JPE.L Regulatory News (JPE)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ELECT PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 29TH FEBRUARY 2020

Legal Entity Identifier: 549300FIUYKKL39ILD07

Information disclosed in accordance with DTR 4.2.2

Chairman's Statement

I hope that you are all safe and healthy during these uncertain times. I am pleased to report on the results for the half-year ended 29th February 2020 but this report must also be set in the context of the extraordinary crisis since our half year end. We have all experienced significant changes to our daily lives and many have been affected more directly by the pandemic. World markets have attempted to adjust to the sudden and unprecedented shut down in all major economies. In a little over one month from their peak in February, global equities fell by just over 25% before recovering over half of this decline by the end of April. The UK market fell even more sharply and we have also seen an immediate and drastic cut in dividends being declared and paid. We will be monitoring our dividend income with particular care over the coming months. In the short term, we are pleased that the manager and the other service providers to the company have all continued to operate efficiently, as they have rapidly transitioned to home working.

Over the half year itself, markets delivered a negative return for investors, as measured by the benchmark indices but it is of some small comfort that both the Managed Growth and Managed Income share classes outperformed their respective benchmarks.

Managed Growth

The objective of the Managed Growth share class is long-term capital growth. In the six month period, the portfolio delivered a total return on net assets of -3.6%, compared with the portfolio's benchmark which returned -4.5%. The share price total return was -1.4%. The long-term performance of the Managed Growth share class continues to be strong, with annualised outperformance against the benchmark index over 10 years of 1.6%. An analysis of performance is set out in the Investment Managers' Report on page 14 of the Half Year Report and Financial Statements of the Company for the six months ended 29th February 2020 (the 'Report').

For the half year ended 29th February 2020, the Board has declared and paid two interim dividends totalling 8.95p per Managed Growth share compared to 7.56p for the half year ended 28th February 2019. Although this share class is a growth vehicle any income generated during the period is generally distributed in that period and investment decisions are not made with the objective of maintaining or growing income.

Managed Income

The objective of the Managed Income share class is a growing income return with potential for long term capital growth. As expected, for the half year ended 29th February 2020 the Board declared and paid two quarterly dividends totalling 2.20p per Managed Income share, as it did in the half year ended 29th February 2019.

On 6th May 2020, the Board declared a third interim dividend of 1.10p per share. As also stated in the announcement relating to the dividend, given recent market volatility and numerous companies cutting or cancelling dividend payments, the level of the fourth interim dividend will be determined by the Board towards the end of the Company's financial year and will depend on the level of dividends received and anticipated by the Company, and the level of reserves at this time.

Over the six months to 29th February 2020, the Managed Income portfolio delivered a total return on net assets of -2.9%, ahead of the portfolio's benchmark which returned -5.5%. The share price total return however was -6.0%. An analysis of performance is set out in the Investment Managers' Report on page 20 of the Report.

Managed Cash

The objective and policy of the Managed Cash share class is to achieve a return in excess of sterling money markets by investing primarily in GBP denominated short-term debt securities through investment in JPMorgan Funds - Sterling Managed Reserves Fund (JSMRF).

The Managed Cash portfolio delivered a total return on net assets of zero over the period under review. The share price was unchanged. The Board considers this class to be an asset allocation tool which continues to benefit shareholders of the Company's other share classes, offering the opportunity to switch into a lower risk share class in times of market volatility.

Gearing

The Board's policy is to not utilise borrowings to increase the funds available for investment for the Managed Growth share class. The Board monitors closely the level of indirect gearing through the underlying investments. The Managed Income share class has the ability to use short term borrowings to increase potential returns to shareholders. Its policy is to operate within a range of 85% to 112.5% invested. The Company has available a £20 million two year multicurrency revolving credit facility with Scotiabank. Discussions are well advanced to renew this facility which expires in June 2020. At the half year end £10 million was drawn and the Managed Income portfolio was 6.1% geared.

Outlook

As Robert Kennedy said, 'Like it or not, we live in interesting times'. 2020 is proving to be an excellent case in point. At the time of writing, we can only speculate on how the pandemic will evolve and the continuing social, economic and financial impacts. It is likely that volatility will remain high and that the recovery, when it comes, will be selective, with some economies and industries much more badly affected than others. This will create risks and opportunities for long term investors. The return of large-scale government intervention into financial markets and directly in the economy has both helped to stabilise the markets, but also reignited the fears around public sector finances and the valuation of government debt.

The Board will continue to closely monitor the operation of the company and its share classes. At this stage, administration and investment appear to be functioning well. Over the next few weeks and months we hope that governments can find a way to minimise the loss of life from the virus, without irreparable harm to society.

Alan Hodson

Chairman 12th May 2020

INVESTMENT MANAGERS' REPORT - MANAGED GROWTH

Performance Review

The Managed Growth portfolio outperformed its benchmark over the period, returning -3.6% versus the benchmark return of -4.5%. The total return to shareholders was -1.4%.

Over the six month period the portfolio outperformed its benchmark in what was a mixed period for markets, as covered in the Market Review section on page 5 of the Report. As we moved into the year-end the positive factors led to an equity rally. After equity markets reached all-time highs in February 2020, this trend reversed sharply as concerns around the spread of COVID-19 and its impact on the global economy weighed on market sentiment. Against this backdrop, seven out of the ten largest holdings outperformed their respective benchmarks which was the key driver of the Managed Growth Portfolio's outperformance. Within the portfolio, the US was the worst performing region, followed by the UK. However, returns cross all regions were negative or flat over the review period.

In terms of positioning, the portfolio maintained an underweight position to Japan and Europe and an overweight to the US through the period. We started the review period with a slight overweight to the UK and reduced that position in October, staying close to neutral until the end of January 2020. At the end of January, the investment trust sector average discount had tightened to 2.2% before widening to 6.0% at the end of February. This compares with 4.4% at the end of August last year (excluding private equity, hedge funds and direct property funds) (Source: Winterflood). Looking at the Managed Growth portfolio we estimate that discount widening detracted approximately 0.1% of the portfolio return.

Outlook

Just as headwinds from trade policy were beginning to dissipate, the outbreak of COVID-19 has pushed the global economy into recession. The speed and depth of this sudden stop to activity is unprecedented as governments around the world put in place measures to control the spread of the virus. As an investor in investment trusts, we faced both NAV declines and discount widening in March, which proved to be even more of a headwind for the portfolio when compared to index returns. Since then monetary policy from central banks and fiscal stimulus from governments has calmed markets and led to a strong recovery in parts of the equity market in April. As volatility started to abate in April we saw discounts start to tighten again for most of our investment trust holdings. We are observing a large hit to company earnings which may ultimately lead to another sell-off for equities from here. With a vaccine for COVID-19 likely to be more than a year away, it is unclear the extent to which global governments will be able to relax social distancing measures, and consequently how quickly economies will recover. In an upside scenario, a relatively V-shaped recovery, most of the global economy gets back to business, with unemployment declining rapidly and fewer of us working from home. In the deeper and longer 'L-shaped' recession downside, new cases re-emerge and economic activity deteriorates, setting in motion a vicious cycle of layoffs, business failures and credit impairments. Most likely, the actual outcome will be 'U-shaped,' somewhere between these two extremes. The coming weeks will provide more clarity. We are carefully assessing opportunities, while maintaining exposure to those funds that we believe will be able to perform over the long term.

Katy Thorneycroft

Simin Li

Peter Malone

Investment Managers 12th May 2020

INVESTMENT MANAGERS' REPORT - managed income

Dividend Review

During 2019 the UK stock market registered underlying dividend growth of 2.8%, down on the 5.1% growth delivered in 2018. The largest 100 companies in the FTSE index delivered dividend growth of 3.5% while mid cap companies (those in the FTSE 250) grew their dividends by 0.9%. The difference in growth between the two reflects the greater sensitivity of the top 100 companies to changes in the value of sterling as a large share of their profits are earned overseas.

Headline dividend growth was much higher at 10.7% as this figure includes special dividends. However, special dividends are volatile, irregular and difficult to forecast so we focus on the underlying growth trends detailed above when framing dividend growth forecasts. The portfolio benefited from special dividends paid by some of our holdings in the housebuilding and insurance sectors.

As has been the case over recent years mining companies were a very significant contributor to dividend growth as higher metals prices boosted profits and cash flows. Banks were also a significant contributor to dividend growth. Oil and gas companies, which are the largest single payers of dividends in the UK held their dividends flat. The Utilities sector saw a fall in dividend growth due to a dividend cut by Centrica.

We discuss the outlook for dividends below.

Performance Review

For the Company's financial half year ended 29th February 2020 the Managed Income portfolio delivered a total return of -2.9%, in comparison to the benchmark's return of -5.5%.

Our holdings in Games Workshop, Taylor Wimpey, Dunelm and One Savings Bank were the biggest contributors to the portfolio's relative performance. These companies earn a large proportion of their revenues from the UK and benefited from an improvement in economic sentiment following the agreement to enter a transitional period with the EU and the decisive victory by the Conservative Party in the General Election.

On the other hand detractors from performance included Royal Dutch Shell, BP and Cineworld. The oil price began to weaken in February as Chinese economic activity was hit by the lock down of Wuhan due to COVID-19. This hit the share price of the oil companies. Signs that the virus was beginning to spread in Western Europe and North American caused a late February sell off in the shares of Cineworld which operates cinemas. This also negatively impacted performance.

Portfolio Review

During the period under review we made use of the Company's borrowing facility. As at 29th February 2020, gearing was 6.1% with the level of gearing primarily influenced by individual stock opportunities. Subsequent to the period end we took gearing down as the outlook for the market and global economy became highly uncertain due to the COVID-19 pandemic.

We assess individual investment opportunities on whether earnings estimates are being revised up, whether the valuation is attractive and whether the balance sheet and forecast cash flows allow for dividend growth. As such, portfolio construction is determined by bottom up stock selection with a focus on potential and sustainable dividend growth.

The largest sector exposure in the portfolio is Life Insurance. These companies have the capital strength to offer some of the most attractive dividend yields in the market. Whilst the impact of the COVID-19 virus and social lock down remains to be seen we were reassured that our largest holding in the sector, Phoenix Group, raised its cash flow guidance and committed to its dividend when it reported its results in March. Home Construction has been and remains one of our long term sector over weight positions. Robust earnings delivery, strong balance sheets and high dividend yields have been the key reasons for our positive investment view.

Unfortunately, given the huge uncertainty that now exists house builders are also mostly suspending their dividends. During the six month period, new positions included Capco, Liontrust Asset Management and Avast.

We bought Capital & Counties Properties which owns Covent Garden and until recently the Earls Court regeneration project. Post the disposal the company is committed to focusing on prime central London assets which should be more resilient than other retail property assets as on-line shopping continues to grow. We expected strong earnings and dividend growth prior to the current crisis. Our purchase of Liontrust Asset Management was based on revenue and earnings growth in excess of 10% as assets under management grew strongly. This growth was sufficient to fund a pre-crisis dividend increase of 20%. Avast is a provider of cyber security software. With the growth of 'connected' devices in our homes security and privacy is becoming more and more important, which is driving strong growth for the company.

On the other hand we sold our positions in Direct Line, WPP and Telecom Plus.

We sold Direct Line as we believed that profit growth was likely to be hit by competition in motor insurance and a regulatory review into wider pricing practices. We also sold the advertising agency WPP. The company embarked on a number of initiatives in early 2019 which boosted returns and client growth. However, these improvements proved not to be sustainable in a challenged industry. The sale of Telecom Plus, a supplier of telephony services and electricity, was based on a set of results that were in line with expectations but did not suggest material upside.

Outlook

Forecasts for earnings and dividends have been reduced to reflect the lock downs that were put in place to restrict the spread of COVID-19. The majority of companies have withdrawn profit guidance for 2020 and beyond. Nearly half of UK companies have reduced, suspended or cancelled their dividend payments as conserving cash becomes the number one priority. Political and regulatory influences have also played a part as we have seen in the suspension of dividends by the banks and companies whose staff are furloughed. However the decision by Royal Dutch Shell to cut its dividend by two thirds as profits fell due to the collapse in the oil price is perhaps the most significant move as it was the top payer of dividends in the UK for the last five years and it is the first cut by that company since World War II. For the moment, BP has continued to pay its dividend but we remain alert to the risk of future cuts.

The direction of change for earnings and dividends from here is largely dependent on whether the lock down measures that were introduced globally can be eased without leading to a second wave of infections and the reintroduction of new restrictions and remains uncertain. However, if we assume we reach a new normal in the second half of the year we hope to see some of those companies who suspended their dividends to return to the payment list. This should be especially true for those companies which took that action out of prudence rather than necessity, for example the UK housebuilders which have considerable reserves. We would also expect companies we own in sectors that are less sensitive to economic developments such as tobacco, utilities and food retailers to continue to pay dividends.

We believe governments and central banks have learnt valuable lessons from the last crisis and have reacted quickly and decisively to provide liquidity and stimulus to reduce the economic impact of the current crisis. However, the shape of the recovery is unknown, and we will continue to monitor closely the macro data points, and continue to engage with company management teams to see how the situation unfolds. Having reduced gearing to 0% at the beginning of March, we retain significant flexibility to be able to take advantage of market volatility to invest in those companies that we believe will emerge from the crisis intact and perhaps with a stronger competitive position.

John Baker

Katen Patel

Investment Managers 12th May 2020

INVESTMENT MANAGERS' REPORT - Managed cash

The Managed Cash fund's net asset value and share price performance was flat over the six month period to 29th February 2020. Managed Cash invests its assets in the Sterling Managed Reserves Fund which has an objective to invest in a blend of money market securities and short term bonds.

During this six month period, the Bank of England's (BoE) Monetary Policy Committee kept the base rate at 0.75%, the level it had been reduced to in August 2018 from 0.5%. As of 12th May 2020 the base rate is 0.10% after the BoE cut rates by 0.5% on 11th March and by a further 0.15% on 19th March, to address the COVID-19 crisis and the wave of associated mass job layoffs.

The Bank of England spent much of 2019 signaling via its inflation reports and data forecasts that the next rate movement would likely be an increase based on an 'orderly Brexit'. However, as growth weakened and risks rose around Brexit, the market signaled that rates would likely either stay on hold or possibly be cut by early 2020, were a more disorderly outcome for Brexit expected. No sooner had negotiations begun on the UK's post-Brexit relationship with the EU, than the coronavirus pandemic effectively put a halt to proceedings.

After the longest expansionary phase on record the global economy is now falling into what may be one of the deepest recessions it has ever had. The first quarter of 2020 took an unexpected turn, as the rise and spread of COVID-19 gripped markets and brought certain areas of the global economy to a halt in March. US equities entered bear market territory, government bond yields dropped to the lowest levels ever and oil prices collapsed. Credit markets seized up in March and have sold off significantly since the beginning of the year; the Bloomberg Barclays Sterling Corporate 1-3 year index yield increased from 1.25% on 28th February, to 3.03% on 24th March before closing the month around 2.87%.

Portfolio Review

As the uncertainty around the rapid spread of COVID-19 built through February we moved quickly to reduce risk. Working closely with our team of 72 credit analysts we got comfortable that it was appropriate to continue to hold all the issuers in the portfolio at the time; in a small number of cases we trimmed exposures to lower rated BBB securities to help to reduce volatility. The Sterling Managed Reserves Fund has retained its high average rating of AA- since the start of the year and this continued into May 2020. This process is leveraged from the JPMorgan Asset Management Global Liquidity Money Market Fund platform. This approach to credit risk also ensured a high level of diversification across corporate issuers as each security has an internal rating assigned by the sector specific analyst, which then dictates the maximum exposure and maximum maturity the Fund can hold in that name. We reduced our exposure to fixed income sectors which can have more volatile reactions to spread widening events, such as securitised credit, and we also built in a more pronounced liquidity ladder to ensure the Sterling Managed Reserves Fund could satisfy any redemption flows as investors globally re-assessed their investments.

Outlook

Given the unprecedented halt in global activity due to social distancing containment measures, there is considerable uncertainty about the path ahead. However, since the liquidity crunch seen globally across markets in March, central banks have acted swiftly to provide a mixture of different liquidity support measures to help markets to function as normal and to help bring down the credit spreads which widened out dramatically across all currencies. As a result of the actions taken by central banks, we anticipate that credit curves will steepen and the level of returns or outperformance of the Fund, relative to the Bank of England Base rate of 10 basis points, should increase versus historical levels.

JPMorgan Asset Management

Investment Manager 12th May 2020

Interim Management Report

The Company is required to make the following disclosures in its half-yearly financial report.

Principal and Emerging Risks and Uncertainties

The principal and emerging risks faced by the Company fall into the following broad categories: investment underperformance against benchmark, fraud and cyber crime, dividends, accounting, legal and regulatory, business strategy, board loses confidence in Investment Manager, borrowing, third party risk and global pandemic. The recent emergence and spread of coronavirus (COVID-19) has raised the emerging risk of global pandemics. Information on the principal risks of the Company is given in the Business Review section within the 2019 Annual Report and Financial Statements.

Related Party Transactions

During the half year to 29th February 2020, no new agreements were entered into with related parties which have materially affected the financial position or the performance of the Company.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, as well as the economic situation in the context of coronavirus COVID-19, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least 12 months from the date of the approval of this half-yearly financial report. For these reasons, they consider there is reasonable evidence to adopt the going concern basis in preparing the financial statements.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 29th February 2020, as required by the UK Listing Authority Disclosure Guidance and Transparency Rules 4.2.4R; and

(ii) the interim Management report includes a fair review of the information required by 4.2.7R (important events that have occurred since inception, their impact on these financial statements and a description of the principal risks facing the Company) and 4.2.8R (related party transactions since inception that have materially affected the financial position or performance of the Company) of the UK Listing Authority Disclosure Guidance and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Alan Hodson

Chairman 12th May 2020

statement of comprehensive income

for the six months ended 29TH FEBRUARY 2020

statement of changes in equity

for the six months ended 29TH FEBRUARY 2020

statement of financial position

at 29TH FEBRUARY 2020

statement of cash flows

for the six months ended 29th February 2020

Notes to the financial statements

for the six months ended 29th February 2020

1. Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st August 2019 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and includes the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, and updated in March 2018, has been applied in preparing this condensed set of financial statements for the six months ended 29th February 2020.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st August 2019.

3. Return/(loss) per share

4. Dividends

5. Net asset value per share

The net asset values per share are calculated as follows:

6. Events after the six months ended 29th February 2020 - Impact of the coronavirus pandemic

Since the global outbreak of coronavirus COVID-19, materially impacting global markets after the period end date, all necessary actions have been undertaken to preserve the financial condition of the Company and to ensure that it is able to continue to operate effectively. Since 14th March 2020 the majority of the Manager's employees have been working from home in accordance with government requirements. The Company has successfully continued to manage its portfolios and the associated administration. Despite market volatility negatively impacting performance in the short term, and the fact that the resulting economic disruption caused by the crisis is likely to create further challenges for the Company in the coming months, the Board considers that the Company's available resources are more than sufficient to ensure its continuing viability.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN FUNDS LIMITED

ENDS

A copy of the Report will be submitted to the National Storage Mechanism and will be available shortly for inspection at  https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The Report will also be available shortly on the Company's website at www.jpmelect.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.