Unaudited Semi-Annual Report 31 December 2017
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Contents Page Statement of Financial Position 1 Statement of Comprehensive Income 2 Statement of Changes in Net Assets Attributable to Holders of Redeemable Units 3 Statement of Cash Flows 4 Notes to the Financial Statements 5 6 Investment Portfolio 7 Statement of Movements in Portfolio Holdings 8 This report does not constitute an offer of any units in the fund forming the subject matter of this document (the "Fund"). Subscriptions are only valid if made on the basis of the current explanatory memorandum (or equivalent), supplemented by the most recent financial report.
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Statement of Financial Position As at 31 December 2017 (Unaudited) 31.12.2017 30.6.2017 Assets Cash at banks 256,965 597,922 Amounts receivable on allotment - 43,428 Investments 13,772,465 12,836,421 Interest receivable - 276 Total assets 14,029,430 13,478,047 ---------- ---------- Liabilities Amounts payable on redemption 106,677 - Other accounts payable 12,139 13,013 Liabilities (excluding net assets attributable to holders of redeemable units) 118,816 13,013 ---------- ---------- Net assets attributable to holders of redeemable units [Note 3] 13,910,614 13,465,034 The notes on pages 5 to 6 form part of these financial statements. - 1 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Statement of Comprehensive Income For the period ended 31 December 2017 (Unaudited) 1.7.2017 to 31.12.2017 1.7.2016 to 31.12.2016 Income Net gains on investments [Note 4] 62,045 21,641 Interest on deposits 1,105 342 Net foreign currency exchange losses (3) (1) Other income 1,526-64,673 21,982 ---------- ---------- Expenses Administration fee 11,300 7,420 Auditor's fee 5,485 8,022 Safe custody and bank charges 487 365 Transaction costs 30 24 Printing and publication expenses 16 470 Trustee's fee - 1,123 Legal and professional expenses - 225 Other operating expenses 1,178 5,153 18,496 22,802 ---------- ---------- Increase/(decrease) in net assets attributable to holders of redeemable units and total comprehensive income 46,177 (820) The notes on pages 5 to 6 form part of these financial statements. - 2 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Statement of Changes in Net Assets Attributable to Holders of Redeemable Units For the period ended 31 December 2017 (Unaudited) 1.7.2017 to 31.12.2017 1.7.2016 to 31.12.2016 Net assets attributable to holders of redeemable units at the beginning of the period 13,465,034 10,268,974 ---------- ---------- Allotment of redeemable units 2,541,054 2,707,332 Redemption of redeemable units (2,141,651) (869,189) Net allotment 399,403 1,838,143 ---------- ---------- 13,864,437 12,107,117 Increase/(decrease) in net assets attributable to holders of redeemable units and total comprehensive income 46,177 (820) Net assets attributable to holders of redeemable units at the end of the period 13,910,614 12,106,297 The notes on pages 5 to 6 form part of these financial statements. - 3 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Statement of Cash Flows For the period ended 31 December 2017 (Unaudited) 1.7.2017 to 31.12.2017 1.7.2016 to 31.12.2016 Operating activities Purchase of investments (1,425,000) (1,500,000) Proceeds from disposal of investments 551,000 - Interest received 1,381 388 Trustee's fee paid - (1,056) Transaction costs paid (96) (18) Administration fee paid (10,860) (7,410) Others (6,890) (22,194) Net cash outflow from operating activities (890,465) (1,530,290) ----------- ----------- Financing activities Receipts on allotment of redeemable units 2,584,482 2,707,151 Payments on redemption of redeemable units (2,034,974) (1,021,511) Net cash inflow from financing activities 549,508 1,685,640 ----------- ----------- (Decrease)/increase in cash and cash equivalents (340,957) 155,350 Cash and cash equivalents at the beginning of the period 597,922 405,728 Cash and cash equivalents at the end of the period 256,965 561,078 Analysis of balances of cash and cash equivalents: Cash at banks 256,965 561,078 The notes on pages 5 to 6 form part of these financial statements. - 4 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Notes to the Financial Statements 1 The Fund JPMorgan Provident Money Fund (the "Fund") was established under a Trust Deed dated 31 August 2000, as amended (the "Trust Deed") and is governed by the laws of Hong Kong. The Fund is authorized by the Securities and Futures Commission of Hong Kong. With effect from 28 April 2017, the Fund changed domicile from the Cayman Islands to Hong Kong. Cititrust Limited replaced Royal Bank of Canada Trust Company (Cayman) Limited as Trustee and Citicorp Trustee (Singapore) Limited replaced Royal Bank of Canada Trust Company (Cayman) Limited as Registrar for the Fund. The investment objective of the Master Fund is to achieve a return in USD in line with prevailing money market rates whilst aiming to preserve capital consistent with such rates and to maintain a high degree of liquidity by investing in USD denominated short-term debt securities. The Fund offers two classes of units, administration units and investment units. All unitholders' rights with regard to the convening, voting or otherwise acting at any meeting of unitholders are the same. 2 Summary of significant accounting policies (a) Accounting policies of interim financial statements The accounting policies and methods of computation used in the preparation of these unaudited condensed interim financial statements are consistent with those used in the annual financial statements for the. (b) Investments Classification The Fund classifies its investments as financial assets or financial liabilities at fair value through profit or loss. These financial assets or financial liabilities are held-for-trading as they are acquired or incurred principally for the purpose of selling or repurchasing in the near term or short-term profit taking. Recognition, derecognition and measurement Purchases and sales of investments are accounted for on the trade date basis. Investments are initially recognized at fair value and are subsequently re-measured at fair value. Realized and unrealized gains and losses on investments are recognized in the Statement of Comprehensive Income. Investments are derecognized when the rights to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. Fair value estimation Investments in collective investment schemes are stated at fair value based on the net asset value per unit of the respective funds as determined by the administrators of the relevant funds. (c) Foreign currency translation Functional and presentation currency The Fund has adopted United States dollar as its functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of assets and liabilities denominated in foreign currencies at period/year end exchange rates are recognized in the Statement of Comprehensive Income. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Statement of Comprehensive Income within "Net foreign currency exchange gains/losses". Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the Statement of Comprehensive Income within "Net gains/losses on investments". - 5 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 (d) Proceeds and payments on allotment and redemption of units The net asset value per unit is computed for each dealing day. The price at which units are allotted or redeemed is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day in accordance with the provisions of the Trust Deed which may be different from the accounting policies stated in the financial statements. Units of the Fund are redeemable at the option of the holders of redeemable units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to holders of redeemable units (or "net asset value" or "net assets" or "NAV") and is carried at the redemption amount that would be payable at the Statement of Financial Position date if the holders of redeemable units exercised the right to redeem units of the Fund. 3 Number of units in issue and net assets attributable to holders of redeemable units (per unit) Number of units in issue 31.12.2017 30.6.2017 Units Units Administration Units 397,430.151 315,024.501 Investment Units 782,239.906 823,909.125 Net assets attributable to holders of redeemable units Administration Units 4,371,195 3,460,338 Investment Units 9,539,419 10,004,696 13,910,614 13,465,034 Net assets attributable to holders of redeemable units (per unit) Administration Units 11.00 10.98 Investment Units 12.20 12.14 4 Net gains on investments 1.7.2017 to 31.12.2017 1.7.2016 to 31.12.2016 Change in unrealized gains/losses in value of investments 58,254 21,641 Realized gains on sale of investments 3,791-62,045 21,641 5 Soft dollar arrangements/commission sharing arrangements During the period, the Investment Manager and its Connected Persons did not enter into any soft dollar arrangements/commission sharing arrangements in connection with directing transactions of the Fund through a broker or dealer (31 December 2016: nil). 6 Distribution No distribution was made during the period (31 December 2016: nil). - 6 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Investment Portfolio As at 31 December 2017 (Unaudited) Place of establishment Holding Fair value % of net assets Listed/Quoted Investment (99.0%) Collective Investment Scheme (99.0%) International (99.0%) JPMF-JPM US Dollar Money Market 'A' (acc)-usd* Luxembourg 136,172 13,772,465 99.0 Total Listed/Quoted Investment 13,772,465 99.0 Other net assets 138,149 1.0 Net assets attributable to holders of redeemable units at 31 December 2017 13,910,614 100.0 Total investments, at cost 13,645,136 * Issued and managed by a Connected Person of the Manager - 7 -
JPMORGAN PROVIDENT MONEY FUND Semi-annual report for the period ended 31 December 2017 Statement of Movements in Portfolio Holdings For the period ended 31 December 2017 (Unaudited) % holdings of net assets 31.12.2017 30.6.2017 Listed/Quoted Investment Collective Investment Scheme International 99.0 95.3 Total Listed/Quoted Investment 99.0 95.3 Other net assets 1.0 4.7 Net assets attributable to holders of redeemable units 100.0 100.0-8 -
www.jpmorganam.com.hk
Audited Annual Report 30 June 2017
JPMORGAN PROVIDENT MONEY FUND Contents Page Statement of Responsibilities of the Manager and the Trustee 1 Report of the Trustee to the Unitholders 2 Independent Auditor s Report to the Unitholders 3-4 Statement of Financial Position 5 Statement of Comprehensive Income 6 Statement of Changes in Net Assets Attributable to Holders of Redeemable Units 7 Statement of Cash Flows 8 Notes to the Financial Statements 9 19 Investment Portfolio Unaudited 20 Statement of Movements in Portfolio Holdings - Unaudited 21 Supplementary information -- Investment Portfolio of JPMorgan Funds -- US Dollar Money Market Fund (Unaudited) 22 24 Performance Record - Unaudited 25 Management and Administration 26 This report does not constitute an offer of any units in the fund forming the subject matter of this document (the "Fund"). Subscriptions are only valid if made on the basis of the current explanatory memorandum (or equivalent), supplemented by the most recent financial report.
JPMORGAN PROVIDENT MONEY FUND Statement of Responsibilities of the Manager and the Trustee Manager's Responsibilities The Manager of the Fund is required by the Code on Unit Trusts and Mutual Funds established by the Securities and Futures Commission of Hong Kong and the Trust Deed to prepare financial statements for each annual accounting period which give a true and fair view of the financial position of the Fund at the end of that period and of the transactions for the period then ended. In preparing these financial statements, the Manager is required to: - select suitable accounting policies and then apply them consistently; - make judgments and estimates that are prudent and reasonable; and - prepare the financial statements on the basis that the Fund will continue in operation unless it is inappropriate to presume this. The Manager is also required to manage the Fund in accordance with the Trust Deed and take reasonable steps for the prevention and detection of fraud and other irregularities. Trustee's Responsibilities The Trustee of the Fund is required to: - ensure that the Fund is managed by the Manager in accordance with the Trust Deed and that the investment and borrowing powers are complied with; - satisfy itself that sufficient accounting and other records have been maintained; - safeguard the property of the Fund and rights attaching thereto; and - report to the unitholders for each annual accounting period on the conduct of the Manager in the management of the Fund. - 1 -
JPMORGAN PROVIDENT MONEY FUND Report of the Trustee to the Unitholders We hereby confirm that, in our opinion, the Manager of the Fund has, in all material respects, managed the Fund in accordance with the provisions of the Trust Deed dated 31 August 2000, as amended, for the. For and on behalf of Cititrust Limited, Trustee - 2 -
JPMORGAN PROVIDENT MONEY FUND Independent Auditor's Report To the Unitholders of JPMorgan Provident Money Fund (the "Fund") Report on the Audit of the Financial Statements Opinion What we have audited The financial statements of JPMorgan Provident Money Fund set out on pages 5 to 19, which comprise: the Statement of Financial Position as at 30 June 2017; the Statement of Comprehensive Income for the year then ended; the Statement of Changes in Net Assets Attributable to Holders of Redeemable Units for the year then ended; the Statement of Cash Flows for the year then ended; and Our opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 30 June 2017, and of its financial transactions and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA"). Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Fund in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. Other Information The Trustee and the Manager (the "Management") of the Fund are responsible for the other information. The other information comprises all of the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information 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 of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Management for the Financial Statements The Management of the Fund is responsible for the preparation of the financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA, and for such internal control as the Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Management of 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 of accounting unless the Management either intends to liquidate the Fund or to cease operations, or have no realistic alternative but to do so. In addition, the Management of the Fund is required to ensure that the financial statements have been properly prepared in accordance with the relevant disclosure provisions of the Trust Deed dated 31 August 2000, as amended ("Trust Deed") and Appendix E of the Code on Unit Trusts and Mutual Funds issued by the Hong Kong Securities and Futures Commission (the "SFC Code"). - 3 -
JPMORGAN PROVIDENT MONEY FUND Independent Auditor's Report (continued) To the Unitholders of JPMorgan Provident Money Fund (the "Fund") Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, we are required to assess whether the financial statements of the Fund have been properly prepared, in all material respects, in accordance with the relevant disclosure provisions of the Trust Deed and the SFC Code. As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. Conclude on the appropriateness of the Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Matters under the Relevant Disclosure Provisions of the Trust Deed and the SFC Code In our opinion, the financial statements have been properly prepared, in all material respects, in accordance with the relevant disclosure provisions of the Trust Deed and the SFC Code. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 20 October 2017-4 -
JPMORGAN PROVIDENT MONEY FUND Statement of Financial Position As at 30 June 2017 2017 2016 Assets Cash at banks 597,922 405,728 Amounts receivable on allotment 43,428 5,066 Investments [Note 4(I)(a)] 12,836,421 10,028,192 Interest receivable 276 93 Total assets 13,478,047 10,439,079 ---------- ---------- Liabilities Amounts payable on redemption - 152,322 Other accounts payable 13,013 17,783 Liabilities (excluding net assets attributable to holders of redeemable units) 13,013 170,105 ---------- ---------- Net assets attributable to holders of redeemable units [Note 3] 13,465,034 10,268,974 Approved by the Manager on 20 October 2017 Signed By: For and on behalf of JPMorgan Funds (Asia) Limited, Manager The notes on pages 9 to 19 form part of these financial statements. - 5 -
JPMORGAN PROVIDENT MONEY FUND Statement of Comprehensive Income For the 2017 2016 Income Net gains on investments [Note 5] 66,228 7,263 Interest on deposits 938 1,039 Net foreign currency exchange (losses)/gains (5) 1 67,161 8,303 ---------- ---------- Expenses Administration fee [Note 7(g)] 16,274 13,141 Auditor's fee 11,000 16,000 Trustee's fee [Note 8] 1,902 1,928 Legal and professional expenses 1,137 507 Safe custody and bank charges 550 409 Printing and publication expenses 477 633 Transaction costs 112 12 Other operating expenses 5,609 5,579 37,061 38,209 ---------- ---------- Increase/(decrease) in net assets attributable to holders of redeemable units and total comprehensive income 30,100 (29,906) The notes on pages 9 to 19 form part of these financial statements. - 6 -
JPMORGAN PROVIDENT MONEY FUND Statement of Changes in Net Assets Attributable to Holders of Redeemable Units For the 2017 2016 Net assets attributable to holders of redeemable units at the beginning of the year 10,268,974 8,330,173 ---------- ---------- Allotment of redeemable units [Note 3] 5,296,182 4,233,068 Redemption of redeemable units [Note 3] (2,130,222) (2,264,361) Net allotment 3,165,960 1,968,707 ---------- ---------- 13,434,934 10,298,880 Increase/(decrease) in net assets attributable to holders of redeemable units and total comprehensive income 30,100 (29,906) Net assets attributable to holders of redeemable units at the end of the year 13,465,034 10,268,974 The notes on pages 9 to 19 form part of these financial statements. - 7 -
JPMORGAN PROVIDENT MONEY FUND Statement of Cash Flows For the 2017 2016 Operating activities Purchase of investments (2,742,001) (2,290,000) Interest received 755 970 Transaction costs paid (40) (12) Trustee's fee paid (2,420) (1,830) Administration fee paid (15,848) (12,719) Others (23,525) (22,724) Net cash outflow from operating activities (2,783,079) (2,326,315) ----------- ----------- Financing activities Receipts on allotment of redeemable units 5,257,820 4,228,267 Payments on redemption of redeemable units (2,282,544) (2,136,425) Net cash inflow from financing activities 2,975,276 2,091,842 ----------- ----------- Increase/(decrease) in cash and cash equivalents 192,197 (234,473) Cash and cash equivalents at the beginning of the year 405,728 640,202 Exchange losses on cash and cash equivalents (3) (1) Cash and cash equivalents at the end of the year 597,922 405,728 Analysis of balances of cash and cash equivalents: Cash at banks 597,922 405,728 The notes on pages 9 to 19 form part of these financial statements. - 8 -
JPMORGAN PROVIDENT MONEY FUND Notes to the Financial Statements 1 The Fund JPMorgan Provident Money Fund (the "Fund") was established under a Trust Deed dated 31 August 2000, as amended (the "Trust Deed") and is governed by the laws of Hong Kong. The Fund is authorized by the Securities and Futures Commission of Hong Kong ("SFC"). With effect from 28 April 2017, the Fund changed domicile from the Cayman Islands to Hong Kong. Cititrust Limited replaced Royal Bank of Canada Trust Company (Cayman) Limited as Trustee and Citicorp Trustee (Singapore) Limited replaced Royal Bank of Canada Trust Company (Cayman) Limited as Registrar for the Fund. The Fund is a feeder fund investing solely in the JPM US Dollar Money Market A (acc) USD share class of the JPMorgan Funds US Dollar Money Market Fund (before 13 May 2016, JPMorgan US Dollar Money Market A (acc) USD share class of the JPMorgan Funds US Dollar Money Market Fund) (the "Master Fund") which is managed by JPMorgan Asset Management (Europe) S.à r.l., a Connected Person of the Manager. The investment objective of the Fund is to provide investors with the opportunity to invest in short-term deposits and debt securities. The JPMorgan US Dollar Money Market A (acc) USD share class merged into JPM US Dollar Money Market A (acc) USD share class on 13 May 2016 after close of business. The investment objective of the Master Fund is to achieve a return in USD in line with prevailing money market rates whilst aiming to preserve capital consistent with such rates and to maintain a high degree of liquidity by investing in USD denominated short-term debt securities. The Fund offers two classes of units, administration units and investment units. All unitholders' rights with regard to the convening, voting or otherwise acting at any meeting of unitholders are the same. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation of financial statements The financial statements of the Fund have been prepared in accordance with Hong Kong Financial Reporting Standards ("HKFRSs"). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments) held at fair value through profit or loss. The preparation of financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires the Manager and the Trustee (the "Management") to exercise their judgment in the process of applying the Fund's accounting policies. Standards and amendments to existing standards effective from 1 July 2016 There are no standards or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2016 that have had a material impact on the Fund. New standards, amendments and interpretations effective after 1 July 2016 that have not been early adopted by the Fund HKFRS 9, "Financial instruments", addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in Hong Kong Accounting Standard ("HKAS") 39, "Financial instruments: recognition and measurement", that relates to the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in HKAS 39. For financial liabilities, there were no changes to classification and measurement, except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Management is currently assessing the impact on the Fund's financial statements. There are no other standards, interpretations or amendments to existing standards that are effective for the financial year after 1 July 2016 that would be expected to have a material impact on the Fund. - 9 -
JPMORGAN PROVIDENT MONEY FUND (b) Investments Classification The Fund classifies its investments as financial assets or financial liabilities at fair value through profit or loss. These financial assets or financial liabilities are held-for-trading as they are acquired or incurred principally for the purpose of selling or repurchasing in the near term or short-term profit taking. Recognition, derecognition and measurement Purchases and sales of investments are accounted for on the trade date basis. Investments are initially recognized at fair value and are subsequently re-measured at fair value. Realized and unrealized gains and losses on investments are recognized in the Statement of Comprehensive Income. Investments are derecognized when the rights to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership. Fair value estimation Investments in collective investment schemes are stated at fair value based on the net asset value per unit of the respective funds as determined by the administrators of the relevant funds. Transfers between levels of the fair value hierarchy Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period. (c) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. (d) Income and expense Interest income on cash at banks and short-term deposits is accounted for in the Statement of Comprehensive Income on an effective interest basis. Expenses are accounted for in the Statement of Comprehensive Income on an accrual basis. (e) Foreign currency translation Functional and presentation currency The Fund has adopted United States dollar as its functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in the Statement of Comprehensive Income. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Statement of Comprehensive Income within "Net foreign currency exchange gains/losses". Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the Statement of Comprehensive Income within "Net gains/losses on investments". (f) Cash and cash equivalents For the purpose of the Statement of Cash Flows, cash and cash equivalents comprise cash at banks and bank deposits with maturity of three months or less from the date of placing the deposits, net of certain short-term bank loans which the Fund usually undertakes as overnight bank borrowings. - 10 -
JPMORGAN PROVIDENT MONEY FUND (g) Amounts due from/to brokers Amounts due from/to brokers represent receivables for investments sold and payables for investments purchased that have been contracted for but not yet settled by the end of the year. (h) Proceeds and payments on allotment and redemption of units The net asset value per unit is computed for each dealing day. The price at which units are allotted or redeemed is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day in accordance with the provisions of the Trust Deed which may be different from the accounting policies stated in the financial statements. Units of the Fund are redeemable at the option of the holders of redeemable units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to holders of redeemable units (or "net asset value" or "net assets" or "NAV") and is carried at the redemption amount that would be payable at the Statement of Financial Position date if the holders of redeemable units exercised the right to redeem units of the Fund. 3 Number of units in issue and net assets attributable to holders of redeemable units (per unit) Number of units in issue: 2017 2016 Investment Administration Investment Administration Units Units Units Units At the beginning of the year 647,748.995 220,988.262 556,782.814 142,586.606 Total allotments 305,606.330 145,224.331 201,315.953 162,453.620 Total redemptions (129,446.200) (51,188.092) (110,349.772) (84,051.964) At the end of the year 823,909.125 315,024.501 647,748.995 220,988.262 Net assets attributable to holders of redeemable units 10,004,696 3,460,338 7,836,230 2,432,744 Net assets attributable to holders of redeemable units (per unit) 12.14 10.98 12.10 11.01 Holders of investment units are only entitled to investment management services from the Manager. Holders of administration units are also entitled to other administrative services provided by the Manager upon payment of the administration fee, which is deducted from the share of net assets of the respective units. 4 Financial risk management (I) Financial risk factors The Fund solely invests in a collective investment scheme JPMorgan Funds - US Dollar Money Market Fund which is managed by a Connected Person of the Manager. The Master Fund invests in the money markets of major countries such as the United States. The Fund's activities therefore expose it to the same financial risks to which the Master Fund is exposed to, i.e. market risk (including market price risk, interest rate risk and currency risk), credit risk and liquidity risk. The Fund's holding in the Master Fund, as a percentage of the Master Fund's total net asset value, will vary from time to time dependent on the volume of subscriptions and redemptions at the Master Fund level. It is possible that the Fund may, at any point in time, hold a majority of the Master Fund's total units in issue. As at 30 June 2017, the Fund owned 3.41% (2016: 2.29%) of the Master Fund's net assets attributable to the holders of redeemable units. (a) (i) Market risk Market price risk The Master Fund primarily invests in debt securities which are subject to interest rate risk. Refer to Note 4(l)(a)(ii) for interest rate risk. - 11 -
JPMORGAN PROVIDENT MONEY FUND (ii) Interest rate risk Interest rate risk is the risk that the value of a financial instrument or future cash flow will fluctuate due to changes in market interest rates. The Fund The Fund is a feeder fund investing substantially all of its assets in the Master Fund and thus its investment is not directly exposed to interest rate risk. The Fund's bank deposits are exposed to interest rate risk which is considered to be minimal as these interest bearing assets are short term in nature, changes in their fair values in the event of a change in interest rate will not be material. The Master Fund The Master Fund is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its investments and cash deposits. The table below summarizes the Master Fund's financial assets and liabilities as at 30 June extracted from the unaudited financial records of the Master Fund as at that date which expose it to the risk associated with the effects of fluctuations in the prevailing levels of market interest rates, categorized by remaining maturity dates. 2017 Less than 1 year 1-5 years Total Cash at banks 68,218,721-68,218,721 Investments (Note*) 304,821,276-304,821,276 Total interest sensitivity gap 373,039,997-373,039,997 2016 Cash at banks 86,488,023-86,488,023 Investments (Note*) 362,470,807-362,470,807 Total interest sensitivity gap 448,958,830-448,958,830 Note: * The coupon rate of the investments ranged between 0.00% p.a. 1.72% p.a. (2016: 0.00% p.a. 1.05% p.a.). As at 30 June, the Master Fund's fair value of investments extracted from the unaudited financial records as at that date were as follows: 2017 2016 Listed/Quoted Investments Fair value of investments % of net assets Fair value of investments % of net assets Assets Debt securities - United States 164,402,071 43.7 196,262,925 44.9 - Canada 47,965,717 12.7 5,000,000 1.1 - United Kingdom 21,995,399 5.8 19,985,997 4.6 - Sweden 16,500,408 4.4 29,987,798 6.7 - Others 53,957,681 14.3 111,234,087 25.5 Total Listed/Quoted Investments 304,821,276 80.9 362,470,807 82.8-12 -
JPMORGAN PROVIDENT MONEY FUND The investment manager of the Master Fund monitors the Master Fund's interest rate risk sensitivity primarily through the modified duration of the Master Fund on a regular basis. The modified duration measures the sensitivity of the price of a bond and money market investment relative to the change in interest rate. As at 30 June 2017, the investment manager of the Master Fund estimates that the Master Fund has a modified duration of 0.08 (2016: 0.10). For the purpose of disclosing relevant sensitivities, the percentage of reasonable possible change in interest rate adopted is 25 basis points, and does not include remote or "worst case" scenarios or "stress tests" nor represent the investment manager of the Master Fund s forecast of the Master Fund's future returns. If the interest rates were to rise by 25 basis points with all other variables that may impact the net asset value of the Master Fund held constant, this would result in a decrease in net asset value of the Master Fund by approximately 75,396 (2016: 109,493). If the interest rates were to fall by 25 basis points, this would result in an increase in the net asset value of the Master Fund by the same amount. (iii) Currency risk The Fund The Fund invests substantially all of its assets in the Master Fund in United States dollar denomination. HKFRS 7 considers the foreign exchange exposure relating to non-monetary assets and liabilities to be a component of market price risk not currency risk. The Investment Manager monitors the exposure on all foreign currency denominated assets and liabilities including both monetary and nonmonetary assets and liabilities. The Fund's other assets and liabilities are mainly denominated in United States dollar and Hong Kong dollar and are therefore not exposed to significant currency risk as the Hong Kong dollar is currently pegged to United States dollar. The Master Fund The Master Fund's functional currency is United States dollar and the Master Fund s assets and liabilities are mainly denominated in United States dollar. As a result, the investment manager of the Master Fund considered that the Master Fund has no direct currency exposure. (b) Credit risk Credit risk is the risk that a counterparty will not be able to pay amounts in full when due. The Fund As at 30 June, the Fund's maximum exposure to credit risk before any credit enhancements was as follows: 2017 2016 Cash at banks 597,922 405,728 Amounts receivable on allotment 43,428 5,066 Interest receivable 276 93 641,626 410,887 The table below summarizes the credit rating of the banks/custodian which the Fund has placed the financial assets as at 30 June. 2017 2016 Exposure to counterparties Exposure to counterparties Bank balances S&P(AA)/Moody's(Aa)/FITCH(AA) 597,922 405,728 Investment balances with custodian S&P(AA)/Moody's(Aa)/FITCH(AA) 12,836,421 10,028,192-13 -
JPMORGAN PROVIDENT MONEY FUND The Master Fund As at 30 June, the Master Fund's maximum exposure to credit risk before any credit enhancements based on unaudited financial information as at that date was as follows: 2017 2016 Cash at banks 68,218,721 86,488,023 Amounts receivable on allotment 5,699,342 5,897,862 Investments debt securities 304,821,276 362,470,807 Accrued interest on investment 319,473 228,050 379,058,812 455,084,742 All transactions in listed/quoted investments are settled on a delivery versus payment basis using approved brokers. The risk of default is considered minimal, as delivery of investments sold is only made when the Master Fund's custodian bank has received payment. For a purchase, payment is made once the investments have been received by the Master Fund's custodian bank. The trade will fail if either party fails to meet the obligation. The Master Fund's investments are predominantly in debt securities and therefore the Master Fund is exposed to credit risk that the issuers may not be able to repay the principal amount and interest at maturity. Credit risk derived from debt securities is managed and monitored on an on-going basis by making reference to the credit rating and credit outlook provided by credit rating agencies, if available, and internal credit analysis. The table below summarizes the debt securities by credit rating as at 30 June based on unaudited financial information as at that date. 2017 2016 % of % of net net assets assets S&P(A-1)/Moody's(P-1)/FITCH(F-1) 80.9 82.8 80.9 82.8 The table below summarizes the credit rating of the banks/custodian which the Master Fund has placed the financial assets as at 30 June based on unaudited financial information as at that date. 2017 2016 Exposure to counterparties Exposure to counterparties Bank balances S&P(A-1)/Moody's(P-1)/FITCH(F-1) 68,218,721 86,488,023 Investment balances with custodian S&P(A-1)/Moody's(P-1)/FITCH(F-1) 304,821,276 362,470,807 (c) Liquidity risk The Fund is exposed to daily redemption of units. As at 30 June 2017 and 2016, the Fund invests solely in a collective investment scheme JPMorgan Funds - US Dollar Money Market Fund which allows daily redemption. The Manager may also limit the total number of units redeemed on any dealing day to 10% or more of the units in issue on any dealing day. - 14 -
JPMORGAN PROVIDENT MONEY FUND The Fund The table below summarizes the Fund's financial liabilities into relevant maturity groupings based on the remaining period as at 30 June to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. 2017 2016 Less than 1 month Less than 1 month Amounts payable on redemption - 152,322 Other accounts payable 13,013 17,783 Net assets attributable to holders of redeemable units 13,465,034 10,268,974 Total financial liabilities 13,478,047 10,439,079 The Master Fund The table below summarizes the Master Fund's financial liabilities into relevant maturity groupings based on the remaining period as at 30 June extracted from the unaudited financial information of the Master Fund as at that date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. 2017 2016 Less than 1 month Less than 1 month Amounts payable on redemption 1,935,383 16,960,533 Other accounts payable 143,181 152,556 Net assets attributable to holders of redeemable units (Note*) 376,980,248 437,971,653 Total financial liabilities 379,058,812 455,084,742 Note: * If the total requests for redemptions and switches on any dealing day exceeds 10% of the total value of shares in issue, the management company may decide that redemption and switching requests in excess of 10% shall be deferred until the next dealing day. The Investment Manager manages the Fund's liquidity risk by investing in investments that the Investment Manager expects to liquidate normally within 1 month and making short-term bank borrowing to meet the total financial liabilities. (II) Capital risk management The capital of the Fund is represented by the net assets attributable to holders of redeemable units which is subject to allotments and redemptions of redeemable units. The Fund's objective for capital management is to provide returns and long-term capital growth for unitholders. In order to maintain the capital structure, the Management performs the following: - Monitor allotment and redemption activities relative to the liquid assets. - To protect the interest of unitholders and in exceptional circumstances, the Manager may also limit the total number of units redeemed on any dealing day to 10% or more of the units in issue on any dealing day. - Monitor fund investment guidelines and restrictions, in accordance with the constitutional documents, to maintain sufficient liquidity through diversification. (III) Fair value estimation As at 30 June 2017 and 2016, the Management considers that the carrying values of assets and liabilities were reasonable approximations of their fair value. - 15 -
JPMORGAN PROVIDENT MONEY FUND HKFRS 13 requires the Fund to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The table below summarizes the Fund's investments (by class) within the fair value hierarchy measured at fair value as at 30 June: Listed/Quoted Investments Level 1 Level 2 Level 3 Total 2017 Assets Collective Investment Scheme 12,836,421 - - 12,836,421 Total financial assets at fair value through profit and loss 12,836,421 - - 12,836,421 2016 Assets Collective Investment Scheme 10,028,192 - - 10,028,192 Total financial assets at fair value through profit and loss 10,028,192 - - 10,028,192 Investments, whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. The Fund does not adjust the quoted price for these instruments. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer/broker quotations or alternative pricing sources supported by observable inputs are classified within level 2. Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. There were no transfers between levels for the years ended 30 June 2017 and 2016. The table below summarizes the Fund's assets and liabilities (by class) within the fair value hierarchy not measured at fair value at 30 June but for which fair value is disclosed. Level 1 Level 2 Level 3 Total 2017 Assets Cash at banks 597,922 - - 597,922 Amounts receivable on allotment - 43,428-43,428 Interest receivable - 276-276 Total assets 597,922 43,704-641,626 Liabilities Other accounts payable - 13,013-13,013 Net assets attributable to holders of redeemable units 13,465,034 - - 13,465,034 Total liabilities 13,465,034 13,013-13,478,047-16 -
JPMORGAN PROVIDENT MONEY FUND 2016 Level 1 Level 2 Level 3 Total Assets Cash at banks 405,728 - - 405,728 Amounts receivable on allotment - 5,066-5,066 Interest receivable - 93-93 Total assets 405,728 5,159-410,887 Liabilities Amounts payable on redemption - 152,322-152,322 Other accounts payable - 17,783-17,783 Net assets attributable to holders of redeemable units 10,268,974 - - 10,268,974 Total liabilities 10,268,974 170,105-10,439,079 Cash at banks and short-term deposits include cash in hand, deposits held with banks and other short-term investments. Amounts due from brokers and other receivables include the contractual amounts for settlement of trades and other obligations due to the Fund. Amounts due to brokers and other payables represent the contractual amounts and obligations due by the Fund for settlement of trades and expenses. Units of the Fund are redeemable at the option of the holders of redeemable units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to holders of redeemable units (or "net asset value" or "net assets" or "NAV") and is carried at the redemption amount that would be payable at the Statement of Financial Position date if the holders of redeemable units exercised the right to redeem units of the Fund. The redemption amount is determined based on the net assets attributable to holders of redeemable units calculated in accordance with the provisions of the Trust Deed ("Trust Deed NAV"). These units are traded in an active market. As such, level 1 is deemed to be the appropriate categorization for the net assets attributable to holders of redeemable units (or "net asset value" or "net assets" or "NAV"). 5 Net gains on investments 2017 2016 Change in unrealized gains/losses in value of investments 66,228 7,263 Realized gains on sale of investments - - 66,228 7,263 6 Taxation No provision for Hong Kong profits tax has been made as the Fund was authorized as a collective investment scheme under Section 104 of the Securities and Futures Ordinance and is therefore exempt from profits tax under Section 26A(1A) of the Inland Revenue Ordinance. Under laws of the Cayman Islands for the period that the Fund was domiciled there, there was no income, capital gains or other taxes payable by the Fund. As a result, no provision for income taxes has been made in the financial statements. 7 Transactions with the Trustee and its affiliates and the Manager and its Connected Persons The following is a summary of significant related party transactions entered into during the year between the Fund and the Trustee and its affiliates and the Manager and its Connected Persons. Connected Persons of the Manager are those as defined in the Code on Unit Trusts and Mutual Funds established by the SFC. All such transactions were entered into in the ordinary course of business and were on normal commercial terms. (a) As stated in Note 1, the Fund is a feeder fund investing solely in the units of JPMorgan Funds - US Dollar Money Market Fund which is issued and managed by a Connected Person of the Fund's Manager. - 17 -