Jpmorgan Investment Funds Société D’Investissement À Capital Variable, Luxembourg (R.C.S
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GB Audited Annual Report JPMorgan Investment Funds Société d’Investissement à Capital Variable, Luxembourg (R.C.S. No B 49 663) 31 December 2010 JPMorgan Investment Funds Audited Annual Report As at 31 December 2010 Contents Board of Directors 1 Management and Administration 2 Board of Directors’ Report 3 Investment Managers’ Report 4 Audit Report 5 Financial Statements and Statistical Information CombinedStatementofNetAssets 7-11 CombinedStatementofOperationsandChangesinNetAssets 13-17 StatementofChangesintheNumberofShares 18-21 StatisticalInformation 22-26 Notes to the Financial Statements 27-34 Schedule of Investments JPMorganInvestmentFunds-BlueandGreenFund 35 JPMorganInvestmentFunds-EmergingMarketsCorporateBondPortfolioFundI 40 JPMorganInvestmentFunds-EuroLiquidMarketFund 43 JPMorganInvestmentFunds-EuropeBondFund 45 JPMorganInvestmentFunds-EuropeRecoveryFund 48 JPMorganInvestmentFunds-EuropeSelectEquityFund 50 JPMorganInvestmentFunds-EuropeStrategicDividendFund 53 JPMorganInvestmentFunds-GlobalBalancedFund(EUR) 57 JPMorganInvestmentFunds-GlobalBalancedFund(USD) 61 JPMorganInvestmentFunds-GlobalBondFund(EUR) 68 JPMorganInvestmentFunds-GlobalBondFund(USD) 73 JPMorganInvestmentFunds-GlobalCapitalAppreciationFund 78 JPMorganInvestmentFunds-GlobalCapitalPreservationFund(EUR) 84 JPMorganInvestmentFunds-GlobalCapitalPreservationFund(USD) 90 JPMorganInvestmentFunds-GlobalConvertiblesFund(USD) 95 JPMorganInvestmentFunds-GlobalDividendFund 99 JPMorganInvestmentFunds-GlobalEnhancedBondFund 102 JPMorganInvestmentFunds-GlobalFinancialsFund 107 JPMorganInvestmentFunds-GlobalHighYieldBondFund 110 JPMorganInvestmentFunds-GlobalIncomeFund 115 JPMorganInvestmentFunds-GlobalSelect130/30Fund 123 JPMorganInvestmentFunds-GlobalSelectEquityFund 127 JPMorganInvestmentFunds-GlobalTotalReturnFund 131 JPMorganInvestmentFunds-HighbridgeStatisticalMarketNeutralFund 133 JPMorganInvestmentFunds- IncomeOpportunityFund 137 JPMorganInvestmentFunds-Japan50EquityFund 151 JPMorganInvestmentFunds-JapanBehaviouralFinanceEquityFund 153 JPMorganInvestmentFunds-JapanFocusFund 155 JPMorganInvestmentFunds-JapanSelectEquityFund 157 JPMorganInvestmentFunds-JapanStrategicValueFund 159 JPMorganInvestmentFunds-JFAsiaex-JapanFund 161 JPMorganInvestmentFunds-USBondFund 162 JPMorganInvestmentFunds-USEquityFund 166 JPMorganInvestmentFunds-USSelectEquityFund 169 Appendix: Unaudited Additional Disclosures FundTotalExpenseRatios 172 SummaryofInvestmentObjectivesoftheSub-Funds 177 PerformanceandVolatility 179 InterestRateReceived/(Charged)onBankAccounts 184 Sub-FundShareClassesSubjecttoTaxed’AbonnementRateof0.01% 184 Sub-FundShareClassesExemptfromTaxed’Abonnement 184 PortfolioTurnoverRatio 185 HistoricalStatementsofChangesintheNumberofShares 186 For additional information please consult www.jpmorganassetmanagement.com No subscriptions can be received solelyon the basis of this report. Subscriptions are onlyvalid if made on the basis of the current prospectus, the current simplified prospectus, supplemented bythe latest audited annual report and, if published thereafter, the latest unaudited semi-annual report. The current prospectus, the current simplified prospectus, the unaudited semi-annual reports, as well as the audited annual report can be obtained free of charge from the registered office of the SICAV and from local paying agent. Following a review of the disclosure of Investment Manager(s) within the Prospectus and Simplified Prospectus, the details of the Investment Manager(s) for the individual Sub-Funds will now be available from the Management Companyat its registered office, or from www.jpmorganassetmanagement.com. JPMorgan Investment Funds Board of Directors As at 31 December 2010 Chairman Deputy Chairman Iain O.S. Saunders Pierre Jaans Banker Economist Duine, Ardfern 3, rue de Kahler Argyll PA31 8QN L-8356 Garnich United Kingdom Grand Duchy of Luxembourg Directors Jacques Elvinger Andrea L. Hazen Partner Managing Director Elvinger, Hoss & Prussen JPMorgan Asset Management (UK) Limited 2, place Winston Churchill 20 Finsbury Street L-2014 Luxembourg London EC2Y 9AQ Grand Duchy of Luxembourg United Kingdom Jean Frijns Robert Van der Meer Professor, Finance and Investments Professor of Finance Antigonelaan 2 12 Lange Vijverberg NL-5631 LR Eindhoven NL-2513 AC The Hague The Netherlands The Netherlands Berndt May Managing Director JPMorgan Asset Management (Europe) S.à r.l. Austrian Branch Führichgasse 8 A-1010 Vienna Austria Registered Office European Bank & Business Centre 6, route de Trèves L-2633 Senningerberg Grand Duchy of Luxembourg 1 JPMorgan Investment Funds Management and Administration As at 31 December 2010 Management Company, Registrar and Transfer Agent, Global Distributor and Domiciliary Agent JPMorgan Asset Management (Europe) S.à r.l. European Bank & Business Centre 6, route de Trèves L-2633 Senningerberg Grand Duchy of Luxembourg Investment Managers J.P. Morgan Investment Management Inc. 245 Park Avenue New York, NY 10167 United States of America JPMorgan Asset Management (Japan) Limited Tokyo Building 7-3 Marunouchi 2-Chome Chiyoda-Ku Tokyo 100-6432, Japan JPMorgan Asset Management (UK) Limited 20 Finsbury Street London EC2Y 9AQ United Kingdom JF Asset Management Limited 21st Floor, Chater House 8 Connaught Road Central, Hong Kong Highbridge Capital Management LLC 9 West 57th Street New York, NY 10019 United States of America JPMorgan Asset Management (Singapore) Limited 168 Robinson Road 17th Floor, Capital Tower Singapore 068912 Custodian, Corporate and Administrative Agent J.P. Morgan Bank Luxembourg S.A. European Bank & Business Centre 6, route de Trèves L-2633 Senningerberg Grand Duchy of Luxembourg Auditor PricewaterhouseCoopers S.à r.l. 400, Route d’Esch BP 1443 L-1014 Luxembourg Grand Duchy of Luxembourg Legal Adviser Elvinger, Hoss & Prussen 2, place Winston Churchill L-2014 Luxembourg Grand Duchy of Luxembourg 22 JPMorgan Investment Funds Board of Directors’ Report As at 31 December 2010 The Board of Directors is pleased to present the Audited Annual Report for the year ended 31 December 2010. Structure and Size of the Fund The Fund is a variable capital investment companywith multiple Sub-Funds, organised as a “société anonyme”,under the laws of the Grand Duchyof Luxembourg, organised as an “umbrella” with a number of Sub-Funds, each of which has its own investment policy and restrictions. At the year end the Fund had issued shares in 34 Sub-Funds. During the year, the total net assets of the Fund increased from USD 17.1 billion to USD 18.3 billion at year end. The Fund qualifies as an Undertaking for Collective Investments in Transferable Securities under the amended EC Directive 85/611 of 20 December 1985 and maytherefore be offered for sale in European Union Member States, subject to registration in countries other than the Grand Duchyof Luxembourg. In addition, applications to register the Fund and its Sub-Funds may be made in other countries. The Board of Directors of JPMorgan Investment Funds has decided to liquidate JPMorgan Investment Funds - US Market Neutral Fund on 15 December 2010. The Fund and the Sub-Funds are currently registered for offer and distribution in the Grand Duchy of Luxembourg and in the following jurisdictions: Austria, Bahrain, Belgium, Chile, Cyprus, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Jersey, Macau, The Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan and United Kingdom. Single Swing Pricing From 2 April 2009 onwards, a Swing Pricing Adjustment, as described in note 2 b), may be applied to the NAV per Share of the relevant Sub-Funds. Responsibility of the Directors The responsibilityof the Directors of the Fund is governed byLuxembourg law. With respect to the annual accounts of the Fund, the duties of the Directo rs are governed bygeneral corporate law and the law of 19 December 2002 on, inter alia, the accounting and annual accounts of undertakings and bythe law of 20 December 2002 relating to undertakings for collective investments. ALFI Code of Conduct Following its introduction the Board of Directors has adopted the ALFI Code of Conduct (the “Code”) which sets out principles of good governance. The Board of Directors considers that the Fund has been in compliance with the Code in all material aspects throughout the financial year ended 31 December 2010. Annual General Meeting The next Annual General Meeting of the Company will be held on 29 April 2011. The Board of Directors Luxembourg, 4 April 2011 33 JPMorgan Investment Funds Investment Managers’ Report For the year ended 31 December 2010 Market review of 2010 2010 was a good year for global markets, particularly equities, with the MSCI World Index up 20.1% in euro terms (Source: FactSet, total return index). Equities made headwayon strong corporate earnings growth and an improved economic outlook. Across the globe governments and central banks worked to sustain the global economic recoveryand steer markets clear of a double-dip recession; the equitymarket responded positivelyto these actions. B onds performed well in euro terms despite sovereign debt concerns as quantitative easing and worries over deflation held down yields. The JPMorgan Global Bond Index was up 13.8% in euro terms over the review period (Source: J.P. Morgan). The yearbegan with a continuation of the market rallyfrom 2009, boosted byhopes that the pace of the global economic recoverywould accelerate. However, bythe end of April it had become apparent that various headwinds were restraining global growth. In the US,