Audited Annual Report. JPMorgan Investment Funds Société d Investissement à Capital Variable, Luxembourg (R.C.S. No B ) - PDF

Audited Annual Report JPMorgan Investment Funds Société d Investissement à Capital Variable, Luxembourg (R.C.S. No B ) 31 December 2015 JPMorgan Investment Funds Audited Annual Report Contents Board

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Audited Annual Report JPMorgan Investment Funds Société d Investissement à Capital Variable, Luxembourg (R.C.S. No B ) 31 December 2015 JPMorgan Investment Funds Audited Annual Report Contents Board Directors 1 Management and Administration 2 Board Directors Report 3 Investment Managers Report 7 Audit Report 8 Audited Financial Statements and Statistical Information Combined Statement 11 Combined Statement Operations and Changes in 17 Statement Changes in the Number Shares 21 Statistical Information 27 Notes to the Financial Statements 33 Schedules Investments JPMorgan Investment Funds - Europe Select Equity Fund 51 JPMorgan Investment Funds - Europe Strategic Dividend Fund 54 JPMorgan Investment Funds - Global Balanced Fund 59 JPMorgan InvestmentFunds - Global Capital Preservation Fund () 64 JPMorgan Investment Funds - Global Conservative Balanced Fund 69 JPMorgan Investment Funds - Global Convertibles Fund () 73 JPMorgan Investment Funds - Global Dividend Fund 77 JPMorgan Investment Funds - Global Financials Fund 80 JPMorgan Investment Funds - Global HighYield Bond Fund 83 JPMorgan Investment Funds - Global Income Fund 91 JPMorgan Investment Funds - Global Macro Opportunities Fund 124 JPMorgan Investment Funds - Global Select Equity Fund 129 JPMorgan Investment Funds - Global Select Equity Plus Fund 132 JPMorgan Investment Funds - Income Opportunity Fund 136 JPMorgan Investment Funds - Japan Advantage Equity Fund 160 JPMorgan Investment Funds - Japan Select Equity Fund 162 JPMorgan Investment Funds - Japan Strategic Fund 164 JPMorgan Investment Funds - US Bond Fund 167 JPMorgan Investment Funds - US Equity Fund 175 JPMorgan Investment Funds - US Select Equity Fund 178 Appendix - Unaudited Additional Disclosures 1. Fund Total Expense Ratios Summary Investment Objectives the Sub-Funds Performance and Volatility Interest Rate Received/(Charged) on Bank Accounts Sub-Fund Share Classes Subject to Taxe d Abonnement Rate Portfolio Turnover Ratio Calculation Method the Risk Exposure Collateral Historical Statement Changes in the Number Shares for the year ended 31 December Historical Statement Changes in the Number Shares for the year ended 31 December For additional information please consult No subscriptions can be received solelyon the basis this report. Subscriptions are onlyvalid if made on the basis the current Prospectus, the current Key Investor Information Documents, supplemented bythe latest audited annual report and, if published thereafter, the latest unaudited semi-annual report. The current Prospectus, the current KeyInvestor 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. Following a review the disclosure Investment Manager(s) within the Prospectus and current KeyInvestor Information Documents, the details the Investment Manager(s) for the individual Sub-Funds will now be available from the Management Companyat its registered fice, or from JPMorgan Investment Funds Board Directors Chairman Iain O.S. Saunders Duine, Ardfern Argyll PA31 8QN United Kingdom Directors Jacques Elvinger Elvinger, Hoss & Prussen 2, place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg Jean Frijns Antigonelaan 2 NL-5631 LR Eindhoven The herlands Massimo Greco (from 24 April 2015) JPMorgan Asset Management (UK) Limited 60 Victoria Embankment London EC4Y OJP United Kingdom John Li How Cheong The Directors Office 19, rue de Bitbourg L-1273 Luxembourg Grand Duchy Luxembourg Peter Thomas Schwicht Birkenweg Bad Vilbel Germany 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 JPMorgan Investment Funds Management and Administration Management Company, Registrar and Transfer Agent, Global Distributor and Domiciliary Agent JPMorgan Asset Management (Europe) S.à r.l. 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. 245 Park Avenue New York, NY United States America JPMorgan Asset Management (Japan) Limited Tokyo Building 7-3, Marunouchi 2-Chome, Chiyoda-Ku Tokyo Japan JF Asset Management Limited 21st Floor, Chater House 8 Connaught Road Central Hong Kong Custodian, Corporate and Administrative Agent J.P. Morgan Bank Luxembourg S.A. 6, route de Trèves L-2633 Senningerberg Grand Duchy Luxembourg Auditor PricewaterhouseCoopers, Société coopérative 2, rue Gerhard Mercator B.P L-1014 Luxembourg Grand Duchy Luxembourg Legal Adviser Elvinger, Hoss & Prussen 2, place Winston Churchill B.P. 425 L-2014 Luxembourg Grand Duchy Luxembourg 2 JPMorgan Investment Funds Board Directors Report Chairman Iain O.S. Saunders Independent Director and Chairman. A member the Board since September Mr Saunders graduated in Economics from Bristol Universityand joined Robert Fleming in He held several senior positions with the group in Hong Kong, Japan and the US, beforereturning to the UK in He was appointed DeputyChairman Fleming Asset Management and retired in 2001 following the merger the Robert Fleming group with JP Morgan. Mr Saunders is currentlychairman several JPMorgan managed Luxembourg-domiciled investment funds and MB Asia Select Fund. Directors Jacques Elvinger Independent Director. A member the Board since January Mr Elvinger became a member the Luxembourg Bar in 1984 and has been a partner the Luxembourg law firm Elvinger, Hoss & Prussen since Mr Elvinger practices general corporate and banking law and specialises in the field investment and pension funds. He is a member the Board Directors the Luxembourg Fund Association (ALFI) and is currentlychairman the Regulation AdvisoryBoard and Co-Chair the Legal Committee ALFI. He is also a member the AdvisoryCommittees to the Luxembourg Commission for the Supervision the Financial Sector in the area investment funds, pension funds and investment companies in risk capital. Mr Elvinger currentlyholds a number pressional and board mandates with European organisations including several JPMorgan managed Luxembourg-domiciled investment funds. Jean Frijns Independent Director. A member the Board since July Mr Frijns studied Econometrics, attained a doctorate in Economics from the University Tilburg and was a lecturer at the Northern Illinois University. He joined the Dutch Central Planning Bureau (CPB), the economicthink-tank the Dutch governmentin 1980 and, in 1983, was appointed as deputydirector the CPB. Mr Frijns has held various posts including Chief Investment Strategist ABP, a Dutch pension fund, a pressorship in Investments from Vrije Universiteit (Amsterdam) and, since 2005 has served as Chairman the Monitoring Committee on Corporate Governance. Mr Frijns currentlyholds a number pressional and board mandates with European organisations including several JPMorgan managed Luxembourg-domiciled investment funds. John Li How Cheong Independent Director. A member the Board since June During the last 26 years Mr Li worked essentially in the financial sector auditing and advising clients such as banks, investment funds, insurance companies, etc. Clients also were from Europe, US, Japan and Asia feringmr Li an extensive experience in dealing with international companies. Mr Li was a Partner at KPMG Luxembourg for more than 20 years during which he was Managing Partner for 8 years before taking on the role Chairman the Supervisory Board for 3 years. Mr Li was also a member the Investment Management Practice. Mr Li is a board member the Institut Luxembourgeois des Administrateurs. Mr Li currentlyholds a number board mandates with financial institutions including several JPMorgan managed Luxembourg-domiciled investment funds. Massimo Greco Connected Director. A member the Board since April Mr Greco is responsible for the Global Funds business in Continental Europe, based in London. Mr Greco has been a JPMorgan employee since 1992, he took on his current responsibilities in In 1998 Mr Greco moved to Head the Investment Management business in Italy. Before that, he worked for Goldman Sachs International in the London Capital Markets team from 1986 to Mr Greco began his career with the Investment Bank as head Sales for Credit and Rates in Italy. 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 currently a Director 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 Germanyafter having studied business, tax and accounting in Hamburg, Norwayand the USA and was an employeejpmorganasset Management from1987 until October2014. Priorto his retirementmr Schwichtwas the Chief Executive Investment Management - EMEA, JPMorgan Asset Management He had previouslyheld positions as the Head the Continental Europe Institutional business and the Investment Management CountryHead for Institutional and Retail business in Germanywhere he first developed the business and then went on to expand this throughout Continental Europe. Mr Schwicht is currentlya Director several JPMorgan managed Luxembourg-domiciled investment funds. Daniel Watkins Connected Director. A member the Board since December Mr Watkins, managing director, is the DeputyCEO IM Europe and Global Co-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 RFP. Mr Watkins also performs the role DeputyCEO GIM EMEA, acting as a director all the regulated legal entities across the region. Mr Watkins has held a numberpositionsat JPMorgannamely; Head EuropeCOO and GlobalIM Operations, Head the EuropeanOperations 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 31 December JPMorgan Investment Funds Board Directors Report (continued) Structure the Fund The Fund is a variable capital investment company, organised as a Société Anonyme, under the laws the Grand Duchy Luxembourg. The Board has appointed JPMorgan Asset Management (Europe) S.à r.l. (JPMAM) as Management Company the Fund. The Fund is organised as an umbrella with a number Sub-Funds each which has its own investment objective, policies and restrictions. The objectivethe Fund is to place the moneyavailable to it in transferablesecurities and otherpermitted assets anykind, in accordancewith 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 July2009 and is subject to the Luxembourg law 17 December 2010, as amended, on undertakings for collective investment. The Fund maytherefore 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 20 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: Argentina, Austria, Bahrain, Belgium, Chile, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Jersey, Korea, Liechstenstein, Macau, The herlands, herlands Antilles, Norway, Poland, Portugal, Singapore, Slovakia, Spain, Sweden, Switzerland, Taiwan and the United Kingdom. Role and Responsibility the Board The responsibility the Board is governed exclusivelybyluxembourg law. With respect to the annual accounts the Fund, the duties the Directors are governed bythe law 10 December 2010 on, inter alia, the accounting and annual accounts undertakings for collective investment and bythe law 17 December 2010 relating to undertakings for collective investment. A management agreement between the Fund and JPMorgan Asset Management (Europe) S.à r.l sets out the matters over which the Management Company has authorityunder Chapter 15 the Law 17 December This includes management the Fund s assets and the provision administration, registration, domiciliationagent and marketingservices. All othermatters are reserved forapproval bythe Board and a schedule setting out such matters 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 keyinvestment and financial data, including the annual accounts, as well as the appointment, and review the services provided by, the Management Company, Auditor and Custodian. Prior to each Board meeting the Directors receive detailed and timelyinformation allowing them to be prepared for the items under discussion during the meeting. For each quarterlymeeting the Board requests, and receives, reports from, amongst others, the Management Company, the investment managers, risk management as well as proposals for changes to existing Sub-Funds or proposals to launch new ones as appropriate. Senior representatives each these functions attend Board meetings by invitation to enable the Directors to question the reports presented to it. The Directors take decisions in the interests the Fund and its shareholders as a whole and refrain from taking part in anydeliberation or decision which createsa conflictinterestbetweentheirpersonalinterestsand thosethefund and itsshareholders. Thesubjectconflictsinterestisdocumentedin 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 bymr 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 independentlyfrom the Management Company. The Board as a whole has a breadth investment knowledge, financial skills, as well as legal and other experience relevant to the Fund s business. Directors are elected annuallybyshareholders at the Annual General Meeting. The Board does not limit the number years Directors service and it does take into account the nature and requirements the fund industry and the Fund s businesswhenmakingrecommendationto shareholdersthat Directorsbeelected. The terms each Director s appointmentare 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 Annual General Meeting ( AGM ) held on 24 April 2015 the shareholders appointed Mr Massimo Greco as an additional Director with effect from the date the AGM. Board Remuneration The Board believes that the remuneration the Board members should reflect the responsibilities the Board, the experience the Board as a whole and be fair and appropriate given the size, complexity and investment objectives the Fund and Sub-Funds. The remuneration is reviewed on an annual basis. The Chairman is currentlypaid 50, per annum and the other Directors 40, per annum apart from the Connected Directors who have agreed to waive their remuneration. 4 JPMorgan Investment Funds 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 currentlyconsider it necessaryto 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 currentlyapproved bythe Board or, where there are specific matters that need further consideration, a Sub-Committee the Board could be formed to address these. Such circumstances could be where the Board requests some amendments to the Prospectus and where it is not appropriate to wait till the next quarterlyboard meeting for this to be approved. These Sub-Committee meetings are usuallyformed a minimum two Directors. ThereweresixBoardmeetingsheldduringtheyear. FourthesewerequarterlyBoardmeetingswhere, amongstothermatters, theagenda includedthose items highlightedunder the sectionabove called Roleand Responsibilitythe Board and twoweread hocboard meetings. Therewas onesub-committee meeting held during the year. In addition to the Board meeting where the Auditors present the report on the audit the Fund accounts, the Independent Directors also meet with them annually without the Connected Directors being in attendance. Internal Control Investment management and all administrative services are provided bythe Management Companyand custody assets is provided byj.p. Morgan Bank LuxembourgS.A. TheBoard ssystem internalcontrolthereforemainlycomprisesmonitoringtheservicesprovidedbythemanagementcompanyand the Custodian, including the operational and compliance controls established bythem to meet the Fund s obligations to shareholders as set out in the Prospectus, Articles Incorporationas well as all relevant regulations. The Management Companyformallyreports 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 ALFI Code Conduct (the Code ) which sets out principles good governance. These principles were amended in July 2013 and are set out below: 1. The Board should ensure that high standards corporate governance are applied at all times; 2. The Board should have good pressional standing and appropriate experience and use best efforts to ensure that it is collectivelycompetent 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 properlyinformed, are fairlyand equitablytreated, and receive the benefits and services to which theyare 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 shar
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