JPMorgan Liquidity Funds Société d Investissement à Capital Variable, Luxembourg

Transcription

1 Audited Annual Report JPMorgan Liquidity Funds Société d Investissement à Capital Variable, Luxembourg 30 November 2017 Report for the attention Swiss investors

2 Audited Annual Report As at 30 November 2017 Contents Board Directors 1 Management and Administration 2 Board Directors Report 3 Investment Managers Report 7 Audit Report 10 Financial Statements and Statistical Information Combined Statement Assets 12 Combined Statement Operations and Changes in Assets 14 Statement Changes in the Number Shares 16 Statistical Information 18 Notes to the Financial Statements 20 Schedule Investments JPMorgan Liquidity Funds - Australian Dollar Liquidity Fund 24 JPMorgan Liquidity Funds - Euro Liquidity Fund 26 JPMorgan Liquidity Funds - Singapore Dollar Liquidity Fund 30 JPMorgan Liquidity Funds - Sterling Gilt Liquidity Fund 32 JPMorgan Liquidity Funds - Sterling Liquidity Fund 33 JPMorgan Liquidity Funds - US Dollar Current Yield Liquidity Fund 36 JPMorgan Liquidity Funds - US Dollar Government Liquidity Fund 37 JPMorgan Liquidity Funds - US Dollar Liquidity Fund 38 JPMorgan Liquidity Funds - US Dollar Treasury Liquidity Fund 44 Appendix - Unaudited Additional Disclosures 1. Total Expense Ratios Summary Investment Objectives the Sub-Funds Performance and Volatility Interest Rates Received/(Charged) on Bank Accounts Portfolio Turnover Ratio Calculation Method the Risk Exposure Collateral Received Securities Financing Transactions UCITS Remuneration Disclosures Historical Statement Changes in the Number Shares 59 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 Key Investor Information Documents, supplemented by the latest audited annual report and, if published thereafter, the latest unaudited semi-annual report. The current Prospectus, the current Key Investor Information Documents, the unaudited semi-annual report, as well as the audited annual report can be obtained free charge from the registered fice the SICAV and from local paying agents. Details the Investment Manager(s) for the individual Sub-Funds are available within the Prospectus and from the Management Company at its registered fice, or from

3 Board Directors Chairman Iain O.S. Saunders Duine, Ardfern Argyll PA31 8QN United Kingdom Directors Jacques Elvinger Elvinger Hoss Prussen, société anonyme 2, place Winston Churchill B.P. 425, L-2014 Luxembourg Grand Duchy Luxembourg Massimo Greco JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0JP United Kingdom John Li How Cheong The Directors Office 19, rue de Bitbourg L-1273 Luxembourg Grand Duchy Luxembourg Peter Thomas Schwicht Guiollettstraße 64 D Frankfurt am Main Germany Susanne van Dootingh (from 15 December 2017) Vlierbeekberg 125 B-3090 Overijse Belgium Daniel Watkins 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

4 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 JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y 0JP United Kingdom J.P. Morgan Investment Management Inc. 270 Park Avenue New York, NY United States America JF Asset Management Limited 21st Floor, Chater House 8 Connaught Road Central Hong Kong Depositary, Corporate, Administrative and Listing Agent J.P. Morgan Bank Luxembourg S.A. 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Independent Auditor PricewaterhouseCoopers, Société coopérative 2, rue Gerhard Mercator B.P. 1443, L-1014 Luxembourg Grand Duchy Luxembourg Luxembourg Legal Adviser Elvinger Hoss Prussen, société anonyme 2, place Winston Churchill B.P. 425, L-2014 Luxembourg Grand Duchy Luxembourg 2

5 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 returningto 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 High Committee for the Development the Financial Sector instituted by the Luxembourg Government. He is also a member the Advisory Committees to the Luxembourg Commission for the Supervision the Financial Sector in the area investment funds. He is a member the Board Directors the Association the LuxembourgFund Industry (ALFI) and is currently chairman ALFI s Regulatory Board. Mr Elvinger currently holds a number board mandates with Luxembourg investment funds including several JPMorgan managed Luxembourg-domiciled investment funds. Massimo Greco Connected Director. A member the Board since November Mr Greco, Managing Director, is responsible for JPMorgan Asset Management s Global Funds business in Europe, based in London. He took on his current responsibilities in Mr Greco has been a JPMorgan employee since 1992, initially with the Investment Banking unit, moving to Asset Management in Before that, he worked for Goldman Sachs International in London. Mr Greco holds a degree in Economics from the University Turin and an MBA (Major in Finance) from the Anderson Graduate School Management at UCLA. Mr Greco is a Member the Board JPMorgan Asset Management (Europe) S.à r.l. as well as other Luxembourg domiciled SICAVs and is on the Board the European Fund Asset Management Association ( EFAMA ). John Li How Cheong Independent Director. A member the Board since June Mr Li is a fellow the Institute Chartered Accountants in England & Wales. Mr Li moved to Luxembourg in 1987 and has since been working in the financial sector. 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 Global Investment Management Practice KPMG. During these years Mr Li s experience included auditing and advising clients such as banks, investment funds, insurance companies from Europe, US, Japan and Asia fering Mr Li an extensive experience in dealing with international companies. 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. Peter Thomas Schwicht Independent Director. A member the Board since June Mr Schwicht obtained a Business Economics degree from the University Mannheim in Germany after having studied business, tax and accounting in Hamburg, Norway and the USA and was an employee JPMorgan Asset Management from 1987 until October Prior to his retirement Mr Schwicht was the Chief Executive Investment Management - EMEA, JPMorgan Asset Management. He had previously held positions as the Head the Continental Europe Institutional business and the 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. Mr Schwicht is currently a Director several JPMorgan managed Luxembourg-domiciled investment funds. Susanne van Dootingh Independent Director. A member the Board since December Ms van Dootingh was at State Street Global Advisors from 2002 to 2017 with her final position being as Senior Managing Director, Head European Governance and Regulatory Strategy, EMEA. In addition she was the Chair the SSGA Sicav and Management Company and has been a member various ESMA consultative working groups since Prior to this she held positions within State Street Global Investors as the Global Head Institutional Product Development and Research, Head European Product Development and Management, EMEA, Head Fixed Income Product Engineering, EMEA and Senior Fixed Income Strategist and Product Engineer. Before 2002 Ms van Dootingh worked at Fortis Investment Management as Senior Product Manager, European Fixed Income, at Barclays Global Investors as Product Manager, Fixed Income, and at ABN AMRO Asset Management as Portfolio Manager Global Fixed Income. She graduated from Vrije Universiteit Amsterdam with a Master Arts Financial Sector Management. Ms van Dootingh is currently a Director several JPMorgan managed Luxembourg-domiciled investment funds. Daniel Watkins Connected Director. A member the Board since December Mr Watkins is the Deputy CEO JPMorgan Asset Management s IM Europe and Global Head IM Client Services and Business Platform. Mr Watkins has been an employee since 1997 and oversees the business infrastructure Investment Management in Europe and Asia including client services, fund administration, product development, and RFPs. Mr Watkins also performs the role Deputy CEO GIM EMEA, acting as a director all the regulatedlegalentities across the region. Mr Watkins has held a number positions at JPMorgan namely; Head Europe COO and Global IM Operations, Head the European Operations Team, Head the European Transfer Agency, Head Luxembourg Operations, manager European Transfer Agency and London Investment Operations; and manager the Flemings Investment Operations Teams. Mr Watkins obtained a BA in Economics and Politics from the University York and is a qualified Financial Advisor. Mr Watkins 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 November

6 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. (JPMAME) 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, as amended, 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 9 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, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Jersey, The herlands, Norway, Peru, Spain, Sweden, Switzerland 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, as amended, on 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 2010, as amended. 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 Depositary. Prior to each Board meeting the Directors receive detailed and timely information allowing them to be prepared for the items under discussion duringthe meeting. For each quarterlymeetingthe 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 them. 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 documentedin 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 five 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. The Board has agreed that a proposal will be put to shareholders to appoint Directors on a rotational basis and believes that this is benefit to shareholders as it will ensure that there is always continuity Directors. In order to facilitate this proposal it is necessary that the Articles Incorporation be altered; the decision to amend them is subject to a shareholder vote at an Extraordinary General Meeting and it is anticipated that this meeting will take place during 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. Change to the Composition the Board At the Board meeting held on 14 December 2017, Mr Frijns resigned from the Board with effect from the close business on that day. The Board would like to take this opportunity to record its thanks for his service. At the same Board meeting, the Board approved that Ms Susanne van Dootingh be co-opted as a Director with effect from 15 December 2017 subject to CSSF approval. Induction and Training All new Directors will receive an induction incorporating relevant information regarding the Fund and their duties and responsibilities as a Director. In addition, the Board takes active steps to keep up to date with developments relevant to the Fund and have ensured that a formal training programme is in place. Board Evaluation The Board carries out a biennial review its performance. 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 remuneration is reviewed on an annual basis. The Chairman is currently paid EUR 67,688 and the other Directors EUR 53,776 for the year ended 30 November 2017 apart from the Connected Directors who have agreed to waive their remuneration. No element the remuneration paid by the Fund to the Directors is performance related. 4

7 Board Directors Report (continued) 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 four Board meetings held during the year. These were quarterly Board meetings where, amongst other matters, the agenda included those items highlighted under the section above called Role and Responsibility the Board. In addition to the Board meeting wherethe 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. 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 Depositary, 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 quarterlybasis 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 ALFICode Conduct (the Code ) which sets out principles good governance. These principles 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 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 November 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 in the 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 1986.The provision audit services was last put to competitive tender in The Board reviewed the services PwC in 2016 and decided that, subject to any other influencing factor, they should continue to be proposed to Shareholders as Auditor. Annual General Meeting The next Annual General Meeting (AGM) the Company will be held on 27 April 2018 at the Registered Office the Company to consider matters relating to the year ending on 30 November 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; 5. the discharge Directors duties. No special business is being proposed by the Board. 5

8 Board Directors Report (continued) Discharge Directors One the resolutions in the AGM, as required under Luxembourg law, is for Shareholders to vote on the discharge the Directors their duties for the fiscal year in question. This discharge is only valid where the annual accounts contain no omission or false information concealing the real financial situation the Company. Privacy Policy The Management Company complies with a privacy policy that has been issued by J.P. Morgan Asset Management which can be accessed at This policy will be updated by 25May 2018to comply with the General Data Protection Regulation. Events During the Year During the year, the total net assets the Fund increased from USD 144 billion to USD 178 billion at year end. The Board agreed the following corporate actions relating to Sub-Funds during the year: a) Sub-Fund liquidation During the year, the following Sub-Fund was liquidated: JPMorgan Liquidity Funds - US Dollar Current Reserves Fund on 22 May b) Changes to Prospectus Addition W Share Class With effect from 23 December 2016, the Prospectus was amended to incorporate the addition the W Share Class which were then launched on 28 and 29 December 2016 by JPMorgan Liquidity Funds. Reverse Repurchase Transactions for the JPMorgan Liquidity Funds for AUD and SGD With effect from March 2017 the General Investment Rules for JPMorgan Liquidity Funds - Singapore Dollar Liquidity Fund were amended to take full advantage their existing ability to utilise reverse repurchase transactions in AUD and SGD by allowing securities issued by the Singapore government to comprise up to 100 the assets the Sub-Fund or to be received as full collateralisation reverse repurchase transactions traded. Events after the Year-End a) Sub-Fund closure Subsequent to the year-end, JPMorgan Liquidity Funds - US Dollar Current Yield Liquidity Fund became dormant on 12 December The Board Directors Luxembourg, 14 March

9 Investment Managers Report Below is an overview the markets in which our Liquidity Funds invest and our strategy over the last 12 months. Europe The European Central Bank (ECB) kept interest rates on hold over the period, with the interest rate on the main refinancingoperations, the marginal lending facility and the deposit facility unchanged at 0.00, 0.25 and respectively. The average monthly rate asset purchases was trimmed from EUR 80bn to EUR 60bn from April 2017, and in October the ECB announced an extension the bank s asset purchase programme for nine months with monthly purchases reduced to EUR 30bn from January to September This was an acknowledgement the solid growth apparent in the region, but also keeps the door open for a further extension to be announced. ECB President Mario Draghi reiterated that on top monthly purchases, they will reinvest the principal maturing securities and would do so for an extended period time after the end its net asset purchases. The ECB appear keen to move the focus away from monthly asset purchases (the flow) towards the overall size the ECB balance sheet (the stock), which will provide ongoing policy support even after the end net purchases. The end the first quarter marked the beginning at least two years enormous uncertainty as the future relationship between the UK and the EU is negotiated. Those negotiations are unlikely to go smoothly. Continued cooperation on security and free trade in goods would seem to be in the interest boththe UK and the EU. But it is in the interest the EU forsome the Europeanfinancial (and other) services business that is currently done out London to be done out Europe in the future: the associated jobs and tax receipts would be welcome in any European financial centre. As well as being a busy quarter for central bank watchers, the second quarter was also a period filled with key political developments. At the start the quarter, the markets were not expecting an election in the UK and were worried about elections in France. By the end the quarter, Marine Le Pen s anti-euro campaign in France had been rejected, with pro-euro and pro-reform candidate Emmanuel Macron elected as president, with a majority in parliament. As a result, Mario Draghi noted recently that politicalwinds are becomingtailwinds in Europe. In contrast, in the UK, Theresa May s decisionto call an election has weakened both the strength and stability her government at a crucial time for the country, as it embarks on Brexit negotiations. So, while political uncertainty in Europe declined over the quarter, it increased in the UK. Catalonia held a referendum on independence on 1 October, which caused Spanish equities to weaken moderately and Spanish yields to spread further out from the German Bund. However, as increasing political uncertainty unfolded over the month, the Catalan regional parliament unilaterally declared independence from Spain after a secret vote. This move led the Spanish authorities to trigger Article 155 the Constitution and assume direct control the region. Eurozone economic momentum accelerated over the month November. Preliminary third-quarter GDP growth was revised up, largely due to the German economy s impressive 2.8 growth, but also as a result improving conditions in France and Italy, which confirmed that the recovery is being felt more evenly across countries. The manufacturing Purchasing Managers Index (PMI) for the Eurozone hit a new record high 60.1, which is consistent with a growth rate more than 3. Labour dynamics improved, with the unemployment rate falling below 9 and consumer confidence reached a 16-year high. The flash estimate November headline inflation picked up by 10 basis points to 1.5 but core inflation remained unchanged at 0.9. The minutes the European Central Bank s (ECB s) October meeting (when it announced an extension to its quantitative easing programme) revealed a high degree convictionon the economicoutlook, but not on wages and inflation, whichare still subdued. Bond scarcity was not mentioned but probably played a role in the decision to halve asset purchases from January The dovish message the ECB is consistent with expectations that new purchases under quantitative easing programmewill be tapered further over the course the year, and rates will be raised, in In terms forward guidance on interest rates, the ECB maintained the stance that rates are likely to stay at current levels for an extended period time and well past the end the net asset purchases. JPMorgan Liquidity Funds - Euro Liquidity Fund We continue to target a long weighted average maturity (WAM) in a range 50 to 55 days. The Sub-Fund remained highly liquid over the period, holding around 30 to 35 in weekly liquidity and 40 to 45 in monthly liquidity. Taking into account government exposure and eligible agency paper, weekly liquidity remained comfortably above the 30 Fitch requirement. The United Kingdom InNovembertheBankEngland (BOE) raised thebankrate by25basispoints (bps) to0.5, thefirsthikeintheuk sincejuly2007. Thehikemovesthebank rate f historic lows and effectively reverses the 25bps cut after the Brexit referendum in August The Asset Purchasing Programme was left unchanged at GBP 445 billion. The triggering Article 50 at the end the first quarter 2017 marked the beginning at least two years enormous uncertainty as the future relationship between the UK and the EU is negotiated. Political commentators have suggested that it is not in the interest the EU for Britain to make a resounding success out Brexit. Some leaders in Europe will be afraid that if the UK s exit from the EU is seen by those Europeans who blame the euro for their economic problems as carrying no cost, then the risk another country following the UK out the EU, but also this time out the euro, could rise. For this reason, the political and economic imperative to sustain the Eurozone is likely to be at the forefront the EU negotiators minds when dealing with the UK. The collapse the euro would be a far more calamitous event for Europe than the exit the UK from the EU without a trade deal. It would also be an unthinkable-and yet not unimaginable-disaster for the prosperity Europe. In this sense, the negotiations are about far more than just the relationship between Britain and the EU; they are about the very future the European project. And it is this bigger picture that makes the road ahead potentially so difficult and clouded in uncertainty. The UK election in June resulted in a hung parliament after the Prime Minister Theresa May s Conservative lost the slim majority they held in Parliament before she called surprise election. May had a comfortable lead over Labour in April when the election was called but with an election campaign focusingona hard Brexit and a serious gaffes including an unpopular proposed healthcare charge for the elderly dubbed dementia tax and May abstaining from participation in the TV debates, her lead was whittled away by a more coherent Labour campaign. The UK Autumn budget revealed a slower pace fiscal tightening to support the economy through the Brexit negotiations. Third-quarter GDP growth was confirmed at 1.5 and inflation remained unchanged at the highest reading in over five years. The BOE reiterated its intent to followa slow, gradual and limited path inraisingrates and the dovish minutes the meetingunderlined this; stating that the gently raising market expectation for rates brings growth just above its rate potential with inflation projected to approach the 2 target by the end the forecast period. The market is currently pricing in a 40 chance a further 25bps rise by May 2018 and market participants anticipate roughly two rate rises over the next three years to control inflation. Despite the stronger global picture there are real headwinds ahead and potential downside risks to the UK economy over the coming months which could derail further rise: ongoing Brexit negotiations and the potential for a no-deal scenario could impact business investment with knock-on effects to the less than stellar growth numbers and hiring; unemployment remains historically low but real wages have been under pressure and may curb the consumer; inflation is due to peak later this year as base effects fall out and decline towards target in

10 Investment Managers Report (continued) JPMorgan Liquidity Funds - Sterling Liquidity Fund The weighted average maturity the strategy was positioned at around 50 days over the period. The portfolioremained highly liquid, carrying 25 to 30 in overnight liquidity, with around 30 the portfolio maturing within one week. JPMorgan Liquidity Funds - Sterling Gilt Liquidity Fund The weightedaverage maturity the strategy was positionedat around 45to 50 days overthe period. The portfolioremainedhighlyliquid, carryingaround 30 to 40 in in overnight liquidity. The United States The surprise Republicansweep the White House and bothchamberscongressset the tone forthe fiscal year. This result changed our priorview that the U.S. was stuck in a sub-trend growth and inflation environment. With the exception a very brief risk-f reaction by global markets, bond yields and equity prices moved higher since the U.S. election on expectations deregulation, corporate and individual tax cuts, and infrastructure spending. Further, the Federal Open Committee (FOMC) decided unanimously to raise the Fed Funds rate. The median Fed Funds rate projection for 2017 suggested three rate hikes from two hikes at the September 2016 meeting, which added to the post-election sell-f. The committee was driven by the drop in the unemployment rate to a new cycle low at the time 4.6, and expectations for fiscal stimulus from the new administration. Riskassets continuedtheirupwardtrajectoryas thereflationtrade persistedintothenewyear. Consumersentimentand businessconfidencelevelssoared, driving equity markets higher, as the Trump administration s proposed initiatives tax reform, infrastructure spending and deregulation were expected to spur growth. However, the failure to repeal and replace the Affordable Care Act emphasised the uncertainty around the new administration s ability to deliver on its pro-growth agenda. As a result, the U.S. dollar began to weaken and U.S. Treasury yields fell from their highs. The two-year Treasury yield ended the firstquarter up only7 basis points (bps) at 1.25 after reaching1.39 inmid-march, and the five-year Treasury yield ended the quarter down1 bp at 1.92, rallying from a high 2.14 in mid-march. Despite this political uncertainty, the macro picture continued to solidly improve which led the Federal Reserve (Fed) to once again raise rates by 25 bps, noting strength in employment, stability in financial markets and a recent uptick in inflation. The second quarter was rife with domestic and international political headline risks. Nonetheless, global growth continued its positive trajectory. Even as investors expectations for pro-growth policies in the second half this year continued to fizzle, risk assets continued to perform well. Equity markets continued to reach record highs, the U.S. Dollar continued to weaken and longer maturity Treasury yields declined further. The two-year Treasury yield ended the quarter up 13 basis points (bps) at 1.38 after reaching a low 1.16 in mid-april, while the five-year Treasury yield ended the quarter down 3bpsat 1.89, fromahigh1.94 inmid-may. Forthesecondtimein2017, thefedraisedratesby25bpsto at itsjunefomcmeeting. While this was consistent with market expectations at the time, the announcement that balance sheet normalisation would begin before the end the year was more hawkish than investors anticipated. The third quarter was dominated by a multitude factors: geopolitical tensions flared between the U.S. and North Korea; political concerns in Europe increasedas theresults thegermanelectionsshoweda Merkelwin, but herconservativealliancelostground; theannouncementa potentialtax reform plan in Washington; and multiple natural disasters globally. The global economy grew at its fastest pace since the recovery, with over 80 countries reporting higher year-over-year GDP growth. In the U.S., 2nd quarter GDP growth was revised upward and inflation surprised to the upside in September after five consecutive down months, leading market participants to increase expectations an additional rate hike this year. The Federal Reserve (Fed) kept rates unchanged at at its September FOMC meeting. However, consistent with market expectations, the Fed also announced that balance sheet normalization would begin on October 1st. The committee would stop reinvesting the proceeds from Treasury and mortgage securities at a maximum run-f rate USD 10 billion per month initially, accelerating at three-month intervals to USD 50 billion per month. The committee lowered its outlook on core inflation but prepared the market for one more rate hike this year, and forecast three rates hikes in The unemployment rate estimates continued to be revised down for the next few years and the median long-run Fed Funds rate was lowered from 3 to U.S. Tax reform took center stage in November as both Houses Congress worked expeditiously to pass their respective versions the tax bill. Investors sifted through the proposed changes looking for clues to assess both the likelihood that the bill would pass and the potential impact on risk assets. A lower corporate tax rate would be positive for corporate earnings, which in turn could lift risk assets further. Skepticism that Republicans would be able to get a reconciled tax bill passed by the end the year thwarted markets enthusiasm early in the month. Credit spreads widened and high yield corporate bonds sold f. Investor sentiment shifted in the second half the month with resumed optimism around the passage tax reform. Equity markets rallied, reaching fresh highs, and Bitcoin climbed to an exuberant high. At its November meeting, the Federal Reserve Open Committee (FOMC) set the stage for a December rate hike. The committee was increasingly upbeat on growth and business investment, but also expressed some concern about inflation. Jerome Powell was confirmed by Congress as the next Fed Chair. Meanwhile, JanetYellenannouncedthatshewouldretirefromtheFedat theendherterm, leavingthewhitehousewithanotherboardgovernor seat to fill after it had recently nominated Marvin Goodfriend. The Treasury yield curve flattened over the month; and the spread between the 2- and 10-year Treasury yields narrowed to 59 basis points (bps), the lowest level since the crisis. The two-year Treasury yield ended up 18 bps at 1.78, and the five-year Treasury yield ended up 12 bps at JPMorgan Liquidity Funds - US Dollar Liquidity Fund The weighted average maturity (WAM) our Liquidity strategy was in the 20- to 30-day range for the fiscal year. Investments throughout the year were focused on six-month to one-year floating rate securities with one-month or three-month LIBOR coupons. We opportunistically purchased high quality fixed rate paper in the one- to six-month area while being mindful, and adequately positioned for, the Fed rate hikes in March, June, and December. During the first quarter, spreads tightened across the sector as supply in floating rate credit instruments was light. By the end the second quarter, 3- month LIBOR was at 1.30, 15 bpshighervs. the end Marchand 1- year LIBOR was downby 6.3 bpsto We generallycarried 25 to 30 inovernightliquidity and 42 to 45 in monthly liquidity. As year-end approached, the investment focus was mainly on managing liquidity over year-end. We will continue to purchase term securities if they compensate us for the potential additional rate hikes on the horizon. JPMorgan Liquidity Funds - US Dollar Government Liquidity Fund The WAM our Government strategy was in the 25 - to 41-day range for the fiscal year. In the first half year, purchases were focused on one-month to three-month agency discount notes and US Treasury bills and nine- to ten-month agency floating rate notes. Once again, other than the Federal Home Loan Banks (FHLB), issuance from the Government Sponsored Enterprises (GSE s) was relatively light and expensive to our breakeven analysis. By the end the third quarter, purchases were focused on two-month and three-month agency discount notes, US Treasury bills and US Treasury notes. Unlikeearlierintheyear, wefoundreasonablesupplyinthefanniemaeandfreddiemacnamesthat werefavorablebasedonourbreakevenanalysis. Aswe expected, the FOMC started the process normalising the System Open Account (SOMA) balance in the fourth quarter this year with minimal impact on the market. 8

11 Investment Managers Report (continued) JPMorgan Liquidity Funds - US Dollar Treasury Liquidity Fund We saw the Federal Reserve raised rates 3 times in the first half the fiscal year. Fed ficials stated that... the labor market had continued to strengthen and economic activity has been rising moderately. At the same time... inflation on a 12 month basis is expected to remain somewhat below 2 percent in the near term but to stabilise over the medium term. With money market reform in the back mirror, markets stabilised and continued to trade in a narrow range. Treasury markets traded within a tight range in the third quarter as yields stabilised. At the September FOMC meeting the Fed communicated the start their balance sheet normalization process. The markets expected there to be limited reaction in the short end the curve as the reduction program slowly built up. The strategy was unchanged for most year; the Sub-Fund carried high levels liquidity and was active in both fixed and floating rate securities opportunistically across the curve as the markets repriced higher after the each rate hike. JPMorgan Liquidity Funds - US Dollar Current Reserves Fund For the rest 2016, our USD Current Reserves Fund maintained an average WAM 45 days. volatility increased over the period due to uncertainty around the US Presidential election and investors positioning ahead the December FOMC policy meeting. The investment team s strategy evolved over the quarter to account for changes in interest rate expectations. Generally, The Sub-Fund s maturity prile shortened when market sentiment improved and the probability a FOMC rate hike in December increased. The team purchased three- to four-month fixed rate securities issued by Canadian, Japanese, Nordic and European banks and added to the Sub-Fund s variable rate positionwith nine- to twelve-month securities issued by Australian and Nordic banks. During the fourth quarter, the Sub-Fund was generally positioned with 5 to 12 overnight liquidity and 20 to 30 monthly liquidity. We remain comfortable with a WAM range 50 to 70 days and will target a WAL 90 to 120 days. JPMorgan Liquidity Funds - US Dollar Current Yield Liquidity Fund The JPM US Dollar Current Yield Liquidity Institutional (dist.) returned 0.77 (net fees) for the year ending 30 November 2017, and ended the period with a seven-day yield0.99 (net). TheSub-Fund endedtheperiodwithaweightedaveragematurity 2days andportfolioallocationremainedroughlystable, with around 50 in time deposits and the remaining 50 invested in commercial paper, certificates deposit and asset-backed commercial paper. Singapore Swap Offer Rate (SOR) yields increased and the curve flattened during the year, with the one-month yielding 1.10 (up 65 bps), the three-month yielding 1.12 (up 39 bps) and the six-month yielding 1.24 (up 7 bps). The Singapore dollar strengthened by 6.36 year on year and ended the period at vs. the US dollar. The Singapore economy remained robust, although the strong export and manufacturing sector still masks weak wage growth and st consumer sentiment. At their October semi-annual meeting the Monetary Authority Singapore was less hawkish than expected given their forecast that 2017 GDP to print at the top their 2-3 range, before stening in 2018 while inflation will only increase gradually. Nevertheless, the recent strong data allowed the government to raise its 2017 GDP forecast to This could encourage the MAS to be more hawkish in 2018 which could push interest rates lower although Fed hikes could help fset this. JPMorgan Liquidity Funds - Singapore Dollar Liquidity Fund The Sub-Fund s yield averaged 0.77 (gross) in the year and traded in a range between 0.58 and Weighted average maturity averaged 41-days, with a range between 28 and 57 days. Liquidity remains good, with 27 maturing in one week and 41 maturing within one month. Asset quality remains high at AA-. Australia Bank Bill Swap (BBSW) yield curve flattened, with the one-month yielding 1.66 (up 4bps), the three-month yielding 1.74 (down 3bps) and the six-month yielding 1.92 (down 10bps). The Australian dollar strengthened by 2.45 year on year and ended the period at vs. the US dollar. Australia s economic data provide a dilemma for the central banks with exports and mining robust, while consumer spending and confidence remain st. High house prices, lowwagegrowthandrecordconsumerdebtcomplicatethematterfurther. TheReserveBankAustralia leftbaseratesunchangedat1.5 forthe15 consecutive months. Looking ahead, despite solid employment data, low inflation levels eased pressure on the RBA to hike quickly. JPMorgan Liquidity Funds - Australian Dollar Liquidity Fund The grossyield the Sub-Fund averaged 1.76 and traded in a range between1.64 and The weighted average maturity averaged 46 days, ending the period at 50.2 days. The Sub-Fund s liquidity remains good, with 20 in overnight cash and 31 maturing within one month. Credit quality remains solid, with a long-term credit average AA-. The Investment Managers Luxembourg, 14 March 2018 The information stated in this report is historical and not necessarily indicative future performance. 9

12 Audit Report To the Shareholders JPMorgan Liquidity Funds Our opinion In our opinion, the accompanying financial statements give a true and fair view the financial position JPMorgan Liquidity Funds and each its sub-funds (the Fund ) as at 30 November 2017, 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 and presentation the financial statements. What we have audited The Fund's financial statements comprise: - the Combined Statement Assets as at 30 November 2017; - the Schedule Investments as at 30 November 2017; - the Combined Statement Operations and Changes in Assets for the year then ended; and - the Notes to the Financial Statements, which include a summary significant accounting policies. Basis for opinion We conducted our audit in accordance with the Law 23 July 2016 on the audit pression (the Law 23 July 2016 ) and with International Standards on Auditing ( ISAs ) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilitiesunder the Law 23 July 2016 and ISAs are further described in the "Responsibilities the "Réviseur d'entreprises agréé" for the audit the financial statements" section our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. WeareindependenttheFund inaccordancewiththeinternationalethicsstandards BoardforAccountants CodeEthicsforPressionalAccountantsas adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit the financial statements. We have fulfilled our other ethical responsibilities under those ethical requirements. Other information The Board Directors the Fund is responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our audit report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form assurance conclusion thereon. In connection with our audit the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities the Board Directors the Fund and those charged with governance for the financial statements The Board Directors the Fund is responsible for the preparation and fair presentation the financial statements in accordance with Luxembourg legal and regulatory requirementsrelatingto the preparationand presentationthe financialstatements, and forsuch internalcontrolas the Board Directors the Fund determines is necessary to enable the preparation financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board Directors the Fund is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis accounting unless the Board Directors the Fund either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Fund s financial reporting process. PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg T: , F: , Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n ) R.C.S. Luxembourg B TVA LU