JPEI.L Regulatory News (JPEI)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ELECT PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 28th FEBRUARY 2022

Legal Entity Identifier: 549300FIUYKKL39ILD07

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

I present to you the report of the Company for the half-year ended 28th February 2022.

It was only four days before the end of the half year that Russia invaded Ukraine. While this was the most important geo-political event of the period, markets also had to digest higher and seemingly more durable inflation, with Central Banks, led by the UK and US, indicating a path to monetary tightening. The subsequent decline in bond markets provides a headwind for equity markets. In the meantime, the implications of sanctions and other consequences of the invasion are likely to lead to much slower economic activity in the second half of this year. In the period since the end of February, markets have been volatile and have recently begun to discount the deterioration in the economic outlook.

Managed Growth

The objective of the Managed Growth share class is long-term capital growth. In the six month period, the portfolio underperformed its benchmark and delivered a total return on net assets of -6.8%, compared with the portfolio's benchmark which returned -0.1%. The main drivers of this negative return over this half year were the underperformance of the growth style and the technology exposure in a number of the underlying holdings. More detail is given in the Manager's review, which follows. The share price total return was -9.3%. The long-term performance of the Managed Growth share class however continues to be strong, with annualised outperformance against the benchmark index over 5 years of 1.3%.

For the half year ended 28th February 2022, the Board has declared and paid two interim dividends totalling 9.75p per Managed Growth share compared to 8.55p for the half year ended 28th February 2021. The Board declared a third interim dividend of 3.00p per share on 5th May 2022. 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. Over the six months to 28th February 2022, the Managed Income portfolio delivered a total return on net assets of -2.5%, against the portfolio's benchmark which returned +2.4%. The share price total return was -3.6%. Underperformance of this share class was attributed to poor performance of some underlying holdings, mostly because of supply chain issues as the economy emerges from COVID. A further analysis of performance is set out in the Investment Managers' Report below.

As expected, for the half year ended 28th February 2022 the Board declared and paid two quarterly dividends totalling 2.2p per Managed Income share, as it did in the half year ended 28th February 2021. The Board declared a third interim dividend of 1.10p per share on 5th May 2022, consistent with the previous two quarters. 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.

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 of -0.2% over the period under review. The share price changed from 102.50p to 101.75p during the period. 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.

During the period under review, the Board declared an interim dividend of 0.30 pence per Managed Cash share. No further dividends are expected to be paid on this share class for the financial year ending 31st August 2022. As previously announced, in future years, it is expected that any dividend for this Share Class will be declared in the first quarter of the Company's financial year, which begins on 1st September.

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 £15 million one year multicurrency revolving credit facility with Scotiabank. Discussions are well advanced to renew this facility which expires in June 2022. At the half year end £7 million was drawn and the Managed Income portfolio was 5.5% geared.

Costs

The Company has always complied with the methodology for computing ongoing costs following guidance from the Association of Investment Companies (AIC). It is now recommended that those Companies which invest a substantial part of their assets in other pooled structures incorporate the pro-rata share of underlying costs in reporting total ongoing charges. In the case of the Managed Growth share class, this amounts to 0.66%, which needs to be added to the direct costs of the Company to give a true picture of total costs. On that basis, this share class has a total annualised cost ratio of 1.22%. The calculation is set out on page 46 of this report. The other share classes are unaffected by this change.

Board

As announced in April this year, Rupert Dickinson, a non-executive director of the Company, has stepped down from the Board for health reasons. Rupert has been a diligent and highly effective member and I would like to record my thanks for his contribution and express real regret that he is at present unable to continue in the role. The Board does not envisage seeking a replacement for Rupert in the near term with the remaining five non-executive directors having sufficient knowledge and experience to meet the needs of the Company. However, the Board will continue to evaluate and monitor the Company's governance structure and will consider further Board appointments where appropriate, in particular, with regards to succession planning. The Board will consider the re-appointment of Rupert once he has made a full recovery.

There were no other changes to the Board during the period under review.

Outlook

The last six months have been quite traumatic for global markets. The easy money policies which have persisted since the financial crisis in 2008 (with only minor interruptions) have come to a decisive end. This reflected Central Bank views that economies were robust as they emerged from the shadow of the pandemic and inflation was more of a problem than had been foreseen as supply chains were in disarray. When these tighter policies began to roll off the production line, the crisis in Ukraine was only theoretical. Its arrival in the land of the real has exacerbated the inflation problem and threatened the rosy view of economic activity which predated it. For now, monetary tightening remains the order of the day and although outright recessionary conditions may be avoided in some countries, the risks of economic stagnation have risen sharply. The Managers are navigating the choppy waters and have options to take more defensive positions. Nevertheless, conditions over the next several months are uncertain. Longer term, even with tighter monetary conditions, real rates will remain negative and equities are likely to offer shelter.

Steve Bates

Chairman 12 May 2022

INVESTMENT MANAGERS' REPORT - MANAGED GROWTH

Performance Review

This was a disappointing period for performance and the Managed Growth portfolio underperformed its benchmark, returning -6.8% on an NAV basis, versus the benchmark return of -0.1% over the period. The total return to shareholders was -9.3%.

The main driver of our underperformance over this half year was the underperformance of the growth style and technology exposures in a number of our underlying holdings. The valuations of these holdings declined as government bond yields rose. This move in government bonds occurred as central banks became less accommodative in response to the persistent inflationary pressures. The table below shows the magnitude of the returns achieved by the outperformers when compared to the underperformers.

Against a challenging backdrop of persistent inflation and rising interest rates, a resurgence in COVID, ongoing supply chain issues, geopolitical tensions and the resultant Russian invasion of Ukraine, most of our underlying holdings generated negative absolute returns, with many of them also lagging their own benchmarks. On a regional basis, Japanese and Asia Pacific strategies were among the weakest performers while most US and European strategies fared better.

From a regional perspective, we added to our US exposure over this period. We added to the JPM US Select Equity Fund, funded through a reduction in our UK exposure. We trimmed our positions in Murray Income Trust, Finsbury Growth & Income Trust, JPM Claverhouse Investment Trust and Lowland Investment Company. By the end of November, the US was our biggest regional overweight. This change in positioning was driven by our conviction that solid economic and corporate fundamentals would continue to support the region, combined with increased demand for large cap quality stocks as we move through the economic cycle. The US remained our favoured region relative to the benchmark through the period.

Discounts have been volatile over the period and ended the review period on average wider than at the Company's year-end, with some sectors suffering a significant widening following the Ukraine invasion. Some of the biggest moves were seen in JPM UK Smaller Companies Investment Trust where the discount widened by approximately 14%, Baillie Gifford US Growth which widened by 8% and Baillie Gifford UK Growth which widened by 6%. In contrast, Temple Bar Investment Trust saw its discount narrow by 8% during the period. We estimate that discount widening contributed approximately -0.8% to the portfolio return.

ESG/Engagement

We incorporate Environmental, Social and Governance factors (ESG) in our regular manager/strategy review process where we raise topical considerations, review ESG outliers from a third-party score perspective, and conduct periodic deep-dive ESG reviews to cover enhancements with regards to integration and the sustainable investing process.

Internally managed strategies:

From a Multi-Asset Solutions (MAS) perspective, we leverage our manager research team to engage with underlying investment teams in order to understand how ESG is considered. The team will periodically review the ESG integration processes of underlying managers in order to determine their adherence to their stated process and monitor ongoing enhancements to such processes, the evolution of portfolio scores, engagement of underlying desks with the companies they invest in and reconciliation of outliers within the context of stated integration processes.

Third-party investment trusts:

We look to understand the ESG characteristics of existing and potential third-party holdings and regularly meet with investment trusts in order to understand the governance and stewardship of those underlying managers. We engage with managers to understand how ESG is integrated into their investment process and assess the materiality and extent of ESG risks as well as opportunities which may arise as we look to be long-term holders of the trusts in which we invest. In the past 6 months, we have met/engaged with a total of nine third-party investment trusts.

Outlook

We have seen a multitude of shocks facing the global economy over recent months and considerable uncertainty surrounds the medium-term outlook for inflation and its implications for monetary policy, especially in the U.S. Nonetheless, we believe that the very solid positions of household, corporate, and bank balance sheets will provide sufficient buffers to allow the global economy to dodge a serious downturn in the short run and see encouraging prospects for productivity growth. As such, we do not believe that we face an imminent recession, and while market volatility may remain more elevated for some time, we believe that equities should still be able to deliver positive returns in this environment driven by earnings growth over the coming months.

Katy Thorneycroft

Simin Li

Peter Malone

Investment Managers 12 May 2022

INVESTMENT MANAGERS' REPORT - MANAGED INCOME

Dividend Review

During 2021, the UK stock market registered an underlying dividend increase of 22%. This compares to the 38.1% decrease delivered in 2020. Including special dividends, headline dividend growth was 46%. The dividends of companies comprising the FTSE 100 index rose by 20% while the dividends of mid cap companies (those in the FTSE 250) rose by 40%. The difference between the two reflects the fact that mid cap companies' earnings benefited more from the economic recovery whereas a greater proportion of companies in the FTSE 100 are involved in business activities such as pharmaceuticals, food production and telecoms that deliver steadier earnings and dividend streams both in good times and bad.

The largest dividend payments came from mining companies such as Rio Tinto and BHP. The sector delivered underlying dividend growth of 96% but when special dividends are included the growth rate increases to 160%. Their earnings benefited greatly from extraordinary strength in iron ore prices. In recent years they have shown shareholder friendly capital discipline choosing to distribute most 'excess' profits as special dividends. It's important to remember that this sector is very cyclical and that their pay outs are a ratio of earnings and not progressive so will be subject to fluctuations. Banks also made a significant contribution to dividend growth. When the pandemic took hold in 2020 the regulator instructed banks to suspend dividend payments to ensure financial stability. As the economy began to recover and the banks reported strong capital positions the regulator rescinded that instruction and allowed banks to reinstate dividends. On the other hand, oil companies detracted from dividend growth. BP and Shell cut their pay-outs in 2020 the full impact of which fed through in 2021 leading to a 25% fall in sector dividends.

Special dividends of note were from Berkeley Group and most recently from Next which continues to navigate the choppy and e-commerce disrupted retail environment very successfully.

The robust rate of growth in 2021 dividends is not expected to be repeated. We expect the UK market dividends to grow by 5%. This is due to the impact of the reduced dividend from GlaxoSmithKline following the separation of its consumer and pharmaceutical businesses and the delisting of BHP as it unifies its current dual listed status and adopts a primary listing in Australia. Consequently, dividends from the Pharmaceutical and Mining sectors are set to fall 14% & 25% respectively offsetting high single digit growth from the rest of the market. Overall, we believe that assuming dividend growth of 5% in 2022, the underlying dividend pay-out would be still 18% below 2019 levels.

Performance Review

During the Company's financial half year ended 28th February 2022 the Managed Income portfolio delivered a total return of -2.5%, in comparison to the benchmark's return of +2.4%.

Games Workshop, Luceco and Future were the largest detractors from performance. The shares of each fell in a gradual manner over the course of the half year. This was a partial reversal of the very strong share price momentum from the start of the calendar year. Whilst corporate reports from each were in line with expectations investors have come to expect outlook statements with higher full year guidance. Given supply chain headwinds and cost pressures management adopted a cautious approach to profit guidance. The absence of earnings upgrades led to profit taking given the strong price runs. We have retained our holdings in each name as we believe the medium-term prospects still offer upside as demand remains strong and supply chain disruptions should be temporary.

Positive contributors to performance included Shell, BAE and Serica Energy. The Russian invasion of Ukraine was the biggest driver of each of these companies' shares. The jump in oil and gas prices at the start of the war led to a strong rise in the shares of Shell and Serica Energy. BAE's shares rose as the war is likely to lead to an increase in many countries' defence expenditure.

Portfolio Review

During the period under review, we made use of the company's borrowing facility. As at 28th February 2022, the equity exposure of the Managed Income portfolio was 105.5% with the level of gearing primarily influenced by individual stock opportunities.

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 exposures in the portfolio are Oil & Gas, Financial Services and Home Construction. Higher oil and gas prices both before and after the Russian invasion of Ukraine have led to a much improved earnings and cash flow outlook for Shell and BP. This gives us confidence that both companies have more than adequate resources to support their respective dividend yields of 3.8% & 4.5%. Within Financial Services we own Polar Capital and M&G. Polar Capital has an attractive suite of differentiated funds which have proved popular with investors and the stock yields 6.7%. M&G's fund flows have turned positive after a period of weakness while the stock has an attractive dividend yield of 8.8%. Home Construction has been and remains one of our long-term overweight positions. The supply of new homes is lower than demand leading to persistent house price rises which are more than offsetting the rising cost of construction. Earnings are strong, balance sheets remain robust and dividend yields are very attractive. Persimmon which is one of our key holdings is yielding over 10%.

ESG/Engagement

ESG is integrated into our investment process and so we take environmental, social and governance factors into consideration when we are analyzing potential investment opportunities. In terms of our holdings in BP & Shell, both companies have set out detailed and comprehensive targets to reduce absolute carbon emissions from their operations and are investing significantly in renewable energy projects. Our holdings in the Mining sector are essential to the transition to clean energy. Many new energy items from turbine blades to electric vehicle charging infrastructure require greater volumes of minerals than their old energy equivalents. For instance, a typical electrical car needs six times the mineral inputs of a conventional car. Rio Tinto, Glencore and Anglo American are significant producers of 'electrification' metals such as copper, cobalt, nickel and lithium. Each company has also set out targets to reduce the carbon intensity of their operations through the use of renewable energy and improving the energy efficiency of their plant and machinery.

Transactions

We bought holdings in Provident Financial and Glencore and participated in the IPO of Petershill Partners. Sub-prime lender Provident Financial was added as loan losses have been lower than expected driving upgrades whilst the launch of new products is widening the breadth of the company's offering. The stock has a prospective yield of 4.7% and dividend growth of 6%. We bought Glencore to diversify our mining exposure away from a large bias towards iron ore. Glencore produces thermal coal, copper and zinc the prices of which have been strong. Management have committed to returning excess profits to shareholders resulting in a yield of nearly 10%. Petershill Partners is a permanent capital vehicle with minority stakes in 19 alternative managers, mainly in private assets. The company represents a good opportunity to gain exposure to the structural growth and profit of the industry through a diverse portfolio of partner firms. The dividend yield of the stock is 4% and we expect the dividend to grow by 20% in 2023.

We sold our holdings in MJ Gleeson and NatWest. MJ Gleeson is a house builder focused on low-cost homes in the North of England. It also has a division devoted to supporting land through the planning process to approval before selling it to other builders. While trading has been in line with expectations the company warned that staff shortages in local authority planning offices could cause lower earnings growth. We also sold BHP to fund the purchase of Glencore. We sold NatWest on valuation grounds following a rise in the shares.

Outlook

The Russian invasion of Ukraine has reduced short-term growth forecasts and added further inflationary pressure through higher commodity prices. Geopolitical events, even those involving major energy producers, have not typically had a lasting impact on markets. However, this time may be different. Countries will be looking to decrease their reliance on imports which may have long lasting impacts on global relationships and spark a multi-year investment cycle to facilitate this on-shoring.

The start of the war between Russia and Ukraine and the resulting commodity supply shock has posed a dilemma for the Bank of England (BoE), which has now been forced to choose between trying to tame inflation or support growth. However, the recent monetary policy responses suggest that they view inflation as the more pressing problem to tackle unless the growth outlook materially deteriorates. For now, the BoE expects the inflation rate to peak in the coming few months before normalizing to the bank's target rate of 2% over the next two years.

Despite having widespread supply chain issues, earnings growth was strong across the UK in 2021 as companies were able to pass on the cost increases to consumers. However, going forward, growth could slow as profit margins come under pressure from higher wages, elevated commodity prices and increasing corporate taxes. The risk is that higher commodity prices could impact consumer spending and corporate profits, and in turn, the post-pandemic recovery. However, consumers still have some pent-up savings accumulated during the pandemic and corporate and bank balance sheets are strong. This should cushion some of the hit from higher energy prices.

Currently, we view the UK equity market to be undervalued compared to other developed world markets, with UK companies now trading at their widest discount since the 1970s. This is largely due to lower levels of international investment and political upheaval post Brexit. However, recent M&A activity and the presence of activist investors in many FTSE 100 names shows us that conviction in the valuation opportunity the UK stock market presents is growing. Overall, UK equities should do well in an environment of modestly rising inflation. While we would not be surprised to see a few occasional bouts of volatility, we believe the UK market presents an attractive valuation opportunity.

John Baker

Katen Patel

Investment Managers 12 May 2022

INVESTMENT MANAGERS' REPORT - MANAGED CASH

Review and Performance

The Managed Cash share class returned -0.2% over the six month period to 28th February 2022. The Managed Cash class 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.

At the end of February 2022, the fund's duration stood at 3 months, significantly below the maximum 1 year duration permitted by the investment guidelines.

Outlook

Inflation has been the dominant theme in recent months, and as a result the yields on securities within our investment space have risen aggressively, with several hikes now being priced in for the Bank of England in 2022. In this environment, we have been running the portfolio with very low levels of duration. However, concerns for the UK's GDP growth have the potential to create downward pressure on Sterling yields, therefore we expect to increase the portfolio's duration over the next few months, most likely focused on securities that have 12 - 18 month maturity dates.

JPMorgan Asset Management

Investment Manager 12 May 2022

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, global pandemic, climate change and inflation. 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 and believes that recession is an emerging risk for the Company. Information on the principal risks of the Company is given in the Business Review section within the 2021 Annual Report and Financial Statements.

Related Party Transactions

During the half year to 28th February 2022, 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 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 28th February 2022, 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

Steve Bates

Chairman 12 May 2022

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 28TH FEBRUARY 2022

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 28TH FEBRUARY 2022

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

STATEMENT OF FINANCIAL POSITION

AT 28TH FEBRUARY 2022

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 28TH FEBRUARY 2022

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 28TH FEBRUARY 2022

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 2021 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 April 2021.

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 28th February 2022.

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 2021.

3. Return/(loss) per share

4. Dividends

1 All the dividends paid and declared in the period have been funded from the Revenue Reserve.

2 In accordance with the accounting policy of the Company, these dividends will be reflected in the financial statements of the following period.

5. Net asset value per share

The net asset values per share are calculated as follows:

JPMORGAN FUNDS LIMITED

12 May 2022

For further information, please contact:

Priyanka Vijay Anand

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

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.

ENDS

A copy of the half year 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 half year 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.