to 15. Global bond markets also experienced a volatile 12 months, against a backdrop changing investor sentiment and sharp reversals in interest rate expectations.in the summer the prospect potential interest rate increases caused bond markets to sell f, however, as problems in the financial sector became critical in September, government bonds once again saw strong demand causing yields to fall and prices to rally as the credit crisis sparked a flight to quality, which endured for the remainder the year despite interest rate cuts. Outlook for 2009 It is currently very difficult to gauge the depth and duration the global economic downturn.it is important for policymakers to somehow break the negative feedback loop between poor economic data and tightening credit market conditions.a lot policy measures have been taken in recent months, and further announcements are expected from incoming President Obama in the US, and therefore hopefully it will just be a question time for these policies to yield results. On the positive side, the decline in energy prices should provide a useful boost to household purchasing power.inflation levels are already falling, which should provide some support to real income even if nominal wages do not rise.interest rates have also been significantly reduced in most major economies which, providing they are passed on and credit is actually made available, should provide some relief to the battered mortgage market and corporate borrowers. For investors to really gain confidence we would like to see volatility fall back towards more normal levels it has been extremely high for many months now, as measured by the VIX.We would also like to see the spreads between three-month Libor and policy rates narrow towards their historic averages in the UK, eurozone and US.Three-month Libor is currently significantly higher, but is important because it is widely used to price mortgages, loans and in the derivatives market. Finally, it is a positive sign that interest rates and inflation levels are already falling. The Investment Managers 13 March 2009 The information stated in this report is historical and not necessarily indicative future performance. 4

8 Independent Auditor s Report To the Shareholders JPMorgan Investment Funds PricewaterhouseCoopers Société à responsabilité limitée Réviseur d Entreprises 400, route d Esch B.P L-1014 Luxembourg Telephone Facsimile info@lu.pwc.com Following our appointment by the General Meeting the Shareholder dated 25 April 2008, we have audited the accompanying financial statements JPMorgan Investment Funds and each its sub-funds, which comprise the Combined Statement and the Schedule Investments as at 31 December 2008 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. Board Directors the SICAV s responsibility 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.this responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility 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 by the "Institut des Réviseurs d'entreprises".those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 Auditor's judgment, including the assessment the risks material misstatement the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor 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, these financial statements give a true and fair view the financial position JPMorgan Investment Funds and each its sub-funds as 31 December 2008, 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. Without qualifying our opinion, we draw attention to Note 2 a) to the financial statements relating to the valuation certain assets.this note explains that, in the absence a liquid market, the assets certain sub-funds have been subject to a valuation process described therein.the list the related sub-funds and their exposure as at 31 December 2008 to assets subject to such valuation process are further disclosed in Note 2 a) to the financial statements. Other matter 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 S.à r.l. Luxembourg, 13 March 2009 Réviseur d entreprises Represented by Marc Schernberg R.C.S. Luxembourg B TVA LU

9 JPMorgan Investment Funds Combined Statement JPMorgan Investment Funds Combined USD Europe Select Equity Fund EUR Europe Select Mega Cap Fund EUR Global Balanced Fund (USD) USD Investments in Securities at (1) 10,091,204,831 85,125,328 11,622, ,242,424 Acquisition Cost: 12,216,880, ,748,214 17,313, ,191,183 Investment in TBAs at (2) 464,597, Cash at Bank 2,022,258, , ,563 24,509,277 Time Deposits and Cash Equivalents 310,222, Amounts Receivable on Sale Investments 28,617, ,277,866 Amounts Receivable on Sale TBAs (2) 440,403, Amounts Receivable on Subscriptions 103,139,564 5,380 3, ,024 Interest and Dividends Receivable, 37,557, ,379 27,036 3,090,041 Tax Reclaims Receivable 412,223 43,275 9,251 16,151 Fee Waiver (3) 15,306 2, Other Receivables 102, Unrealised Gain on Forward Foreign Exchange Contracts 26,032,586 2,077,249 8,667 - Unrealised Gain on Financial Futures Contracts 34,695,557 15, Credit Default Swaps at 102, Interest Rate Swaps at 157, Price Lock Swaps at 1,139, Total Return Swaps at 13,898, Option Contracts at 26,045, Total 13,600,602,384 87,822,654 11,864, ,087,813 Liabilities Bank Overdraft 1, Open Short Positions on TBAs (2) 425,758, Amounts Payable on Purchase Investments 73,451, ,335 Amounts Payable on Purchase TBAs (2) 480,285, Amounts Payable on Redemptions 62,150, ,112 50, ,887 Management and Advisory Fees Payable 13,530,584 23,359 14, ,497 Performance Fees 34,331, Other Payables 2,388,025 17,150 3,952 58,062 Unrealised Loss on Forward Foreign Exchange Contracts 20,651, ,988,063 Unrealised Loss on Financial Futures Contracts 1,505,665-1, ,054 Credit Default Swaps at 7,389, Interest Rate Swaps at 26,237, Total Return Swaps at 1,645, Total Liabilities 1,149,327, ,621 70,484 3,465,898 Total 12,451,274,404 87,650,033 11,793, ,621,915 Historical Total 31 December ,371,859, ,258,620 62,732, ,095, December ,125,854,907 54,144,868 49,112, ,625, December ,421,448,687 10,190,026 43,931, ,190, December ,217,739,726 27,248, ,349, ,425,443 (1) Please refer to Note 2 a). (2) Please refer to Note 2 i). (3) Please refer to Note 3 a). The accompanying notes form an integral part these financial statements. 6

10 JPMorgan Investment Funds Combined Statement (continued) Global Bond Fund (USD) USD Global Capital Preservation Fund (USD) USD Global Enhanced Bond Fund EUR Global Financials Fund USD Global Highbridge Short Duration Statistical Fund Neutral Fund USD EUR Japan 50 Japan Behavioural Equity Finance Equity Fund Fund JPY USD JF Asia ex-japan Fund (4) USD US Bond Fund USD 63,694,477 60,042,908 27,962, ,877,185 17,127,877 1,756,512,214 30,864,761,400 42,676, ,531,276 59,615,787 73,630,838 63,800,051 38,963, ,166,860 19,372,015 1,761,077,936 51,150,076,201 47,633, ,146, ,263,385 63,158,738-60,263, ,987,088 6,983,044 6,283,857 3,836,846 7,360,671 7,684,072 1,123,847, ,491, ,775 24,699,078 5,371, , ,909,141 2,233,815 8,083, ,969,302-58,976, ,207,793 80, ,134 19, ,705-28,617, ,402-4,631,174 7, , , , ,002 79,060 7,951 32,608,511 35,106 1,158, ,935 26,679 12,474-5, , , , , , ,243-16,580, ,094, , ,496-50, , ,586, , , , , ,402,434 68,357, ,771, ,819,990 24,971,823 2,918,571,245 31,779,857,523 45,614, ,103, ,238, ,856,892-47,955, ,593, , , ,988,680 49,316,650 2,488,543 1,985, ,903 62,544,550-71,304, ,508, , , , , ,132 14,019,637 21,641,064-10,225, ,336 19,049 68,328 13, ,920 7,500 4,117,012 16,236,472 32, ,509 42, ,567, ,625 20,917 13,763 31,107 11, ,676 2,656,348 13,291 96,940 20, , ,655 7,083 6,469, , , , , , , ,476-44, ,663, , ,076, , ,767 75,809,751 89,850,534 2,534,513 12,787, ,653,028 71,738,748 67,565,801 31,694, ,313,948 24,765,056 2,842,761,494 31,690,006,989 43,080, ,315,938 65,585, ,540,721 56,022, ,270, ,591, ,867,017 2,536,907,979 61,783,248, ,132,088 1,570,642, ,294, ,299,732 68,884, ,501, ,863, ,839, ,743,758 73,365,835, ,397,687 1,491,870, ,844,843 8,412, ,827, ,011, ,327,438-11,410,319, ,063, ,343, ,781, ,577, ,838, ,860, ,980, ,765, ,630,689 (4) This Sub-Fund changed its name from JF Asia Diversified Fund on 31 March

11 JPMorgan Investment Funds Combined Statement Operations and Changes in For the Year Ended 31 December 2008 JPMorgan Investment Funds Combined USD Europe Select Equity Fund EUR Europe Select Mega Cap Fund EUR Global Balanced Fund (USD) USD at the Beginning the Year * 21,196,768, ,258,620 62,732, ,095,598 Income Dividend Income, 147,498,839 5,366,280 1,361,946 5,227,037 Interest Income, 431,124,176 2,807 7,123 8,993,278 Securities Lending Income 9,932, ,313 96, ,719 Bank Interest 14,104,418 12,893 11, ,262 Interest on Swap Transactions 83,269, Total Income 685,929,721 5,785,293 1,476,942 15,220,296 Expenses Management and Advisory Fees 209,724,669 1,005, ,519 3,547,215 Custodian, Corporate, Administrative and Domiciliary Agency Fees 14,111, ,565 88, ,860 Registrar and Transfer Agency Fees 4,138,982 72,255 14,151 40,061 Taxe d Abonnement 6,697,136 34,567 14, ,192 Overdraft Interest 288, Interest on Swap Transactions 93,756, Sundry Fees** 11,720, ,937 21, , ,438,023 1,407, ,004 4,466,215 Less: Fee Waiver (1) 4,732,908 77,412 15, ,651 Total Expenses before Performance Fees 335,705,115 1,329, ,926 4,331,564 Performance Fees 34,331, Total Expenses 370,036,171 1,329, ,926 4,331,564 Investment Income/(Loss) 315,893,550 4,455, ,016 10,888,732 Realised Gain/(Loss) on Sale Investments (2,320,610,103) (77,929,705) (18,094,843) (14,404,225) Realised Gain/(Loss) on Forward Foreign Exchange Contracts (32,988,380) 3,159,297 (102,896) (4,242,539) Realised Gain/(Loss) on Financial Futures Contracts (122,410,426) (699,990) (558,062) (3,576,222) Realised Gain/(Loss) on Foreign Exchange (43,900,669) (7,866) (90,891) (721,497) Realised Gain/(Loss) on Option Contracts 246,279, Realised Gain/(Loss) on Forward Rate Agreements 42, Realised Gain/(Loss) on TBAs 20,273, Realised Gain/(Loss) on Swaps 324,066, Realised Gain/(Loss) for the Year (1,929,247,672) (75,478,264) (18,846,692) (22,944,483) Change in Unrealised Gain/(Loss) on Investments (1,993,599,647) (23,920,220) (2,673,994) (87,855,864) Change in Unrealised Gain/(Loss) on Forward Foreign Exchange Contracts (32,768,328) 1,325,706 67,459 (2,470,383) Change in Unrealised Gain/(Loss) on Financial Futures Contracts 69,237,211 17,933 (3,570) (926,871) Change in Unrealised Gain/(Loss) on Foreign Exchange 12,855,866 (11,501) (2,381) 11,997 Change in Unrealised Gain/(Loss) on Option Contracts (30,158,150) Change in Unrealised Gain/(Loss) on Forward Rate Agreements (173,858) Change in Unrealised Gain/(Loss) on TBAs 3,370, Change in Unrealised Gain/(Loss) on Swaps 13,516, Change in Unrealised Gain/(Loss) for the Year (1,957,719,113) (22,588,082) (2,612,486) (91,241,121) Increase/(Decrease) in as a Result Operations (3,571,073,235) (93,610,647) (20,634,162) (103,296,872) Movements in Share Capital Subscriptions 14,299,644,747 56,573,198 15,732,289 38,988,078 Redemptions (19,461,579,379) (204,518,424) (46,037,169) (97,164,658) Increase/(Decrease) in as a Result Movements in Share Capital (5,161,934,632) (147,945,226) (30,304,880) (58,176,580) Dividend Distribution (12,486,237) (52,714) (95) (231) Total at the End the Year 12,451,274,404 87,650,033 11,793, ,621,915 * The opening balance was combined using the foreign exchange rate as at 31 December 2008.The same net assets when combined using the foreign exchange ruling as at 31 December 2007 reflected a figure USD 21,371,859,183. ** Sundry Fees are principally comprised Directors fees, audit and tax related fees, registration, publication, mailing and printing fees, as well as legal and marketing expenses. (1) Please refer to Note 3 a). The accompanying notes form an integral part these financial statements. 8

12 JPMorgan Investment Funds Combined Statement Operations and Changes in (continued) For the Year Ended 31 December 2008 Global Bond Fund (USD) USD Global Capital Preservation Fund (USD) USD Global Enhanced Bond Fund EUR Global Financials Fund USD Global Highbridge Short Duration Statistical Fund Neutral Fund USD EUR Japan 50 Japan Behavioural Equity Finance Equity Fund Fund JPY USD JF Asia ex-japan Fund (2) USD US Bond Fund USD 398,540,721 56,022, ,270, ,591, ,867,017 2,536,907,979 61,783,248, ,132,088 1,570,642, ,294, ,554-5,131, ,000,270,332 1,596,223 23,694,991-7,299,361 1,731,189 4,611,195 43,997 2,370, ,533, , ,683,793 46,889 5,939 30, ,441 5, , , , ,642 62,311 63,209 36,846 44, , ,230 25,446 1,204,035 76,880 2,236, , ,216 48,185, ,440 9,701,660 2,295,993 5,580,647 5,635,415 2,526, ,389,379 1,001,406,006 1,718,132 25,244,434 14,700, ,718 1,246, ,136 2,107, ,774 48,942, ,399,512 1,004,255 11,715,581 1,382, , , , , ,267 1,447,657 32,599, ,555 1,103, ,004 44,650 42,831 46, ,486 11, ,828 1,461,262 16, ,732 76,224 47,377 46,729 36,977 71,251 16,635 1,365,369 7,028,282 32, ,479 54,339 1, ,158 28, ,124, , ,160 57,389, ,322 99,369 51,925 55,409 84,830 34,957 2,635,083 32,098,359 60, , ,427 3,619,675 1,586,812 1,852,175 2,645, , ,285, ,615,200 1,293,558 14,035,367 2,758, , , ,850 55, , ,926 6,588,645 48,415 30, ,333 3,361,138 1,426,909 1,659,325 2,589, , ,162, ,026,555 1,245,143 14,004,866 2,576, ,567, ,361,138 1,426,909 1,659,325 2,589, , ,730, ,026,555 1,245,143 14,004,866 2,576,133 6,340, ,084 3,921,322 3,045,435 2,104,534 34,658, ,379, ,989 11,239,568 12,124,459 (17,699,198) (6,611,408) (34,398,087) (76,099,897) 747, ,927 (15,877,828,800) (35,189,996) (170,218,212) (65,196,828) (849,172) 1,755,469 1,096, ,350 (2,442,772) (1,667,274) (29,514,175) 657,756 21,635 (645,696) (12,159,386) (886,513) (6,465,999) (461,841) (2,768,582) - (119,490,959) ,675 (62,999) (423,338) (1,746,091) 359,616 47,148 (58,370) 8,555,566 (250,250) (895,564) 154,444 1,972,731 4,105, , , ,193 5,065-2, ,679-3,381,439-92, ,712,198 (10,679,608) 973,640 (5,203,454) - (3,051,234) 243,875, (1,456,516) (38,870,888) (1,086,601) (42,572,944) (75,605,772) (7,206,287) 242,542,006 (16,018,278,368) (34,782,490) (171,092,141) (60,314,530) (14,002,778) (8,620,214) 16,349,741 (56,123,472) (6,706,748) (4,297,382) (11,059,678,535) 277,345 (682,867,971) 13,660,503 (710,410) 348,815 (773,113) (624,302) 1,633,427 (6,459,049) ,168 3,032, , ,448 (70,307) 533,077-16,580, ,134, ,046 (18,930) 1,535,677 (5,006) 95,182 24,707 (8,527,752) (12,316) 14,301 (205,292) (21,787) (799,210) 23,366-2, (116,106) (23,993) - (11,001) - (6,754) (213,916) - 475,251 - (7,371) ,796,941 (324,109) (597,836) 98, ,056 23,319, ,149,477 (12,048,860) (8,901,655) 18,154,303 (56,823,087) (3,892,593) 12,588,177 (11,051,626,287) 265,029 (682,853,670) 20,024,541 (44,579,226) (9,119,172) (20,497,319) (129,383,424) (8,994,346) 289,788,942 (26,447,525,204) (34,044,472) (842,706,243) (28,165,530) 22,240,547 86,595,119 22,174, ,240,602 3,374,661 2,990,404,394 29,148,095,670 57,212, ,801,191 25,622,028 (304,463,294) (65,932,985) (142,252,578) (198,133,262) (139,482,276) (2,973,687,826) (32,793,812,147) (80,187,414) (922,370,975) (853,149,620) (282,222,747) 20,662,134 (120,078,032) 71,107,340 (136,107,615) 16,716,568 (3,645,716,477) (22,975,315) (179,569,784) (827,527,592) - - (462) (1,870) - (651,995) - (32,056) (50,383) (15,395) 71,738,748 67,565,801 31,694, ,313,948 24,765,056 2,842,761,494 31,690,006,989 43,080, ,315,938 65,585,585 (2) This Sub-Fund changed its name from JF Asia Diversified Fund on 31 March

13 JPMorgan Investment Funds Statement Changes in the Number Shares (continued) For the Year Ended 31 December 2008 Shares Outstanding at the Beginning the Year Shares Subscribed Shares Redeemed Shares Outstanding at the End the Year JPMorgan Investment Funds - Europe Select Equity Fund JPM Europe Select Equity A (acc) - EUR 171, , , , JPM Europe Select Equity A (acc) - USD JPM Europe Select Equity A (dist) - EUR 54, , , , JPM Europe Select Equity B (acc) - EUR 89, , , , JPM Europe Select Equity C (acc) - EUR 267, , , , JPM Europe Select Equity D (acc) - EUR 41, , , , JPM Europe Select Equity D (acc) - USD JPM Europe Select Equity X (acc) - EUR 286, , , , JPM Europe Select Equity X (acc) - EUR (hedged) 846, , , JPMorgan Investment Funds - Europe Select Mega Cap Fund JPM Europe Select Mega Cap A (acc) - EUR 266, , , , JPM Europe Select Mega Cap A (dist) - EUR JPM Europe Select Mega Cap B (acc) - EUR 19, , , JPM Europe Select Mega Cap C (acc) - EUR 19, , , JPM Europe Select Mega Cap D (acc) - EUR 94, , , , JPM Europe Select Mega Cap X (acc) - EUR 55, , , , JPMorgan Investment Funds - Global Balanced Fund (USD) JF Global Balanced (USD) A (acc) - USD 14, , , , JPM Global Balanced (USD) A (acc) - USD 1,088, , , , JPM Global Balanced (USD) A (dist) - USD JPM Global Balanced (USD) B (acc) - USD 468, , , , JPM Global Balanced (USD) C (acc) - USD 157, , JPM Global Balanced (USD) D (acc) - USD 115, , , , JPM Global Balanced (USD) X (acc) - USD 1,415, , ,340, JPMorgan Investment Funds - Global Bond Fund (USD) JF Global Bond (USD) A (acc) - USD 184, , , , JPM Global Bond (USD) A (acc) - USD 1,194, , ,010, , JPM Global Bond (USD) B (acc) - USD 181, , JPM Global Bond (USD) C (acc) - USD 413, , , , JPM Global Bond (USD) D (acc) - USD 105, , , , JPM Global Bond (USD) X (acc) - USD 560, , , JPMorgan Investment Funds - Global Capital Preservation Fund (USD) JPM Global Capital Preservation (USD) A (acc) - USD 256, , , , JPM Global Capital Preservation (USD) D (acc) - USD 223, , , , JPM Global Capital Preservation (USD) X (acc) - USD 8, , , JPMorgan Investment Funds - Global Enhanced Bond Fund JPM Global Enhanced Bond A (acc) - EUR 962, , , , JPM Global Enhanced Bond A (inc) - EUR JPM Global Enhanced Bond B (acc) - EUR 4, , JPM Global Enhanced Bond C (acc) - EUR 178, , , JPM Global Enhanced Bond D (acc) - EUR 154, , , , JPM Global Enhanced Bond X (acc) - EUR 55, , , JPMorgan Investment Funds - Global Financials Fund JPM Global Financials A (acc) - USD 963, , ,000, , JPM Global Financials A (acc) - EUR 20, , , , JPM Global Financials A (dist) - USD , , , JPM Global Financials B (acc) - USD 18, , , , JPM Global Financials C (acc) - USD 18, ,197, , , JPM Global Financials D (acc) - USD 82, , , , JPM Global Financials X (acc) - USD 11, , , , JPMorgan Investment Funds - Global Short Duration Fund JPM Global Short Duration A (acc) - USD 368, , , , JPM Global Short Duration B (acc) - USD* 92, , JPM Global Short Duration C (acc) - USD 322, , , , JPM Global Short Duration D (acc) - USD 21, , , , JPM Global Short Duration X (acc) - USD* 689, , , JPMorgan Investment Funds - Highbridge Statistical Neutral Fund JPM Highbridge Statistical Neutral A (acc) - EUR 8,961, ,883, ,445, ,399, JPM Highbridge Statistical Neutral A (acc) - SEK (hedged) - 73, , , JPM Highbridge Statistical Neutral A (acc) - USD 290, , , , JPM Highbridge Statistical Neutral A (acc) - USD (hedged) - 375, , , JPM Highbridge Statistical Neutral A (dist) - GBP 318, , , , JPM Highbridge Statistical Neutral A (dist) - GBP (hedged) - 435, , , JPM Highbridge Statistical Neutral A (inc) - EUR 66, , , , JPM Highbridge Statistical Neutral B (acc) - EUR 127, ,758, ,082, , JPM Highbridge Statistical Neutral B (acc) - USD - 1, , JPM Highbridge Statistical Neutral C (acc) - EUR 3,979, ,789, ,297, ,471, JPM Highbridge Statistical Neutral C (dist) - GBP (hedged) - 430, , , JPM Highbridge Statistical Neutral D (acc) - EUR 9,495, ,378, ,754, ,119, JPM Highbridge Statistical Neutral D (acc) - USD 13, , , , JPM Highbridge Statistical Neutral D (acc) - USD (hedged) - 46, , JPM Highbridge Statistical Neutral I (acc) - EUR 1,905, , ,747, , JPM Highbridge Statistical Neutral X (acc) - EUR 122, , , ,

14 JPMorgan Investment Funds Statement Changes in the Number Shares (continued) For the Year Ended 31 December 2008 Shares Outstanding at the Beginning the Year Shares Subscribed Shares Redeemed Shares Outstanding at the End the Year JPMorgan Investment Funds - Japan 50 Equity Fund JPM Japan 50 Equity A (acc) - EUR 14, , , , JPM Japan 50 Equity A (acc) - JPY 295, ,341, ,419, , JPM Japan 50 Equity A (dist) - JPY 5, , , , JPM Japan 50 Equity D (acc) - JPY 6, , , , JPM Japan 50 Equity I (acc) - JPY 3,904, , , ,002, JPM Japan 50 Equity X (acc) - JPY 1,536, , ,250, , JPMorgan Investment Funds - Japan Behavioural Finance Equity Fund JPM Japan Behavioural Finance Equity A (acc) - EUR 609, , , , JPM Japan Behavioural Finance Equity A (acc) - USD 51, , , , JPM Japan Behavioural Finance Equity A (dist) - USD 13, , , , JPM Japan Behavioural Finance Equity C (acc) - USD 56, , , , JPM Japan Behavioural Finance Equity D (acc) - EUR 25, , JPM Japan Behavioural Finance Equity D (acc) - USD* 25, , JPM Japan Behavioural Finance Equity I (inc) - EUR* 170, , , JPM Japan Behavioural Finance Equity X (acc) - USD 154, , , , JPMorgan Investment Funds - JF Asia ex-japan Fund (1) JF Asia ex-japan A (acc) - USD 1,884, , ,902, , JF Asia ex-japan A (dist) - USD 28, , , , JF Asia ex-japan B (acc) - USD 144, , , , JF Asia ex-japan C (acc) - USD 600, , , , JF Asia ex-japan D (acc) - USD 365, , , , JF Asia ex-japan I (acc) - USD 1,520, ,686, , ,599, JF Asia ex-japan X (acc) - USD 302, , , , JPMorgan Investment Funds - US Bond Fund JPM US Bond A (acc) - USD 1,467, , ,143, , JPM US Bond A (inc) - USD 5, , , JPM US Bond B (acc) - USD 135, , , JPM US Bond C (acc) - USD 471, , , , JPM US Bond D (acc) - USD 613, , , , JPM US Bond X (acc) - USD* 3,268, ,268, (1) This Sub-Fund changed its name from JF Asia Diversified Fund on 31 March * Share Class inactive as at end the year. The accompanying notes form an integral part these Financial Statements. 11

15 JPMorgan Investment Funds Statistical Information (continued) Asset per Share in Share Class Currency 31 December December December December December 2004 JPMorgan Investment Funds - Europe Select Equity Fund JPM Europe Select Equity A (acc) - EUR , JPM Europe Select Equity A (acc) - USD JPM Europe Select Equity A (dist) - EUR JPM Europe Select Equity B (acc) - EUR JPM Europe Select Equity C (acc) - EUR JPM Europe Select Equity D (acc) - EUR JPM Europe Select Equity D (acc) - USD JPM Europe Select Equity X (acc) - EUR JPM Europe Select Equity X (acc) - EUR (hedged) JPMorgan Investment Funds - Europe Select Mega Cap Fund JPM Europe Select Mega Cap A (acc) - EUR JPM Europe Select Mega Cap A (dist) - EUR JPM Europe Select Mega Cap B (acc) - EUR JPM Europe Select Mega Cap C (acc) - EUR JPM Europe Select Mega Cap D (acc) - EUR JPM Europe Select Mega Cap X (acc) - EUR JPMorgan Investment Funds - Global Balanced Fund (USD) JF Global Balanced (USD) A (acc) - USD JPM Global Balanced (USD) A (acc) - USD JPM Global Balanced (USD) A (dist) - USD JPM Global Balanced (USD) B (acc) - USD JPM Global Balanced (USD) C (acc) - USD JPM Global Balanced (USD) D (acc) - USD JPM Global Balanced (USD) X (acc) - USD JPM Global Balanced (USD) X (inc) - USD* JPMorgan Investment Funds - Global Bond Fund (USD) JF Global Bond (USD) A (acc) - USD JPM Global Bond (USD) A (acc) - USD JPM Global Bond (USD) B (acc) - USD JPM Global Bond (USD) C (acc) - USD JPM Global Bond (USD) D (acc) - USD JPM Global Bond (USD) X (acc) - USD JPMorgan Investment Funds - Global Capital Preservation Fund (USD) JPM Global Capital Preservation (USD) A (acc) - USD JPM Global Capital Preservation (USD) B (acc) - USD* JPM Global Capital Preservation (USD) C (acc) - USD* JPM Global Capital Preservation (USD) D (acc) - USD JPM Global Capital Preservation (USD) X (acc) - USD JPMorgan Investment Funds - Global Enhanced Bond Fund JPM Global Enhanced Bond A (acc) - EUR JPM Global Enhanced Bond A (inc) - EUR JPM Global Enhanced Bond B (acc) - EUR JPM Global Enhanced Bond C (acc) - EUR JPM Global Enhanced Bond D (acc) - EUR JPM Global Enhanced Bond X (acc) - EUR JPM Global Enhanced Bond X (inc) - EUR* JPMorgan Investment Funds - Global Financials Fund JPM Global Financials A (acc) - USD JPM Global Financials A (acc) - EUR JPM Global Financials A (dist) - USD JPM Global Financials B (acc) - USD JPM Global Financials C (acc) - USD JPM Global Financials D (acc) - USD JPM Global Financials X (acc) - USD JPMorgan Investment Funds - Global Short Duration Fund JPM Global Short Duration A (acc) - USD JPM Global Short Duration B (acc) - USD* JPM Global Short Duration C (acc) - USD JPM Global Short Duration D (acc) - USD JPM Global Short Duration X (acc) - USD*

16 JPMorgan Investment Funds Statistical Information (continued) Asset per Share in Share Class Currency 31 December December December December December 2004 JPMorgan Investment Funds - Highbridge Statistical Neutral Fund JPM Highbridge Statistical Neutral A (acc) - EUR JPM Highbridge Statistical Neutral A (acc) - SEK (hedged) JPM Highbridge Statistical Neutral A (acc) - USD JPM Highbridge Statistical Neutral A (acc) - USD (hedged) JPM Highbridge Statistical Neutral A (dist) - GBP JPM Highbridge Statistical Neutral A (dist) - GBP (hedged) JPM Highbridge Statistical Neutral A (inc) - EUR JPM Highbridge Statistical Neutral B (acc) - EUR JPM Highbridge Statistical Neutral B (acc) - USD** JPM Highbridge Statistical Neutral C (acc) - EUR JPM Highbridge Statistical Neutral C (dist) - GBP (hedged) JPM Highbridge Statistical Neutral D (acc) - EUR JPM Highbridge Statistical Neutral D (acc) - USD JPM Highbridge Statistical Neutral D (acc) - USD (hedged) JPM Highbridge Statistical Neutral I (acc) - EUR JPM Highbridge Statistical Neutral X (acc) - EUR JPMorgan Investment Funds - Japan 50 Equity Fund JPM Japan 50 Equity A (acc) - EUR JPM Japan 50 Equity A (acc) - JPY 7, , , JPM Japan 50 Equity A (dist) - JPY 5, , JPM Japan 50 Equity D (acc) - JPY 5, , , JPM Japan 50 Equity I (acc) - JPY 5, , , JPM Japan 50 Equity X (acc) - JPY 7, , , , , JPMorgan Investment Funds - Japan Behavioural Finance Equity Fund JPM Japan Behavioural Finance Equity A (acc) - EUR JPM Japan Behavioural Finance Equity A (acc) - USD JPM Japan Behavioural Finance Equity A (dist) - USD JPM Japan Behavioural Finance Equity C (acc) - USD JPM Japan Behavioural Finance Equity D (acc) - EUR JPM Japan Behavioural Finance Equity D (acc) - USD* JPM Japan Behavioural Finance Equity I (inc) - EUR* JPM Japan Behavioural Finance Equity X (acc) - USD JPMorgan Investment Funds - JF Asia ex-japan Fund (1) JF Asia ex-japan A (acc) - USD JF Asia ex-japan A (dist) - USD JF Asia ex-japan B (acc) - USD JF Asia ex-japan C (acc) - USD JF Asia ex-japan D (acc) - USD JF Asia ex-japan I (acc) - USD JF Asia ex-japan X (acc) - USD JPMorgan Investment Funds - US Bond Fund JPM US Bond A (acc) - USD JPM US Bond A (inc) - USD JPM US Bond B (acc) - USD JPM US Bond C (acc) - USD JPM US Bond D (acc) - USD JPM US Bond X (acc) - USD* * Share Class inactive as at end the year. ** Share Class reactivated during the year. (1) This Sub-Fund changed its name from JF Asia Diversified Fund on 31 March The accompanying notes form an integral part these Financial Statements. 13