JPEI.L Regulatory News (JPEI)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ELECT PLC

ANNUAL RESULTS FOR THE YEAR ENDED 31ST AUGUST 2021

Legal Entity Identifier: 549300FIUYKKL39ILD07

Information disclosed in accordance with DTR 4.1.3

CHAIRMAN'S STATEMENT

The past year has seen global equity markets rise sharply. The FTSE World index returned 26.3%, with all regions contributing positively. On balance, markets in the developed world fared better than their emerging brethren, but even here, returns topped 18%. In the first nine months of the Company's fiscal year, conditions for good equity markets could hardly have been more propitious. A successful vaccine rollout in the major economies set the scene for a robust recovery while interest rates held close to zero. Corporate earnings and dividends bounced strongly.

More recently, two factors have checked the optimism. First, the spread of the delta variant has been an unwelcome reminder that Covid is still with us and that large parts of the global population do not yet have access to vaccines. Second, the disruption to supply chains caused by the pandemic has caused a shortage of goods and rising prices. This reflects the strongest economic recovery on record running headlong into the largest supply interruption since the Second World War. While these are troubling developments, markets have only paused for breath, believing that rising inflation is transitory and will abate as supply chains and labour markets normalise.

I am delighted to report that the portfolios of both Managed Growth and Managed Income benefited fully from market conditions, comfortably outpacing their respective benchmarks.

Managed Growth

The Managed Growth portfolio has delivered a total return on net assets of +33.7%, compared with the portfolio's benchmark which returned +26.8%. Over the medium and longer term, performance remains well ahead of benchmark.

The objective of this share class is long-term capital growth delivered by investing in a range of investment trusts and open-ended funds managed principally by JPMorgan Asset Management. At the year-end, 34% of the portfolio was invested in non-JPMorgan funds.

For the year ended 31st August 2021, the Board declared dividends of 16.0p per Managed Growth share compared to 16.7p for the year ended 31st August 2020. Shareholders are reminded that this share class is a growth vehicle. Any net income generated during the year is generally distributed to shareholders but investment decisions are not made with the objective of maintaining or growing income.

Managed Income

It was encouraging to see the performance of the portfolio as it delivered a total return on net assets of +33.9% in comparison to the benchmark return of +26.9%.

Dividends for the year ended 31st August 2021 totalled 4.75p per share (2020: 4.70p per share). In determining the level of the fourth interim dividend payable by the Managed Income Class the Board took into account the level of dividends received and to be received by the Company, the anticipated dividends for the coming financial year and the commitment made in the 2020 Annual Report. Dividend growth of 1.1% is below the level of inflation and therefore inconsistent with our aim to increase the total dividends by at least inflation. The Board took the decision to increase the dividend by less than the inflation rate for two principal reasons. First, dividend payouts, which fell sharply during the pandemic, have not yet fully recovered and it is unclear whether previous levels will be restored quickly. Second, inflation rates in the UK have been higher than forecast because of supply chain issues resulting from the pandemic. At this point, the Investment Manager and the Board believe that these pressures are temporary and will abate in the year ahead.

Given these uncertainties, we felt that paying a modest increase would provide some breathing room to see how the situation settles. It is perhaps not surprising, therefore, that the fourth interim dividend was not fully covered by the income earned in the financial year leading the Company to utilise the Managed Income Class revenue reserves which have built up over previous years to support this dividend. Following payment of this fourth interim dividend, the Managed Income Class revenue reserve will equate to approximately three quarters of the full year dividend.

In the absence of unforeseen circumstances, the Board intends to declare the first three interim dividends for the year ending 31st August 2022 at 1.1p per share. The level of the fourth interim dividend will be determined by the Board towards the end of the Company's 2021/22 financial year and will depend on the level of dividends received and expected by the Company, as well as on the path of inflation, as discussed.

Managed Cash

The portfolio's objective and policy 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 share class returned +0.2% on net assets and an interim dividend of 0.4p per share was paid for the year ended 31st August 2021.

Historically, the Managed Cash share class has paid one dividend each financial year, in the fourth quarter. However, since the investment objective and policy of the Class was changed and the assets of the Class invested in the Sterling Managed Reserves Fund, the Company receives an annual dividend from that fund, in September. Therefore, to better align the date of receipt of the dividend from the Sterling Managed Reserves Fund with the shareholders on the Managed Cash register at that time, it was proposed that the declaration and payment date for the annual dividend be brought forward to earlier in the financial year.

As announced previously, the Board therefore decided to pay an interim dividend of 0.4p per Managed Cash share, for the second quarter of the year ending 31st August 2021 and no further dividends were paid on this share class for the remainder of the financial year ending 31st August 2021. In future years, it is expected that any dividend for this Class will be declared in the first quarter of the Company's financial year, which begins on 1st September.

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 safer share class in times of market volatility.

The Investment Managers' reports in our Annual Report provide more detail on the positioning and performance of the three separate share class portfolios.

Conversions and Redemptions

During the year, shareholders took the opportunity to convert between share classes. This resulted in a decrease in the Managed Growth share class shares in issue of 188,282, a decrease in the Managed Income share class shares in issue of 652,997 and an increase in the Managed Cash share class shares in issue of 2,275,607. In addition, 584,507 Managed Cash shares were redeemed.

Gearing

The Board's policy is not to utilise borrowings to increase the funds available for investment for the Managed Growth share class. The Board monitors closely the level of indirect gearing (currently around 5%) 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.

During the year, the Company renewed its multicurrency revolving credit facility with Scotiabank, and now has in place a £15 million facility extending its maturity date to June 2022. At the year-end, £7 million was drawn and the Managed Income portfolio was 4.6% geared.

Environmental, Social and Corporate Governance ('ESG')

As detailed in the Investment Managers' report, Environmental, Social and Governance ('ESG') considerations form an important part of the Investment Managers' investment process. The Board shares the Investment Managers' view of the importance of ESG factors when making investments for the long term and of the necessity of continued engagement with investee companies throughout the duration of the investment. Further information on the Manager's ESG process and engagement is set out in the ESG Report section within the 2021 Annual Report.

The Board

Notwithstanding that James Robinson will have served as a director for almost ten years at the date of the 2022 AGM, the Board agrees that he continues to remain independent. Accordingly, due to his significantly positive contribution to the Board, in particular leading the Audit Committee and his knowledge of the industry, the Board agrees that it would be in the Company's best interests if James Robinson's appointment as a director and Audit Committee Chairman continued. The succession plan for the Audit Committee is well advanced and an announcement will be made when the process is complete.

The Board supports the annual re-election for all Directors, as recommended by the UK Corporate Governance Code, and therefore all Directors will stand for re-election at the forthcoming AGM.

Further, during the year, the Board carried out its customary evaluation of the Directors, the Chairman, the Committees and the working of the Board as a whole. It was concluded that the Board and its procedures were operating effectively.

Covid-19 and the Company's Key Service Providers

The Board is pleased to report that, since the on-set of the pandemic in spring 2020 and throughout, the Manager and the Company's other service providers have been able to adjust their business models to continue to accommodate working from home requirements. The Board has been closely monitoring all service arrangements and has received assurances that the Company's operations, to include the management of the portfolio, have continued as normal with no reduction in the level of service provided nor any issues being identified.

Annual General Meeting

Regrettably Covid-19 restrictions prevented the holding of the Company's AGM earlier this year in the usual format. The Directors were disappointed not to be able to have the usual interaction with shareholders at this forum. Current indications are that a more familiar format for the AGM may be permissible in January 2022 and, to that end, the AGM is scheduled to be held at 12.30 p.m. on 26th January 2022 at 60 Victoria Embankment, London EC4Y 0JP.

We do of course strongly advise all shareholders to consider their own personal circumstances before attending the AGM in person. For shareholders wishing to follow the AGM proceedings but choosing not to attend, we will be able to welcome you through conferencing software. Details on how to register, together with access details, can be found on the Company's website: www.jpmelect.co.uk, or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com.

As is normal practice, all voting on the resolutions will be conducted on a poll. Due to technological reasons, shareholders viewing the meeting via conferencing software will not be able to vote on the poll and we therefore encourage all shareholders, and particularly those who cannot attend physically, to exercise their votes in advance of the meeting by completing and submitting their form of proxy.

Shareholders are encouraged to send any questions ahead of the AGM to the Board via the Company Secretary at the email address above. We will endeavour to answer relevant questions at the meeting or via the website depending on arrangements in place at the time.

Outlook

We have never before experienced economic conditions anything like as dramatic as those which have characterised the last 18 months. Conventional forecasting uses historical models to project what will happen in the future. These models are now broken, so wise counsel would be to take all forecasts with a pinch of salt. Nevertheless, the convention in these statements is to prognosticate about the future, so here goes.

Liquidity conditions are likely to remain benign. This means that interest rates will stay low, even as Central Banks try to engineer a return to normal monetary policy. This is partly because the world is now so indebted that a rise in rates would hobble the global economy, but also because policymakers believe that the current rises in inflation are temporary. Even if they are wrong, it would likely take several years before we know whether higher rates of inflation have become embedded in the economy.

Rising prices and supply disruption will affect corporate margins. The squeeze hasn't started yet, but profit expectations are high and the risk of disappointment is real. On the other side of this coin sits the increasing use of technology in business - so called digitisation. This is a long term trend which should boost productivity across many sectors and thereby offset margin pressure.

This mix of influences is broadly positive for global equity markets, although the very high returns of the past year will prove a hard act to follow.

Steve Bates

Chairman 18th November 2021

INVESTMENT MANAGERS' REPORT - MANAGED GROWTH

Performance Review

The Managed Growth portfolio outperformed its benchmark for the year ended 31st August 2021, returning +33.7% on an NAV basis, versus the benchmark return of +26.8%. The total return to shareholders was +39.6%, narrowing the discount at which the company's shares trade relative to its NAV.

Stock selection was the key driver of the portfolio's outperformance over the last 12 months. Performance was positive across each underlying holding in absolute terms, with our UK and North American strategies delivering the strongest returns. Our Japanese, Asian and emerging markets holdings also enhanced absolute returns, although in some cases, performance was more muted.

Relative performance was mostly positive across the period, with 27 strategies outperforming, although seven strategies marginally underperformed their benchmarks.

These tables reflect performance for those holdings that have been held throughout the 12 month period.

PERFORMANCE ATTRIBUTION

CONTRIBUTIONS TO NAV RETURN AS AT 31ST AUGUST 2021

Source: JPMAM and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.

The company's share price discount to NAV narrowed over the last 12 months, to 3.0% from 7.3% at the end of the previous year, although there was some volatility during the period. The company's average discount fluctuated in a range between 2.2% and 7.3%, averaging 4.0% across the period (Bloomberg). The main drivers of this discount narrowing over the year were the improvement in the macro economic backdrop and associated strong earnings growth, which were supported by accommodative fiscal and monetary policy and the re-opening of economies.

Portfolio Activity

At the end of August 2021, 40% of the portfolio was invested in JPMorgan managed investment trusts, 26% in JPMorgan managed open-ended funds, and 34% in investment trusts managed by third party managers.

During the first six months of the financial year ended August 2021, the portfolio was underweight the UK and Japan and overweight European and Asia ex-Japan Pacific regions. We entered the financial year with a significant underweight to the UK and gradually increased our exposure over the period. We added to the Temple Bar and Lowland Investment Trusts in November 2020, to increase the portfolio's value tilt and take advantage of attractive valuations in this market. We also added Aberforth Smaller Companies Trust in the first quarter of 2021, increasing our UK Small Cap exposure, to participate more fully in the cyclical recovery. We reduced our Finsbury Income & Growth Trust position given its growth bias, and invested some of the proceeds in the Fidelity Special Values Trust, to further increase the value tilt in the portfolio.

Across other regions, we reduced our exposure to emerging markets in September 2020, taking some profits following a strong run in these markets. We also trimmed our exposure to the Baillie Gifford US Growth Trust following a period of exceptional performance.

We added further to our UK exposure from March onwards, and closed our underweight to Japan on the view that the broadening global recovery would benefit Japan's many cyclical, export-driven companies. We added to the portfolio's Japanese exposure via a new position in the Baillie Gifford Japan Trust. These changes were funded by the sale of Worldwide Healthcare Trust and a reduction in our overweight positions in Asia and emerging markets, which we viewed as exposed to potential headwinds from the US dollar.

In the US, we reduced our position in the JPM US Select Equity and JPM US Smaller Companies Funds, to fund a new position in the JPM US Value Fund, based on our ongoing conviction that value strategies would outperform as the global economy continued to recover and earnings were revised upwards. We started adding exposure to the US in June, as the resilience of earnings continued to support the region. At the same time, we scaled back our overweight to Europe.

Outlook

Although global growth momentum probably peaked in Q2 2021, strong economic data, aggressive fiscal and monetary policy support and successful vaccine rollouts continue to drive fundamentals. The renewed surge in Covid cases in the UK and some other countries may slow the pace of recovery, especially during the winter, but the economic re-opening is unlikely to be reversed, and we expect the major developed economies to experience a broadening recovery over the remainder of the year. Solid demand, which is being accompanied by a surge in productivity, will continue to bolster profits and ensure strong earnings growth over the year.

However, the bright economic outlook has raised some concerns in equity markets about how central banks will react if growth continues to surprise on the upside. Rising energy and commodity prices, demand/supply imbalances and emergent labour market pressures have already fuelled fears of higher interest rates and generated intermittent bouts of market volatility. However, central banks seem confident these inflation pressures will prove temporary, and the International Monetary Fund (IMF) expects inflation to return to pre-pandemic ranges in most countries in 2022. This expectation is reinforced by the impact of structural forces, especially the rapid advance of technology into many areas of the global economy, and associated productivity gains, which are likely to dampen inflation pressures in 2022 and beyond.

Global equities should do well in an environment of robust growth and modestly rising inflation. Profit margins may come under some pressure from rising commodity prices, higher wages and increasing corporate taxes. However, higher input prices can be passed onto customers when demand is strong. So, in summary, as the world emerges from its most recent, profound crisis, we expect earnings growth in coming years to be substantial, and front-loaded, in much the same manner as it was during the rebound from the global financial crisis. This should support market performance. We are confident of the company's ability to capture this performance and to continue delivering long term capital growth to shareholders.

Katy Thorneycroft

Simin Li

Peter Malone

Investment Managers 18th November 2021

INVESTMENT MANAGERS' REPORT - MANAGED INCOME

Dividend Review

Dividend payments by the end of August 2021 were approximately 50% higher than for the same period last year. This figure includes special dividends which will not necessarily be repeated, but underlying growth of approximately 40% was still very impressive. Most sectors increased their dividends as confidence in the recovery grew. Growth was particularly notable in sectors such as hospitality and travel, which were hardest hit by the pandemic. This is clearly seen in the difference in dividend growth between FTSE 250 companies and those in the FTSE 100. Dividends paid by companies in the FTSE 250, which includes more economically sensitive stocks than the FTSE 100, increased by 156% this year, while the dividends of FTSE 100 companies rose by 44%. However, despite this recovery, dividends paid in the period were still 33% lower than for the same period in 2019.

The most significant recent development for dividend payments was the Bank of England's (BoE) decision to allow banks to resume dividend payments if their boards deemed this appropriate. This ruling should result in a dividend yield across UK banks of around 2-3% for 2021. We believe that the banks we own have the capacity to pay dividends while also maintaining sufficient capital to meet regulatory requirements. In fact, three of our four bank holdings declared higher than expected dividends this year.

The market also welcomed Royal Dutch Shell's (RDS) surprise announcement of a 50% year-on-year dividend increase. Higher oil prices combined with lower capital expenditure led to very strong cash generation, making this payment easily affordable. RDS's management also reiterated their commitment to the company's progressive dividend policy, which aims to grow the dividend by 4% each year. BP's dividend increased by a more modest 4%, but the company also committed to 4% annual dividend growth out to 2025, provided the oil price stays above $60 per barrel.

We have significant exposure to housebuilders, so it was encouraging to see this sector restore dividends, as strong demand for homes led to higher profits and cash flow. Dunelm, the home furnishings company, also reinstated their dividend, as they successfully navigated the various lockdowns by developing their on-line business. In the mining sector, soaring commodity prices and cost controls saw cash flow surge. Both Rio Tinto and BHP, our main holdings in the sector, have a clear commitment to shareholder value and chose to distribute excess cash flow.

The outlook for dividend growth has become more certain over the course of 2021 as vaccination roll outs have allowed developed economies to re-open. We expect the FTSE All Share to register underlying dividend growth of 13% in 2021, and we have a high degree of confidence that the dividend forecasts for the companies we own are robust, as long as the economy avoids further widespread lockdowns.

Performance Review

We are pleased to report that the Managed Income portfolio delivered a NAV total return of +33.9% during the Company's financial year ended 31st August 2021, outpacing the benchmark return of +26.9%. The discount narrowed from 6.4% to 3.7% over the year with the result that the total return to shareholders was significantly higher at +37.7%.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 31ST AUGUST 2021

Source: PAT, JPMAM and MorningStar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.

Our stock selection contributed more to returns over the year and our holdings in Reach, Future and OSB were amongst the best performers. Reach is a newspaper publisher whose titles include the Daily Mirror and Daily Express. Readers are increasingly migrating on-line and the company's progress in securing digital advertising revenues has been the impetus for a significant share price rise over the past year. Future is also a publishing company, focused on specialist magazines. As in the newspaper business, the circulation of printed magazines is declining, while on-line readership is growing rapidly, leading to higher digital advertising revenues. OSB is a bank specialising in commercial buy-to-let mortgages and asset finance. Both these areas are experiencing high growth and cash flow generation is strong, raising the possibility of future increases in dividend payments.

Positive performance contributions by these and other positions were only partially offset by the adverse impact of other holdings. Detractors from returns included the house furnishings retailer Dunelm and Polymetal, a precious metals miner. As mentioned above, Dunelm was a stand-out retailer during lockdown, thanks to the expansion of its on-line business, and its shares performed very well. However, when lockdowns lifted, investors' attention turned to retailers with greater exposure to a reopening bounce, and Dunelm's shares lagged, although since the end of our reporting period, Dunelm's share price has recovered and is presently trading near its all-time highs. Polymetal's earnings and share price performance were hurt by a decline in the gold price and lower gold shipments to China, which declined following the re-imposition of Covid restrictions.

Portfolio Activity

During the financial year, we made use of the company's borrowing facility. As at 31st August 2021, the equity exposure of the Managed Income portfolio was 104.6%, with the level of gearing primarily influenced by individual stock opportunities.

Portfolio construction is determined by bottom-up stock selection, with a focus on potential and sustainable dividend growth. When assessing investment opportunities, we consider the company's earnings outlook, the attractiveness of its valuation and whether its balance sheet and forecast cash flows are capable of supporting dividend growth over the long term.

We did not make any large changes to the portfolio's sector exposures during the review period. The largest sector positions are in Banks, General Retail and Home Construction. The earnings outlook for these sectors is favourable, as the economy recovers from lockdown restrictions, while valuations remain attractive. The financial results of our holdings across these sectors have exceeded expectations. Higher profits and cash flows have led to generally higher than expected dividend payments. Amongst our bank holdings, Barclays, Lloyds and NatWest paid dividends approximately 10% higher than forecast. In the Retail sector, Dunelm and Next, a clothing retailer, paid supplementary special dividends, while the dividend paid by Halfords, which specialises in motoring and cycling products, was double expectations. Home Construction companies are generating high levels of free cash flow, thanks to the demand for new homes, and dividend yields in this sector are averaging 5%, with Persimmon paying 8%.

Transactions

During the review period we opened several new positions, including exposures to Lloyds and Natwest. Earnings growth in both companies is exceeding expectations. Housing market strength is underpinning mortgage demand and higher consumer expenditure should bolster higher margin credit card lending. We expect capital returns in this sector to continue to rise following the BoE's decision to lift its prohibition on bank dividend payments. We also bought Royal Mail. This company's earnings are being persistently upgraded due to rapid growth in parcel volumes and productivity improvements following an agreement with the postal workers' union, Unite. Free cash flow is healthy, the balance sheet is robust and the company has committed to a progressive dividend policy from 2022, representing a yield of 4%.

These purchases were funded by the sale of Tesco, Vodafone, Reckitt Benckiser and National Grid.

Outlook

As vaccine rollouts continue and the global economy takes progressive steps towards normality, pent-up demand is being unleashed and the outlook for UK equities looks particularly promising. Dividend yields are strong, valuations are attractive and there is scope for profit margin expansion. Although every crisis is different, looking out over the next five years, we expect earnings growth to be substantial, front-loaded, and similar in many ways to the rebound which followed the global financial crisis. Cyclically geared markets, sectors and companies, which were particularly hit by the Covid crisis, are likely to benefit.

Many market participants would argue that expectations of a rebound in cyclical stocks is already fully discounted, but our assessment of the market outlook is more positive. Historical experience shows that the potential for growth in a rebounding economy has often been underestimated. We believe the company's portfolio is well-positioned to take full advantage of the recovery as it gathers momentum.

John Baker

Katen Patel

Investment Managers 18th November 2021

INVESTMENT MANAGERS' REPORT - MANAGED CASH

Performance Review

The Managed Cash share class returned +0.2% over the 12 month period to 31st August 2021. The Managed Cash class invests its assets in the JPMorgan Sterling Managed Reserves Fund which has an objective to invest in a blend of money market securities and short term bonds.

During this 12 month period, the Bank of England's (BoE) Monetary Policy Committee (MPC) held the deposit rate at 0.10%. During the year, the BoE increased the pace of its asset purchases, from a target amount of £745 billion at the start of the previous reporting period to £895 billion in Q4 2020, where it remains today. The BoE have also added Negative Interest Rate Policy (NIRP) to their toolkit, however given the resurgence in both growth and inflation, this is not expected to be utilised in the foreseeable future.

In the latter part of 2020, two topics dominated headlines in the UK, Covid-19 and Brexit. Meanwhile, the US election posed a third risk that we were mindful of when positioning our portfolio.

Starting with Brexit, Prime Minister Johnson set a deadline of 15th October 2020 for a deal to be struck between the UK and the EU; however commentators were doubtful as to whether a deal could be struck in this time, and if so, whether such a deal would be constructive or not. Nonetheless, markets seemingly shrugged off these concerns and short-dated Sterling investment grade credit rallied during the summer months. The 15th October deadline passed without any resolution, however on Christmas Eve a trade agreement was agreed, which allows for tariff and quota free trade in goods, but does not cover the services industry, which accounts for 80% of the UK economy.

On the Covid-19 front, infections soared in the UK in the latter part of 2020 as a new variant emerged which proved to be far more infectious than the dominant one that preceded it. In late December, the UK entered a full lockdown as a result. Nonetheless, Pfizer's 9th November announcement that its Covid-19 vaccine provides effective protection buoyed markets, and the sentiment was reinforced later in the month by similar news from Moderna and AstraZeneca.

The UK began its vaccination programme in early 2021 and markets reacted positively on the prospects for a strong recovery given a combination of loose monetary conditions, supportive fiscal policies and record household savings. In this environment, short-term interest rates moved higher, from record lows at the start of the year, and the yield curve steepened, reflecting a rise in reflation expectations. Economic data releases corroborated the expectations for recovery. Q4 2020 GDP rose 1.3% quarter-over-quarter, as businesses and households adapted better to the latest pandemic restrictions.

This positivity continued into Q2 2021, as successful vaccine rollout, diminishing Covid-19 cases and a government guide-path to lift all restrictions before the end of June 2021 fuelled growing optimism in the UK recovery. Loose monetary conditions and supportive fiscal policies, combined with record household savings rates, boosted confidence and spending so that as lockdowns eased, the economy generally delivered on this positive outlook. An improving employment picture contributed to inflation: weekly earnings (ex-bonus) were the highest on record over the three months to April, while the unemployment rate was the lowest since mid-2020 at 4.7%.

Since then, however, inflation has become more of a concern as supply bottlenecks, continued monetary support and Brexit-related factors have all contributed to rising inflation. At the end of August 2021, the BoE was forecasting inflation of 4.0%, for the first six months of 2022.

Portfolio Commentary

With the above growth story in mind, the overarching theme in bond markets this year has been one of rising yields and steeper curves. With this in mind, we are strategically running with a reduced duration exposure, as well as a reduced exposure to longer-dated instruments which are most likely to be at risk of further curve steepening. Nonetheless, we remain positive on credit fundamentals and will look to selectively add credit risk later in the final part of the year as short-term yields rise, with curves steepening as markets fully price hikes by the BoE.

At the end of August 2021, the fund's duration stood at 0.42 years. This is a similar level to where we stood at the end of August 2020, but still below the maximum permitted by our investment guidelines which is one year. We still see opportunities in securitised debt as well as non-GBP denominated assets.

Outlook

Given the fact that inflation is proving to be more persistent than previously forecast, our expectation is that the Bank of England will make its first interest rate increase by the end of 2021, with a second increase happening in early 2022. As this starts to get fully priced in by the market, we expect the yield curve to steepen. With this in mind, we remain invested in short dated assets but will look to add risk in the coming months as we see more attractive opportunities.

We remain strategically positive on credit and will opportunistically add longer-dated assets to the portfolio amid continuing technical support from the Bank of England and positive market sentiment following the success of the UK vaccination programme. Our active management approach and diligent bottom-up credit process nonetheless remain key to generating positive returns through this period and our diversified approach should help reduce the impact of any repricing events. Moreover, we are participating in steeper credit curves and looking to take advantage of new issue premiums where possible.

Spreads are at or close to historically tight levels, as is the case with most high quality risk assets. Nonetheless, given improving fundamentals where we see opportunities we will look to add select AAA-rated asset backed securities which should add some additional yield and diversification. Investing in non-Sterling securities whilst hedging currency risk presents a diversified way of generating returns too.

JPMorgan Asset Management

Investment Manager 18th November 2021

PRINCIPAL AND EMERGING RISKS

Principal and Emerging Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. With the assistance of the Manager, the Audit Committee has drawn up a risk matrix, which identifies the key risks to the Company. These are reviewed and noted by the Board. The risks identified and the broad categories in which they fall, and the ways in which they are managed or mitigated are summarised below. The AIC Code of Corporate Governance requires the Audit Committee to put in place procedures to identify emerging risks. The Committee has looked at this area and has conducted horizon scanning. It does not believe that currently there are any emerging risks facing the Company.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract is set out in the Directors' Report on page 50. The total amount payable to the Manager for the year in respect of these contracts was £1,619,000 (2020: £1,418,000) net of rebates, of which £nil (2020: £nil) was outstanding at the year end.

Included in other administration expenses in note 6 on page 84 are safe custody fees amounting to £4,000 (2020: £4,000) payable to JPMorgan Chase of which £3,000 (2020: £1,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. Commission amounting to £4,000 (2020: £21,000) was payable to JPMorgan Securities Limited for the year of which £nil (2020: £nil) was outstanding at the year end.

The Company holds investments in funds managed by JPMAM. At 31st August 2021 these were valued at £208.9 million (2020: £167.2 million) and represented 52.2% (2020: 51.5%) of the Company's investment portfolio. During the year the Company made £11.8 million purchases of such investments (2020: £6.4 million) and sales with a total value of £25.3 million (2020: £28.6 million). Income amounting to £2.8 million (2020: £3.7 million) was receivable from these investments during the year of which £460,000 (2020: £564,000) was outstanding at the year end.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards), including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law. Under company law, the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. 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 estimates that are reasonable and prudent;

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

• prepare the financial statements on a 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.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmelect.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Annual Reprt, confirms that, to the best of their knowledge:

• the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law, give a true and fair view of the assets, liabilities, financial position and return of the Company; and

• the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board

Steve Bates

Chairman

18th November 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST AUGUST 2021

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST AUGUST 2021

1 These reserves form the distributable reserves of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

AT 31ST AUGUST 2021

AT 31ST AUGUST 2020

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST AUGUST 2021

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST AUGUST 2021

1. Accounting policies

Basis of accounting

The financial statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, and in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' 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.

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

The financial statements for the Company comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the 'Total' column of the Statement of Financial Position, the Statement of Cash Flows, and the 'Total' column within the Notes to the financial statements.

The Managed Growth, Managed Income and Managed Cash Statement of Financial Position, together with the notes to those statements are not required under UK GAAP, and have not been audited but have been disclosed to assist shareholders' understanding of the net assets and liabilities, and income and expenses of the different share classes.

The financial statements have been prepared on a going concern basis following an assessment of the appropriateness of the going concern basis up to 30th November 2022. In forming this opinion, the directors have considered any potential impact of the Covid-19 pandemic on the going concern and viability of the Company. They have considered the potential impact of Covid-19 and the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of Covid-19. The Directors have reviewed the compliance with debt covenants in assessing the going concern and viability of the Company. The Directors have reviewed income and expense projections and the liquidity of the investment portfolio in making their assessment.

The policies applied in these financial statements are consistent with those applied in the preceding year,

2. Return/(loss) per share

3. Dividends

(a) Dividends paid

In respect of dividends paid during the year ended 31st August 2021:

The 2020 4th interim dividends were paid on 21st September 2020 to shareholders on the register as at the close of business on 14th August 2020.

The 1st interim dividends were paid on 23rd December 2020 to shareholders on the register as at the close of business on 20th November 2020.

The 2nd interim dividends were paid on 19th March 2021 to shareholders on the register as at the close of business on 12th February 2021.

The 3rd interim dividends were paid on 18th June 2021 to shareholders on the register as at the close of business on 14th May 2021.

(b) Dividends declared

In respect of the dividends declared, but not paid, during the year ended 31st August 2021, the dividends were paid on 20th September 2021 to shareholders on the register as at the close of business on 13th August 2021.

All dividends in the year have been funded from the revenue reserve.

(c) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')

The requirements of Section 1158 are considered on the basis of dividends paid and declared in respect of the financial year, as follows:

The revenue available for distribution by way of dividend for the year is £7,918,000 (2020: £7,979,000). The revenue reserve after payment of the 4th interim dividends will amount to £3,681,000 (2020: £4,005,000).

4. Net asset value per share

The net asset values per share are calculated as follows:

Status of announcement

2020 Financial Information

The figures and financial information for 2020 are extracted from the Annual Report and Financial Statements for the year ended 31st August 2020 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2021 Financial Information

The figures and financial information for 2021 are extracted from the Annual Report and Financial Statements for the year ended 31st August 2021 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements will be delivered to the Registrar of Companies in due course.

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.

18th November 2021

For further information:

Priyanka Vijay Anand,

JPMorgan Funds Limited

ENDS

A copy of the 2021 Annual Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The annual report will also shortly be available 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.

JPMORGAN FUNDS LIMITED