UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number:811-23117
JPMorgan Trust IV
(Exact name of registrant as specified in charter)
270 Park Avenue
New York, NY 10017
(Address of principal executive offices) (Zip code)
Noah D. Greenhill, Esq.
270 Park Avenue
New York, NY 10017
(Name and Address of Agent for Service)
Registrant’s telephone number, including area code: (800)480-4111
Date of fiscal year end: June 30
Date of reporting period: July 1, 2018 through December 31, 2018
FormN-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule30e-1 under the Investment Company Act of 1940 (17 CFR270.30e-1). The Commission may use the information provided on FormN-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by FormN-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in FormN-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940 (17 CFR270.30e-1).
J.P. Morgan Funds
Semi-Annual Report
December 31, 2018 (Unaudited)
JPMorgan Equity Premium Income Fund
Investments in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund’s share price is lower than when you invested.
Past performance is no guarantee of future performance. The general market views expressed in this report are opinions based on market and other conditions through the end of the reporting period and are subject to change without notice. These views are not intended to predict the future performance of the Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of the Fund.
Prospective investors should refer to the Fund’s prospectus for a discussion of the Fund’s investment objective, strategy and risks. Call J.P. Morgan Funds Service Center at1-800-480-4111 for a prospectus containing more complete information about the Fund, including management fees and other expenses. Please read it carefully before investing.
CEO’S LETTER
February 14, 2018 (Unaudited)
Dear Shareholders,
While the U.S. economy largely outperformed other leading economies during the second half of 2018, record corporate profits and historically low unemployment were overshadowed in December by asell-off in equity markets, unsettled global trade tensions and a political impasse that led the temporary shutdown of large parts of the federal government.
The second longest U.S. economic expansion on record extended through the third and fourth quarters of 2018. Gross domestic product advanced 3.4% in the third quarter of 2018, and was on pace to grow by about 3% for the full year 2018. In September, the U.S. jobless rate dipped to 3.7% - its lowest level in nearly 50 years - and stood at 3.9% at the end of the year. In response, the U.S. Federal Reserve raised interest rates in September and again in December.
U.S. aggregate corporate revenues and earnings reached record high levels in the second and third quarters of 2018. Though some profit growth was attributed to the temporary benefits of late-2017 tax cut legislation, the outlook for U.S. corporate earnings remained generally positive at the end of the year.
Equity prices in the U.S. largely held their ground in the third quarter of 2018. The S&P 500 Index hit record highs in August and remained elevated in September. However, early October saw a sharpsell-off in financial markets and the worst December for the S&P 500 Index since 1931 erased all gains made in the prior five months.
By the end of 2018, investors were confronted with several worrying developments. Leading economies, particularly China and the European Union, showed significant signs of slowing in the latter half of the year. While U.S.-China trade tariffs had little clear direct impact on the U.S. economy in 2018, a continuation or acceleration of protectionist policies could begin to hinder growth. Though the federal government shutdown ended subsequent to the end of the reporting period, the solution was a short-term budget agreement that failed to alleviate concerns about the possibility of future shutdowns.
Overall, economists generally remained optimistic about the fundamental strength of the U.S. economy at the end of 2918. While U.S. corporate profits and gross domestic product are expected to grow in the year ahead, the extent to which U.S. financial markets benefit remains to be seen, given the length of the current economic expansion.
We believe investors who maintain a patient approach and a well-diversified portfolio may be best positioned to navigate from current market conditions. We look forward to managing your investment needs for years to come. Should you have any questions, please visit www.jpmorganfunds.com or contact the J.P. Morgan Funds Service Center at1-800-480-4111.
Sincerely yours,
George C.W. Gatch
CEO, Global Funds Management & J.P. Morgan Asset Management
1
Fund Summary
FOR THE PERIOD AUGUST 31, 2018 (inception date) THROUGH DECEMBER 31, 2018 (Unaudited)
| | | | |
REPORTING PERIOD RETURN: | | | | |
Fund (Class I Shares)* | | | (6.98)% | |
S&P 500 Index | | | (13.03) | |
ICE BofAML3-Month US Treasury Bill Index | | | 0.72 | |
| |
Net Assets as of 12/31/2018 | | | $ 46,526,645 | |
INVESTMENT OBJECTIVES** AND STRATEGIES
The JPMorgan Equity Premium Income Fund seeks total return which includes current income and capital appreciation. The Fund seeks to provide the majority of the returns associated with the Fund’s primary benchmark, the Standard & Poor’s 500 Total Return Index (S&P 500 Index), while exposing investors to less risk through lower volatility and still offering incremental income. The Fund does this by creating a portfolio of equity securities with a lower volatility level than the S&P 500 Index and also investing in equity-linked notes (ELNs). The Fund is managed in a way that seeks, under normal circumstances, to provide monthly distributions at a relatively stable level. Under normal circumstances, the Fund invests at least 80% of its Assets in equity securities (80% Policy). ‘Assets’ means net assets plus the amount of borrowings for investment purposes. In calculating the 80% Policy, the Fund’s equity investments will include common stocks and ELNs, as well as other equity securities.
| | |
TOP TEN EQUITY HOLDINGS OF THE PORTFOLIO*** |
| |
1. UBS AG, ELN, 56.61%, 2/1/2019, (linked to S&P 500 Index) | | 3.9% |
2. Royal Bank of Canada, ELN, 56.00%, 2/1/2019, (linked to S&P 500 Index) | | 3.9 |
3. Deutsche Bank AG, ELN, 59.50%, 1/11/2019, (linked to S&P 500 Index | | 3.9 |
4. BNP Paribas, ELN, 51.80%, 1/11/2019, (linked to S&P 500 Index) | | 3.7 |
5. Pfizer, Inc. | | 1.5 |
6. PepsiCo, Inc. | | 1.4 |
7. Eli Lilly & Co. | | 1.4 |
8. NextEra Energy, Inc. | | 1.4 |
9. Coca-Cola Co. (The) | | 1.4 |
10. Fidelity National Information Services, Inc. | | 1.4 |
| | |
PORTFOLIO COMPOSITION BY SECTOR*** |
| |
Convertible Bond | | 15.4% |
Health Care | | 12.0 |
Financials | | 11.9 |
Industrials | | 11.3 |
Information Technology | | 9.6 |
Utilities | | 9.5 |
Consumer Staples | | 8.9 |
Consumer Discretionary | | 6.3 |
Communication Services | | 4.5 |
Real Estate | | 3.2 |
Materials | | 2.8 |
Energy | | 1.9 |
Short-Term Investments | | 2.7 |
2
* | The return shown is based on net asset values calculated for shareholder transactions and may differ from the return shown in the financial highlights, which reflects adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
** | The adviser seeks to achieve the Fund’s objective. There can be no guarantee it will be achieved. |
*** | Percentages indicated are based on total long investments as of December 31, 2018. The Fund’s portfolio composition is subject to change. |
3
JPMorgan Equity Premium Income Fund
FUND SUMMARY
FOR THE PERIOD AUGUST 31, 2018 (inception date) THROUGH DECEMBER 31, 2018 (Unaudited) (continued)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2018
| | | | | | | | |
| | INCEPTION DATE OF CLASS | | | SINCE INCEPTION | |
CLASS A SHARES | | | August 31, 2018 | | | | | |
With Sales Charge* | | | | | | | (11.93)% | |
Without Sales Charge | | | | | | | (7.05) | |
CLASS C SHARES | | | August 31, 2018 | | | | | |
With CDSC** | | | | | | | (8.21) | |
Without CDSC | | | | | | | (7.21) | |
CLASS I SHARES | | | August 31, 2018 | | | | (6.98) | |
CLASS R5 SHARES | | | August 31, 2018 | | | | (6.93) | |
CLASS R6 SHARES | | | August 31, 2018 | | | | (6.90) | |
* Sales Charge for Class A Shares is 5.25%.
**Assumes a 1% CDSC (contingent deferred sales charge) for the period.
![LOGO](https://capedge.com/proxy/N-CSRS/0001193125-19-066803/g684603page6.jpg)
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. Forup-to-datemonth-end performance information please call1-800-480-4111.
4
The Fund commenced operations on August 31, 2018.
The graph illustrates comparative performance for $1,000,000 invested in Class I Shares of the JPMorgan Equity Premium Income Fund, the S&P 500 Index and the ICE BofAML3-Month U.S. Treasury Bill Index from August 31, 2018 to December 31, 2018. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the S&P 500 Index and the ICE BofAML3-Month U.S. Treasury Bill Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and approximates the minimum possible dividend reinvestment of the securities included in the benchmarks, if applicable. These expenses are not identical to the expenses incurred by the Fund. The S&P 500 Index is an unmanaged index generally representative of the performance of large companies in the U.S. stock market. The ICE BofAML3-Month U.S. Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. Each month the ICE BofAML3-Month U.S. Treasury Bill Index is rebalanced and the issue selected is the outstanding Treasury Bill that matures closest to, but not beyond, 3 months from the rebalancing date. Investors cannot invest directly in an index.
Class I Shares have a $1,000,000 minimum initial investment.
Subsequent to the inception date of the Fund and through December 31, 2018, the Fund did not experience any shareholder activity. If such shareholder activity had occurred, the Fund’s performance may have been impacted.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.
The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.
5
JPMorgan Equity Premium Income Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited)
| | | | | | | | |
Investments | | Shares | | | Value ($) |
| | |
COMMON STOCKS - 81.3% | | | | | | | | |
| | |
Aerospace & Defense - 2.0% | | | | | | | | |
General Dynamics Corp. | | | 2,470 | | | | 388,309 | |
United Technologies Corp. | | | 4,985 | | | | 530,803 | |
| | | | | | | | |
| | | | | | | 919,112 | |
| | | | | | | | |
Banks - 2.0% | | | | | | | | |
BB&T Corp. | | | 10,678 | | | | 462,571 | |
SunTrust Banks, Inc. | | | 4,780 | | | | 241,103 | |
Wells Fargo & Co. | | | 4,720 | | | | 217,498 | |
| | | | | | | | |
| | | | | | | 921,172 | |
| | | | | | | | |
Beverages - 2.9% | | | | | | | | |
Coca-Cola Co. (The) | | | 13,793 | | | | 653,098 | |
PepsiCo, Inc. | | | 6,060 | | | | 669,509 | |
| | | | | | | | |
| | | | | | | 1,322,607 | |
| | | | | | | | |
Capital Markets - 2.5% | | | | | | | | |
CME Group, Inc. | | | 3,185 | | | | 599,162 | |
Intercontinental Exchange, Inc. | | | 7,205 | | | | 542,753 | |
| | | | | | | | |
| | | | | | | 1,141,915 | |
| | | | | | | | |
Chemicals - 2.0% | | | | | | | | |
Air Products & Chemicals, Inc. | | | 1,500 | | | | 240,075 | |
Celanese Corp. | | | 1,469 | | | | 132,166 | |
DowDuPont, Inc. | | | 5,570 | | | | 297,883 | |
Eastman Chemical Co. | | | 1,939 | | | | 141,760 | |
RPM International, Inc. | | | 2,270 | | | | 133,431 | |
| | | | | | | | |
| | | | | | | 945,315 | |
| | | | | | | | |
Commercial Services & Supplies - 1.3% | |
Waste Management, Inc. | | | 6,532 | | | | 581,283 | |
| | | | | | | | |
| | |
Consumer Finance - 0.7% | | | | | | | | |
American Express Co. | | | 3,425 | | | | 326,471 | |
| | | | | | | | |
| | |
Containers & Packaging - 0.8% | | | | | | | | |
Avery Dennison Corp. | | | 3,985 | | | | 357,973 | |
| | | | | | | | |
|
Diversified Financial Services - 1.1% | |
Berkshire Hathaway, Inc., Class B* | | | 2,535 | | | | 517,596 | |
| | | | | | | | |
|
Diversified Telecommunication Services - 1.2% | |
Verizon Communications, Inc. | | | 10,297 | | | | 578,897 | |
| | | | | | | | |
| | |
Electric Utilities - 5.4% | | | | | | | | |
American Electric Power Co., Inc. | | | 8,585 | | | | 641,643 | |
Exelon Corp. | | | 12,905 | | | | 582,015 | |
NextEra Energy, Inc. | | | 3,788 | | | | 658,430 | |
Xcel Energy, Inc. | | | 12,917 | | | | 636,421 | |
| | | | | | | | |
| | | | | | | 2,518,509 | |
| | | | | | | | |
Electrical Equipment - 1.2% | | | | | | | | |
Eaton Corp. plc | | | 8,220 | | | | 564,385 | |
| | | | | | | | |
| | |
Entertainment - 1.3% | | | | | | | | |
Walt Disney Co. (The) | | | 5,375 | | | | 589,369 | |
| | | | | | | | |
|
Equity Real Estate Investment Trusts (REITs) - 3.2% | |
AvalonBay Communities, Inc. | | | 2,555 | | | | 444,698 | |
Boston Properties, Inc. | | | 3,500 | | | | 393,925 | |
Equity Residential | | | 2,800 | | | | 184,828 | |
Prologis, Inc. | | | 4,045 | | | | 237,522 | |
| | | | | | | | |
Investments | | Shares | | | Value ($) |
Equity Real Estate Investment Trusts (REITs) - continued | |
| | |
Vornado Realty Trust | | | 3,692 | | | | 229,015 | |
| | | | | | | | |
| | | | | | | 1,489,988 | |
| | | | | | | | |
| |
Food & Staples Retailing - 0.6% | | | | | |
Costco Wholesale Corp. | | | 1,280 | | | | 260,749 | |
| | | | | | | | |
| |
Food Products - 1.7% | | | | | |
Conagra Brands, Inc. | | | 8,990 | | | | 192,026 | |
Mondelez International, Inc., Class A | | | 15,226 | | | | 609,497 | |
| | | | | | | | |
| | | | | | | 801,523 | |
| | | | | | | | |
|
Health Care Equipment & Supplies - 3.0% | |
Becton Dickinson and Co. | | | 1,703 | | | | 383,720 | |
Danaher Corp. | | | 1,120 | | | | 115,495 | |
Medtronic plc | | | 5,875 | | | | 534,390 | |
Zimmer Biomet Holdings, Inc. | | | 3,288 | | | | 341,031 | |
| | | | | | | | |
| | | | | | | 1,374,636 | |
| | | | | | | | |
| |
Health Care Providers & Services - 3.3% | | | | | |
Anthem, Inc. | | | 1,500 | | | | 393,945 | |
Cigna Corp. | | | 3,237 | | | | 614,771 | |
UnitedHealth Group, Inc. | | | 2,208 | | | | 550,057 | |
| | | | | | | | |
| | | | | | | 1,558,773 | |
| | | | | | | | |
| |
Hotels, Restaurants & Leisure - 0.5% | | | | | |
McDonald’s Corp. | | | 1,316 | | | | 233,682 | |
| | | | | | | | |
| |
Household Products - 1.9% | | | | | |
Kimberly-Clark Corp. | | | 2,520 | | | | 287,129 | |
Procter & Gamble Co. (The) | | | 6,465 | | | | 594,263 | |
| | | | | | | | |
| | | | | | | 881,392 | |
| | | | | | | | |
| |
Industrial Conglomerates - 1.2% | | | | | |
Honeywell International, Inc. | | | 4,312 | | | | 569,701 | |
| | | | | | | | |
| |
Insurance - 5.5% | | | | | |
American International Group, Inc. | | | 8,878 | | | | 349,882 | |
Axis Capital Holdings Ltd. | | | 2,485 | | | | 128,325 | |
Chubb Ltd. | | | 4,643 | | | | 599,783 | |
Everest Re Group Ltd. | | | 2,733 | | | | 595,138 | |
Hartford Financial Services Group, Inc. (The) | | | 8,077 | | | | 359,023 | |
Marsh & McLennan Cos., Inc. | | | 4,700 | | | | 374,825 | |
MetLife, Inc. | | | 4,230 | | | | 173,684 | |
| | | | | | | | |
| | | | | | | 2,580,660 | |
| | | | | | | | |
| |
Interactive Media & Services - 1.3% | | | | | |
Alphabet, Inc., Class A* | | | 561 | | | | 586,223 | |
| | | | | | | | |
|
Internet & Direct Marketing Retail - 0.3% | |
Amazon.com, Inc.* | | | 97 | | | | 145,691 | |
| | | | | | | | |
| |
IT Services - 4.7% | | | | | |
Accenture plc, Class A | | | 2,607 | | | | 367,613 | |
Automatic Data Processing, Inc. | | | 4,263 | | | | 558,965 | |
Fidelity National Information Services, Inc. | | | 6,306 | | | | 646,680 | |
International Business Machines Corp. | | | 1,230 | | | | 139,814 | |
Visa, Inc., Class A | | | 3,560 | | | | 469,706 | |
| | | | | | | | |
| | | | | | | 2,182,778 | |
| | | | | | | | |
|
Life Sciences Tools & Services - 0.4% | |
Thermo Fisher Scientific, Inc. | | | 889 | | | | 198,949 | |
| | | | | | | | |
| |
Machinery - 3.1% | | | | | |
Cummins, Inc. | | | 1,180 | | | | 157,695 | |
SEE NOTES TO FINANCIAL STATEMENTS.
6
JPMorgan Equity Premium Income Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited) (continued)
| | | | | | | | |
Investments | | Shares | | | Value ($) |
Machinery - continued | | | | | | | | |
Ingersoll-Rand plc | | | 6,143 | | | | 560,426 | |
PACCAR, Inc. | | | 3,500 | | | | 199,990 | |
Snap-on, Inc. | | | 1,857 | | | | 269,804 | |
Stanley Black & Decker, Inc. | | | 2,308 | | | | 276,360 | |
| | | | | | | | |
| | | | | | | 1,464,275 | |
| | | | | | | | |
| | |
Media - 0.7% | | | | | | | | |
Comcast Corp., Class A | | | 9,662 | | | | 328,991 | |
| | | | | | | | |
| | |
Multiline Retail - 0.8% | | | | | | | | |
Dollar General Corp. | | | 3,652 | | | | 394,708 | |
| | | | | | | | |
| | |
Multi-Utilities - 4.0% | | | | | | | | |
Ameren Corp. | | | 9,835 | | | | 641,537 | |
DTE Energy Co. | | | 1,530 | | | | 168,759 | |
Public Service Enterprise Group, Inc. | | | 9,889 | | | | 514,723 | |
Sempra Energy | | | 4,970 | | | | 537,704 | |
| | | | | | | | |
| | | | | | | 1,862,723 | |
| | | | | | | | |
|
Oil, Gas & Consumable Fuels - 1.9% | |
Occidental Petroleum Corp. | | | 2,990 | | | | 183,526 | |
ONEOK, Inc. | | | 7,638 | | | | 412,070 | |
TransCanada Corp. (Canada) | | | 7,606 | | | | 271,534 | |
| | | | | | | | |
| | | | | | | 867,130 | |
| | | | | | | | |
| | |
Pharmaceuticals - 5.2% | | | | | | | | |
Eli Lilly & Co. | | | 5,710 | | | | 660,761 | |
Johnson & Johnson | | | 4,382 | | | | 565,497 | |
Merck & Co., Inc. | | | 6,480 | | | | 495,137 | |
Pfizer, Inc. | | | 15,667 | | | | 683,865 | |
| | | | | | | | |
| | | | | | | 2,405,260 | |
| | | | | | | | |
| | |
Road & Rail - 2.4% | | | | | | | | |
Norfolk Southern Corp. | | | 3,565 | | | | 533,110 | |
Union Pacific Corp. | | | 4,158 | | | | 574,760 | |
| | | | | | | | |
| | | | | | | 1,107,870 | |
| | | | | | | | |
|
Semiconductors & Semiconductor Equipment - 2.1% | |
Analog Devices, Inc. | | | 4,773 | | | | 409,667 | |
Texas Instruments, Inc. | | | 6,024 | | | | 569,268 | |
| | | | | | | | |
| | | | | | | 978,935 | |
| | | | | | | | |
| | |
Software - 1.7% | | | | | | | | |
Microsoft Corp. | | | 5,587 | | | | 567,472 | |
Oracle Corp. | | | 5,242 | | | | 236,676 | |
| | | | | | | | |
| | | | | | | 804,148 | |
| | | | | | | | |
| | |
Specialty Retail - 4.6% | | | | | | | | |
AutoZone, Inc.* | | | 468 | | | | 392,343 | |
Home Depot, Inc. (The) | | | 3,442 | | | | 591,405 | |
Ross Stores, Inc. | | | 6,710 | | | | 558,272 | |
TJX Cos., Inc. (The) | | | 13,006 | | | | 581,888 | |
| | | | | | | | |
| | | | | | | 2,123,908 | |
| | | | | | | | |
|
Technology Hardware, Storage & Peripherals - 1.0% | |
Apple, Inc. | | | 2,942 | | | | 464,071 | |
| | | | | | | | |
| | |
Tobacco - 1.8% | | | | | | | | |
Altria Group, Inc. | | | 8,778 | | | | 433,545 | |
Philip Morris International, Inc. | | | 6,342 | | | | 423,392 | |
| | | | | | | | |
| | | | | | | 856,937 | |
| | | | | | | | |
TOTAL COMMON STOCKS (Cost $41,070,443) | | | | 37,808,305 | |
| | | | | | | | |
| | | | | | | | |
Investments | | Principal Amount ($) | | | Value ($) |
| | |
EQUITY-LINKED NOTES - 15.4% | | | | | | | | |
| | |
BNP Paribas, ELN, 51.80%, 1/11/2019, (linked to S&P 500 Index)(a) | | | 680 | | | | 1,721,772 | |
Deutsche Bank AG, ELN, 59.50%, 1/11/2019, (linked to S&P 500 Index)(a) | | | 704 | | | | 1,785,637 | |
Royal Bank of Canada, ELN, 56.00%, 2/1/2019, (linked to S&P 500 Index)(a) | | | 721 | | | | 1,821,882 | |
UBS AG, ELN, 56.61%, 2/1/2019, (linked to S&P 500 Index)(a) | | | 721 | | | | 1,822,750 | |
| | | | | | | | |
TOTAL EQUITY-LINKED NOTES (Cost $7,396,281) | | | | | | | 7,152,041 | |
| | | | | | | | |
| | |
Investments | | Shares | | | Value ($) |
| | |
SHORT-TERM INVESTMENTS - 2.7% | | | | | | | | |
| | |
INVESTMENT COMPANIES - 2.7% | | | | | | | | |
JPMorgan U.S. Government Money Market Fund Class Institutional Shares, 2.40%(b)(c)(Cost $1,267,103) | | | 1,267,103 | | | | 1,267,103 | |
| | | | | | | | |
| | |
Total Investments - 99.4% (Cost $49,733,827) | | | | | | | 46,227,449 | |
Other Assets Less Liabilities - 0.6% | | | | | | | 299,196 | |
| | | | | | | | |
Net Assets - 100.0% | | | | | | | 46,526,645 | |
| | | | | | | | |
Percentages indicated are based on net assets.
SEE NOTES TO FINANCIAL STATEMENTS.
7
JPMorgan Equity Premium Income Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited) (continued)
Abbreviations
(a) | Securities exempt from registration under Rule 144A or | |
| section 4(a)(2), of the Securities Act of 1933, as amended. | |
| Under procedures approved by the Board of Trustees, such | |
| securities have been determined to be liquid by the investment | |
| adviser and may be resold, normally to qualified institutional | |
| buyers in transactions exempt from registration. | |
(b) | Investment in affiliate. Fund is registered under the Investment | |
| Company Act of 1940, as amended, and advised by J.P. | |
| Morgan Investment Management Inc. | |
(c) | The rate shown is the current yield as of December 31, 2018. | |
* | Non-income producing security. | |
SEE NOTES TO FINANCIAL STATEMENTS.
8
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2018 (Unaudited)
| | | | |
| | JPMorgan Equity Premium Income Fund | |
| |
ASSETS: | | | | |
Investments innon-affiliates, at value | | $ | 44,960,346 | |
Investments in affiliates, at value | | | 1,267,103 | |
Receivables: | | | | |
Interest fromnon-affiliates | | | 300,896 | |
Dividends from affiliates | | | 1,860 | |
Due from Adviser | | | 10,319 | |
Prepaid expenses and other assets | | | 21,733 | |
| | | | |
Total Assets | | | 46,562,257 | |
| | | | |
| |
LIABILITIES: | | | | |
Payables: | | | | |
Distributions | | | 2,322 | |
Investment securities purchased | | | 1,851 | |
Accrued liabilities: | | | | |
Administration fees | | | 13 | |
Distribution fees | | | 16 | |
Service fees | | | 9,650 | |
Custodian and accounting fees | | | 4,901 | |
Trustees’ and Chief Compliance Officer’s fees | | | 64 | |
Audit fees | | | 11,442 | |
Printing & Postage fees | | | 3,515 | |
Other | | | 1,838 | |
| | | | |
Total Liabilities | | | 35,612 | |
| | | | |
Net Assets | | $ | 46,526,645 | |
| | | | |
| |
NET ASSETS: | | | | |
Paid-in-Capital | | $ | 51,240,848 | |
Total distributable earnings (loss) (a) | | | (4,714,203) | |
| | | | |
Total Net Assets | | $ | 46,526,645 | |
| | | | |
| |
Net Assets: | | | | |
Class A | | $ | 18,596 | |
Class C | | | 18,565 | |
Class I | | | 46,452,238 | |
Class R5 | | | 18,620 | |
Class R6 | | | 18,626 | |
| | | | |
Total | | $ | 46,526,645 | |
| | | | |
| |
Outstanding units of beneficial interest (shares) | | | | |
($0.0001 par value; unlimited number of shares authorized): | | | | |
Class A | | | 1,367 | |
Class C | | | 1,365 | |
Class I | | | 3,414,591 | |
Class R5 | | | 1,369 | |
Class R6 | | | 1,369 | |
| |
Net Asset Value (b): | | | | |
Class A - Redemption price per share | | $ | 13.60 | |
Class C - Offering price per share (c) | | | 13.60 | |
Class I - Offering and redemption price per share | | | 13.60 | |
Class R5 - Offering and redemption price per share | | | 13.60 | |
Class R6 - Offering and redemption price per share | | | 13.60 | |
Class A maximum sales charge | | | 5.25% | |
Class A maximum public offering price per share | | | | |
[net asset value per share/(100% – maximum sales charge)] | | $ | 14.35 | |
| | | | |
| |
Cost of investments innon-affiliates | | $ | 48,466,724 | |
Cost of investments in affiliates | | | 1,267,103 | |
(a) Total distributable earnings have been aggregated to conform to the current presentation requirements for the adoption of the Securities and Exchange Commission’s Disclosure Update and Simplification Rule. See Note 8.
(b) Per share amounts may not recalculate due to rounding of net assets and/or shares outstanding. (c) Redemption price for Class C Shares varies based upon length of time the shares are held.
SEE NOTES TO FINANCIAL STATEMENTS.
9
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2018 (Unaudited)
| | | | |
| | JPMorgan | |
| | Equity Premium | |
| | Income Fund(a) | |
INVESTMENT INCOME: | | | | |
Interest income fromnon-affiliates | | $ | 978,283 | |
Interest income from affiliates | | | 74 | |
Dividend income fromnon-affiliates | | | 347,563 | |
Dividend income from affiliates | | | 8,896 | |
Total investment income | | | 1,334,816 | |
| |
EXPENSES: | | | | |
Investment advisory fees | | | 39,754 | |
Administration fees | | | 12,899 | |
Distribution fees: | | | | |
Class A | | | 16 | |
Class C | | | 48 | |
Service fees: | | | | |
Class A | | | 16 | |
Class C | | | 16 | |
Class I | | | 39,690 | |
Class R5 | | | 6 | |
Custodian and accounting fees | | | 6,701 | |
Interest expense to affiliates | | | 581 | |
Professional fees | | | 47,880 | |
Trustees’ and Chief Compliance Officer’s fees | | | 6,363 | |
Printing and mailing costs | | | 3,762 | |
Registration and filing fees | | | 486 | |
Transfer agency fees (See Note 2.F.) | | | 872 | |
Offering costs | | | 8,836 | |
Other | | | 1,191 | |
Total expenses | | | 169,117 | |
Less fees waived | | | (54,025 | ) |
Less expense reimbursements | | | (19,794 | ) |
Net expenses | | | 95,298 | |
Net investment income (loss) | | | 1,239,518 | |
| |
REALIZED/UNREALIZED GAINS (LOSSES): | | | | |
Net realized gain (loss) on transactions from investments innon-affiliates | | | (1,204,172 | ) |
Change in net unrealized appreciation/depreciation on investments innon-affiliates | | | (3,506,378 | ) |
Net realized/unrealized gains (losses) | | | (4,710,550 | ) |
Change in net assets resulting from operations | | $ | (3,471,032 | ) |
| | | | |
(a) Commencement of operations was August 31, 2018.
SEE NOTES TO FINANCIAL STATEMENTS.
10
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD INDICATED
| | | | | |
| | JPMorgan Equity |
| | Premium Income Fund |
| | Period Ended December |
| | 31, 2018 (a) (Unaudited) |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: | | | | | |
Net investment income (loss) | | | $ | 1,239,518 | |
Net realized gain (loss) | | | | (1,204,172 | ) |
Change in net unrealized appreciation/depreciation | | | | (3,506,378 | ) |
Change in net assets resulting from operations | | | | (3,471,032 | ) |
| |
DISTRIBUTIONS TO SHAREHOLDERS: | | | | | |
Class A | | | | (482 | ) |
Class C | | | | (449 | ) |
Class I | | | | (1,241,220 | ) |
Class R5 | | | | (507 | ) |
Class R6 | | | | (513 | ) |
Total distributions to shareholders | | | | (1,243,171 | ) |
| |
CAPITAL TRANSACTIONS: | | | | | |
Change in net assets resulting from capital transactions | | | | 51,240,848 | |
| |
NET ASSETS: | | | | | |
Change in net assets | | | | 46,526,645 | |
Beginning of period | | | | — | |
End of period | | | $ | 46,526,645 | |
| | | | | |
(a) Commencement of operations was August 31, 2018.
SEE NOTES TO FINANCIAL STATEMENTS.
11
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD INDICATED (continued)
| | | | | |
| | JPMorgan Equity |
| | Premium Income Fund |
| | Period Ended December |
| | 31, 2018(a) (Unaudited) |
CAPITAL TRANSACTIONS: | | | | | |
Class A | | | | | |
Proceeds from shares issued | | | $ | 20,000 | |
Distributions reinvested | | | | 481 | |
Change in net assets resulting from Class A capital transactions | | | $ | 20,481 | |
Class C | | | | | |
Proceeds from shares issued | | | $ | 20,000 | |
Distributions reinvested | | | | 448 | |
Change in net assets resulting from Class C capital transactions | | | $ | 20,448 | |
Class I | | | | | |
Proceeds from shares issued | | | $ | 49,920,000 | |
Distributions reinvested | | | | 1,238,901 | |
Change in net assets resulting from Class I capital transactions | | | $ | 51,158,901 | |
Class R5 | | | | | |
Proceeds from shares issued | | | $ | 20,000 | |
Distributions reinvested | | | | 506 | |
Change in net assets resulting from Class R5 capital transactions | | | $ | 20,506 | |
Class R6 | | | | | |
Proceeds from shares issued | | | $ | 20,000 | |
Distributions reinvested | | | | 512 | |
Change in net assets resulting from Class R6 capital transactions | | | $ | 20,512 | |
Total change in net assets resulting from capital transactions | | | $ | 51,240,848 | |
| | | | | |
| |
SHARE TRANSACTIONS: | | | | | |
Class A | | | | | |
Issued | | | | 1,333 | |
Reinvested | | | | 34 | |
Change in Class A Shares | | | | 1,367 | |
| | | | | |
Class C | | | | | |
Issued | | | | 1,334 | |
Reinvested | | | | 31 | |
Change in Class C Shares | | | | 1,365 | |
| | | | | |
Class I | | | | | |
Issued | | | | 3,327,999 | |
Reinvested | | | | 86,592 | |
Change in Class I Shares | | | | 3,414,591 | |
| | | | | |
Class R5 | | | | | |
Issued | | | | 1,334 | |
Reinvested | | | | 35 | |
Change in Class R5 Shares | | | | 1,369 | |
| | | | | |
Class R6 | | | | | |
Issued | | | | 1,333 | |
Reinvested | | | | 36 | |
Change in Class R6 Shares | | | | 1,369 | |
| | | | | |
(a) Commencement of operations was August 31, 2018.
SEE NOTES TO FINANCIAL STATEMENTS.
12
FINANCIAL HIGHLIGHTS
FOR THE PERIODS INDICATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Per share operating performance | | Ratios/Supplemental data |
| | | | Investment operations | | Distributions | | | | | | | | Ratios to average net assets (a) | | |
| | | | | | | | | | | | | | Total | | | | | | | | | | |
| | | | | | | | | | | | | | return | | | | | | | | Expenses | | |
| | Net asset | | Net | | Net realized and | | | | | | | | (excludes | | | | | | Net | | without waivers, | | |
| | value, | | investment | | unrealized gains | | Total from | | | | Net asset | | sales | | | | Net | | investment | | reimbursements | | Portfolio |
| | beginning | | income | | (losses) on | | investment | | Net investment | | value, end | | charge) | | Net assets, | | expenses | | income | | and earnings | | turnover |
| | of period | | (loss) (b) | | investments | | operations | | income | | of period | | (c)(d) | | end of period | | (e)(f) | | (loss) (f) | | credits (f) | | rate (c) |
JPMorgan Equity Premium Income Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
August 31, 2018 (g) through December 31, 2018 | | | $ | 15.00 | | | | $ | 0.37 | | | | $ | (1.41 | ) | | | $ | (1.04 | ) | | | $ | (0.36 | ) | | | $ | 13.60 | | | | | (7.05 | )% | | | $ | 18,596 | | | | | 0.85 | % | | | | 7.57 | % | | | | 2.30 | % | | | | 16 | % |
Class C | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
August 31, 2018 (g) through December 31, 2018 | | | | 15.00 | | | | | 0.34 | | | | | (1.41 | ) | | | | (1.07 | ) | | | | (0.33 | ) | | | | 13.60 | | | | | (7.21 | ) | | | | 18,565 | | | | | 1.35 | | | | | 7.05 | | | | | 2.79 | | | | | 16 | |
Class I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
August 31, 2018 (g) through December 31, 2018 | | | | 15.00 | | | | | 0.38 | | | | | (1.41 | ) | | | | (1.03 | ) | | | | (0.37 | ) | | | | 13.60 | | | | | (6.98 | ) | | | | 46,452,238 | | | | | 0.60 | | | | | 7.80 | | | | | 1.03 | | | | | 16 | |
Class R5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
August 31, 2018 (g) through December 31, 2018 | | | | 15.00 | | | | | 0.39 | | | | | (1.41 | ) | | | | (1.02 | ) | | | | (0.38 | ) | | | | 13.60 | | | | | (6.93 | ) | | | | 18,620 | | | | | 0.45 | | | | | 7.95 | | | | | 1.88 | | | | | 16 | |
Class R6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
August 31, 2018 (g) through December 31, 2018 | | | | 15.00 | | | | | 0.39 | | | | | (1.41 | ) | | | | (1.02 | ) | | | | (0.38 | ) | | | | 13.60 | | | | | (6.90 | ) | | | | 18,626 | | | | | 0.35 | | | | | 8.05 | | | | | 1.79 | | | | | 16 | |
(a) | Annualized for periods less than one year, unless otherwise noted. |
(b) | Calculated based upon average shares outstanding. |
(c) | Not annualized for periods less than one year. |
(d) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset values for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
(e) | Includes earnings credits and interest expense, if applicable, each of which is less than 0.005% unless otherwise noted. |
(f) | Certainnon-recurring expenses incurred by the Fund were not annualized for the period ended December 31, 2018. |
(g) | Commencement of operations. |
SEE NOTES TO FINANCIAL STATEMENTS.
13
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 (Unaudited)
1. Organization
JPMorgan Trust IV (the “Trust”) was formed on November 11, 2015, as a Delaware statutory trust, pursuant to a Declaration of Trust dated November 11, 2015 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as anopen-end management investment company.
The following is a separate fund of the Trust (the “Fund”) covered by this report:
| | | | |
| | Classes Offered | | Diversified/Non-Diversified |
JPMorgan Equity Premium Income Fund | | Class A, Class C, Class I, Class R5 and Class R6 | | Diversified |
The investment objective of the Fund is to seek total return which includes current income and capital appreciation.
The Fund commenced operations on August 31, 2018. Currently, the Fund is not publicly offered for investment. Class A Shares generally provide for afront-end sales charge while Class C Shares provide for a contingent deferred sales charge (“CDSC”). No sales charges are assessed with respect to Class I, Class R5 and Class R6 Shares. Certain Class A Shares, for whichfront-end sales charges have been waived, may be subject to a CDSC as described in the Fund’s prospectus. All classes of shares have equal rights as to earnings, assets and voting privileges, except that each class may bear different transfer agency, distribution and service fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements.
J.P. Morgan Investment Management Inc. (“JPMIM”), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co. (“JPMorgan”), acts as Adviser (the “Adviser”) and Administrator (the “Administrator”) to the Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund is an investment company and, thus, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 — Investment Companies, which is part of U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
A. Valuation of Investments — The valuation of investments is in accordance with GAAP and the Fund’s valuation policies set forth by and under the supervision and responsibility of the Board of Trustees (the “Board”), which established the following approach to valuation, as described more fully below: (i) investments for which market quotations are readily available shall be valued at their market value and (ii) all other investments for which market quotations are not readily available shall be valued at their fair value as determined in good faith by the Board.
The Administrator has established the J.P. Morgan Asset Management Americas Valuation Committee (“AVC”) to assist the Board with the oversight and monitoring of the valuation of the Fund’s investments. The Administrator implements the valuation policies of the Fund’s investments, as directed by the Board. The AVC oversees and carries out the policies for the valuation of investments held in the Fund. This includes monitoring the appropriateness of fair values based on results of ongoing valuation oversight including, but not limited to, consideration of macro or security specific events, market events and pricing vendor and broker due diligence. The Administrator is responsible for discussing and assessing the potential impacts to the fair values on an ongoing basis, and at least on a quarterly basis with the AVC and the Board.
Equities and other exchange-traded instruments are valued at the last sale price or official market closing price on the primary exchange on which the instrument is traded before the net asset values (“NAV”) of the Fund are calculated on a valuation date.
Certain foreign equity instruments, as well as certain derivatives with equity reference obligations, are valued by applying international fair value factors provided by approved affiliated and unaffiliated pricing vendors or third party broker-dealers
(collectively referred to as “Pricing Services”). The factors seek to adjust the local closing price for movements of local markets post closing, but prior to the time the NAVs are calculated. Investments inopen-end investment companies, excluding exchange-traded funds (“ETFs”) (the “Underlying Funds”), are valued at each Underlying Fund’s NAV per share as of the report date.
Fixed income instruments are valued based on prices received from Pricing Services. The Pricing Services use multiple valuation techniques to determine the valuation of fixed income instruments. In instances where sufficient market activity exists, the Pricing
14
Services may utilize a market-based approach through which trades or quotes from market makers are used to determine the valuation of these instruments. In instances where sufficient market activity may not exist, the Pricing Services also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or market characteristics in order to estimate the relevant cash flows, which are then discounted to calculate the fair values.
Valuations reflected in this report are as of the report date. As a result, changes in valuation due to market events and/or issuer related events after the report date and prior to issuance of the report are not reflected herein.
The various inputs that are used in determining the valuation of the Fund’s investments are summarized into the three broad levels listed below.
• | Level 1 — Unadjusted inputs using quoted prices in active markets for identical investments. |
• | Level 2 — Other significant observable inputs including, but not limited to, quoted prices for similar investments, inputs other than quoted prices that are observable for investments (such as interest rates, prepayment speeds, credit risk, etc.) or other market corroborated inputs. |
• | Level 3 — Significant inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s assumptions in determining the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement. The inputs or methodology used for valuing instruments are not necessarily an indication of the risk associated with investing in those instruments.
The following table represents each valuation input as presented on the Schedule of Portfolio Investments (“SOI”):
| | | | | | | | | | | | | | | | |
| | Level 1 Quoted prices | | | Level 2 Other significant observable inputs | | | Level 3 Significant unobservable inputs | | | Total | |
Total Investments in Securities(a) | | $ | 39,075,408 | | | $ | 7,152,041 | | | $ | – | | | $ | 46,227,449 | |
| | | | | | | | | | | | | | | | |
(a) | Portfolio holdings designated as level 1 and level 2 are disclosed individually on the SOI. Level 2 consists of Equity-Linked Notes. Please refer to the SOI for asset class specifics of portfolio holdings. |
There were no transfers among any levels during the period ended December 31, 2018.
B. Investment Transactions with Affiliates — The Fund invested in an Underlying Fund which is advised by the Adviser or its affiliates. An issuer which is under common control with the Fund may be considered an affiliate. For the purposes of the financial statements, the Fund assumes the issuer listed in the table below to be an affiliated issuer. The Underlying Fund’s distributions may be reinvested into the Underlying Fund. Reinvestment amounts are included in the purchase cost amounts in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | For the period ended December 31, 2018 | | | | | | | | | | | | | | | | | |
Security Description | | Value at August 31, 2018 | | | Purchases at Cost | | | Proceeds from Sales | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciation/ (Depreciation) | | | Value at December 31, 2018 | | | Shares at December 31, 2018 | | | Dividend Income | | | Capital Gain Distributions | |
JPMorgan U.S. Government Money Market Fund Class Institutional Shares, 2.40%(a)(b) | | | $— | | | | $61,638,381 | | | | $60,371,278 | | | | $— | | | | $— | | | | $1,267,103 | | | | 1,267,103 | | | | $8,896 | | | | $— | |
| | | | |
| | |
(a) | | Investment in affiliate. Fund is registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc. |
| |
(b) | | The rate shown is the current yield as of December 31, 2018. |
C. Equity-Linked Notes —The Fund invested in Equity-Linked Notes (“ELNs”). These are hybrid instruments which combine both debt and equity characteristics into a single note form. ELNs values are linked to the performance of an underlying equity. ELNs are unsecured debt obligations of an issuer and may not be publically listed or traded on an exchanged. ELNS are valued daily, under procedures adopted by the Board, based upon values provided by an approved pricing source. These notes have a coupon which is accrued and recorded as interest income on the Statement of Operations. Changes in the market value of ELNs are recorded as Change
15
in net unrealized appreciation or depreciation on the Statement of Operations. The Fund records a realized gain or loss when ELN is sold or matures.
As of December 31, 2018, the Fund had outstanding ELNs as listed on the SOI.
D. Offering and Organizational Costs —Total offering costs of $18,495 incurred in connection with the offering of shares of the Fund are amortized on a straight line basis over 12 months from the date the Fund commenced operations. Costs paid in connection with the organization of the Fund, if any, are recorded as an expense at the time the Fund commenced operations. For the period ended December 31, 2018, total offering costs amortized were $8,836.
E. Security Transactions and Investment Income — Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on a specifically identified cost basis. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts for amortization of premiums and accretion of discounts. Dividend income, net of foreign taxes withheld, if any, is recorded on theex-dividend date or when the Fund first learns of the dividend. Certain Funds may receive other income from investment in loan assignments and/or unfunded commitments, including amendment fees, consent fees and commitment fees. These fees are recorded as income when received by the Fund. These amounts are included in Interest income fromnon-affiliates on the Statement of Operations.
F. Allocation of Income and Expenses — Expenses directly attributable to a fund are charged directly to that fund, while the expenses attributable to more than one fund of the Trust are allocated among the respective funds. In calculating the NAV of each class, investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day.
Transfer agency fees are class-specific expenses. The amount of the transfer agency fees charged to each class of the Fund for the period ended December 31, 2018 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | | Class C | | | Class I | | | Class R5 | | | Class R6 | | | Total | |
Transfer agency fees | | | $64 | | | | $64 | | | | $614 | | | | $65 | | | | $65 | | | | $872 | |
G. Federal Income Taxes — The Fund is treated as a separate taxable entity for Federal income tax purposes. The Fund’s policy is to comply with the provisions of the Internal Revenue Code (the “Code”), applicable to regulated investment companies and to distribute to shareholders all of its distributable net investment income and net realized capital gains on investments. Accordingly, no provision for Federal income tax is necessary. Management has reviewed the Fund’s tax positions for all open tax years and has determined that as of December 31, 2018, no liability for income tax is required in the Fund’s financial statements for net unrecognized tax benefits. However, management’s conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Fund’s Federal tax returns for the prior three fiscal years remain, or since inception if shorter, subject to examination by the Internal Revenue Service.
H. Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid monthly and are declared separately for each class. No class has preferential dividend rights; differences in per share rates are due to differences in separate class expenses. Net realized capital gains, if any, are distributed at least annually. The amount of distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from GAAP. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition — “temporary differences”), such amounts are reclassified within the capital accounts based on their Federaltax-basis treatment.
3. Fees and Other Transactions with Affiliates
A. Investment Advisory Fee — Pursuant to an Investment Advisory Agreement, the Adviser supervises the investments of the Fund and for such services is paid a fee. The fee is accrued daily and paid monthly at an annual rate of 0.25% of the Fund’s average daily net assets.
The Adviser waived Investment Advisory fees and/or reimbursed expenses as outlined in Note 3.F.
B. Administration Fee — Pursuant to an Administration Agreement, the Administrator provides certain administration services to the Fund. In consideration of these services during the six months ended December 31, 2018, the Administrator received a fee that was accrued daily and paid monthly at an annual rate of 0.15% of the first $25 billion of the average daily net assets of all funds in the J.P. Morgan Funds Complex covered by the Administration Agreement (excluding certain funds of funds and money market funds) and 0.075% of the average daily net assets in excess of $25 billion of all such funds. For the period ended December 31, 2018, the effective annualized rate was 0.08% of the Fund’s average daily net assets, notwithstanding any fee waivers and/or expense reimbursements.
16
The Administrator waived Administration fees as outlined in Note 3.F.
Effective January 1, 2019, the Administrator receives a fee accrued daily and paid monthly at an annual rate of 0.075% of the first $10 billion of the Fund’s average daily net assets, 0.050% of the Fund’s average daily net assets between $10 billion and $20 billion,
0.025% of the Fund’s average daily net assets between $20 billion and $25 billion and 0.01% of the Fund’s daily average net assets in excess of $25 billion.
JPMorgan Chase Bank, N.A. (“JPMCB”), a wholly-owned subsidiary of JPMorgan, serves as the Fund’ssub-administrator (the“Sub-administrator”). For its services asSub-administrator, JPMCB receives a portion of the fees payable to the Administrator.
C. Distribution Fees — Pursuant to a Distribution Agreement, JPMorgan Distribution Services, Inc. (“JPMDS”), an indirect, wholly-owned subsidiary of JPMorgan, serves as the Trust’s principal underwriter and promotes and arranges for the sale of the Fund’s shares.
The Board has adopted a Distribution Plan (the “Distribution Plan”) for Class A and Class C Shares of the Fund in accordance with Rule12b-1 under the 1940 Act. Class I, Class R5 and Class R6 do not charge a distribution fee. The Distribution Plan provides that the Fund shall pay distribution fees, including payments to JPMDS, at annual rates of 0.25% and 0.75% of the average daily net assets of Class A and Class C Shares, respectively.
D. Service Fees — The Trust, on behalf of the Fund, has entered into a Shareholder Servicing Agreement with JPMDS under which JPMDS provides certain support services to the shareholders. For performing these services, JPMDS receives a fee, except for Class R6 Shares which do not charge a service fee, that is accrued daily and paid monthly equal to a percentage of the average daily net assets as shown in the table below:
| | | | | | |
Class A | | Class C | | Class I | | Class R5 |
0.25% | | 0.25% | | 0.25% | | 0.10% |
JPMDS has entered into shareholder services contracts with affiliated and unaffiliated financial intermediaries who provide shareholder services and other related services to their clients or customers who invest in the Fund under which JPMDS will pay all or a portion of such fees earned to financial intermediaries for performing such services.
JPMDS waived service fees as outlined in Note 3.F.
E. Custodian and Accounting Fees — JPMCB provides portfolio custody and accounting services to the Fund. For performing these services, the Fund pays JPMCB transaction and asset-based fees that vary according to the number of transactions and positions, plusout-of-pocket expenses. The amounts paid directly to JPMCB by the Fund for custody and accounting services are included in Custodian and accounting fees on the Statement of Operations. Interest income earned on cash balances at the custodian, if any, is included in Interest income from affiliates in the Statement of Operations.
Interest expense paid to the custodian related to cash overdrafts, if any, is included in Interest expense to affiliates on the Statement of Operations.
F. Waivers and Reimbursements — The Adviser, Administrator and/or JPMDS have contractually agreed to waive fees and/or reimburse the Funds to the extent that total annual operating expenses (excluding acquired fund fees and expenses other than certain money market fund fees as described below, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation and extraordinary expenses) exceed the percentages of the Funds’ respective average daily net assets as shown in the table below:
| | | | | | | | |
Class A | | Class C | | Class I | | Class R5 | | Class R6 |
0.85% | | 1.35% | | 0.60% | | 0.45% | | 0.35% |
The expense limitation agreement was in effect for the period ended December 31, 2018 and is in place until at least August 31, 2019.
17
For the period ended December 31, 2018, the Fund’s service providers waived fees and/or reimbursed expenses for the Fund as follows. None of these parties expect the Fund to repay any such waived fees and reimbursed expenses in future years.
| | | | | | | | |
| | Contractual Waivers | | | | |
| | | | |
Investment Advisory Fees | | Administration Fees | | Service Fees | | Total | | Contractual Reimbursement |
$39,754 | | $12,886 | | $642 | | $53,282 | | $19,794 |
Additionally, the Fund may invest in one or more money market funds advised by the Adviser or its affiliates (affiliated money market funds). The Adviser, Administrator and/or JPMDS, as shareholder servicing agent, have contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the respective net fees each collects from the affiliated money market fund on the respective Fund’s investment in such affiliated money market fund.
The amount of waivers resulting from investments in these money market funds for the period ended December 31, 2018 was $743.
G. Other — Certain officers of the Trust are affiliated with the Adviser, the Administrator and JPMDS. Such officers, with the exception of the Chief Compliance Officer, receive no compensation from the Fund for serving in their respective roles.
The Board appointed a Chief Compliance Officer to the Fund in accordance with Federal securities regulations. The Fund, along with other affiliated funds, makes reimbursement payments, on apro-rata basis, to the Administrator for a portion of the fees associated with the Office of the Chief Compliance Officer. Such fees are included in Trustees’ and Chief Compliance Officer’s fees on the
Statement of Operations.
The Trust adopted a Trustee Deferred Compensation Plan (the “Plan”) which allows the Independent Trustees to defer the receipt of all or a portion of compensation related to performance of their duties as Trustees. The deferred fees are invested in various J.P. Morgan Funds until distribution in accordance with the Plan.
The Fund may use related party broker-dealers. For the period ended December 31, 2018, the Fund did not incur any brokerage commissions with broker-dealers affiliated with the Adviser.
The SEC has granted an exemptive order permitting the Fund to invest in certain financial instruments in addition to Underlying Funds and securities.
4. Investment Transactions
During the period ended December 31, 2018, purchases and sales of investments (excluding short-term investments) were as follows:
| | | | |
| | Purchases (excluding U.S. Government) | | Sales (excluding U.S. Government) |
| | $48,225,977 | | $6,725,336 |
During the period ended December 31, 2018, there were no purchases or sales of U.S. Government securities.
5. Federal Income Tax Matters
For Federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments held at December 31, 2018 were as follows:
| | | | | | | | |
| | Aggregate Cost | | Gross Unrealized Appreciation | | Gross Unrealized Depreciation | | Net Unrealized Appreciation (Depreciation) |
| | $49,733,827 | | $406,165 | | $3,912,543 | | $(3,506,378) |
6. Borrowings
The Fund relies upon an exemptive order granted by the SEC (the “Order”) permitting the establishment and operation of an Interfund Lending Facility (the “Facility”). The Facility allows the Fund to directly lend and borrow money to or from any other fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions. The Interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. The Order was granted to JPMorgan Trust II and may be relied upon by the Fund because the Fund and the series of JPMorgan Trust II are both investment companies in the same “group of investment companies” (as defined in Section 12(d)(1)(G) of the 1940 Act).
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The Trust and JPMCB have entered into a financing arrangement. Under this arrangement, JPMCB provides an unsecured, uncommitted credit facility in the aggregate amount of $100 million to certain of the J.P. Morgan Funds, including the Fund. Advances under the arrangement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions.
Interest on borrowings is payable at a rate determined by JPMCB at the time of borrowing. This agreement has been extended until November 4, 2019.
The Fund had no borrowings outstanding from another fund or from the unsecured, uncommitted credit facility during the period ended December 30, 2018.
7. Risks, Concentrations and Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown. The amount of exposure would depend on future claims that may be brought against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
As of December 31, 2018, all of the Fund’s shares were held by the Adviser.
8. New Accounting Pronouncements
In August 2018, the Financial Accounting Standard Board (“FASB”) issuedAccounting Standard Update (“ASU”) 2018-ASU2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which adds, removes, and modifies certain aspects of the fair value disclosure. ASU2018-13 amendments are the result of a broader disclosure project, FASB Concepts StatementConceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements, to improve the effectiveness of the fair value disclosure requirements. ASU2018-13 is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect to the Fund’s net assets or results of operation.
In August 2018, the SEC adopted their Disclosure Update and Simplification Rule (the “Rule”). The Rule is part of the SEC’s overall project to improve disclosure effectiveness by amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect on the Fund’s net assets or results of operation.
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SCHEDULE OF SHAREHOLDER EXPENSES (Unaudited)
Hypothetical $1,000 Investment
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these ongoing costs with the ongoing costs of investing in other mutual funds. The examples assume that you had a $1,000 investment in each Class at the beginning of the reporting period, July 1, 2018 and continued to hold your shares at the end of the reporting period, December 31, 2018.
Actual Expenses
For each Class of the Fund in the table below, the first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of each Class under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value August 31, 2018 | | | Ending Account Value December 31, 2018 | | | Expenses Paid During the Period* | | | Annualized Expense Ratio | |
| | | | |
JPMorgan Equity Premium Income Fund | | | | | | | | | | | | | | | | |
Class A | | | | | | | | | | | | | | | | |
| | | | |
Actual | | | $1,000.00 | | | | $929.50 | | | | $2.76 | | | | 0.85% | |
| | | | |
Hypothetical | | | 1,000.00 | | | | 1,020.92 | | | | 4.33 | | | | 0.85 | |
Class C | | | | | | | | | | | | | | | | |
| | | | |
Actual | | | 1,000.00 | | | | 927.90 | | | | 4.39 | | | | 1.35 | |
| | | | |
Hypothetical | | | 1,000.00 | | | | 1,018.40 | | | | 6.87 | | | | 1.35 | |
Class I | | | | | | | | | | | | | | | | |
| | | | |
Actual | | | 1,000.00 | | | | 930.20 | | | | 1.95 | | | | 0.60 | |
| | | | |
Hypothetical | | | 1,000.00 | | | | 1,022.18 | | | | 3.06 | | | | 0.60 | |
Class R5 | | | | | | | | | | | | | | | | |
| | | | |
Actual | | | 1,000.00 | | | | 930.70 | | | | 1.46 | | | | 0.45 | |
| | | | |
Hypothetical | | | 1,000.00 | | | | 1,022.94 | | | | 2.29 | | | | 0.45 | |
Class R6 | | | | | | | | | | | | | | | | |
| | | | |
Actual | | | 1,000.00 | | | | 931.00 | | | | 1.14 | | | | 0.35 | |
| | | | |
Hypothetical | | | 1,000.00 | | | | 1,023.44 | | | | 1.79 | | | | 0.35 | |
* | Expenses are equal to each Class’ respective annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect theone-half year period). |
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BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)
The Board of Trustees has established various standing committees composed of Trustees with diverse backgrounds, to which the Board of Trustees has assigned specific subject matter responsibilities to further enhance the effectiveness of the Board’s oversight and decision making. The Board of Trustees and its investment committees (money market and alternative products, equity, and fixed income) meet regularly throughout the year and consider factors that are relevant to their annual consideration of investment advisory agreements at each meeting. They also meet for the specific purpose of considering approvals of initial advisory agreements for new funds. At their May 2018in-person meeting, the Trustees, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of any party to the initial advisory agreement or any of their affiliates (“Independent Trustees”), approved the initial investment advisory agreement (the “New Advisory Agreement”) for the Fund.
In connection with the approval of the New Advisory Agreement, the Trustees reviewed written materials prepared by the Adviser and received oral presentations from Adviser personnel. Before voting on the proposed New Advisory Agreement, the Trustees reviewed the New Advisory Agreement with representatives of the Adviser and with counsel to the Trust and independent legal counsel and received a memorandum from independent legal counsel to the Trustees discussing the legal standards for their consideration of the proposed agreement. The Trustees also discussed the proposed agreement in an executive session with independent legal counsel at which no representatives of the Adviser were present.
A summary of the material factors evaluated by the Trustees in determining whether to approve the New Advisory Agreement is provided below. The Trustees considered information provided with respect to the Fund and the approval of the New Advisory Agreement. Each Trustee attributed different weights to the various factors and no factor alone was considered determinative.
After considering and weighing the factors and information they had received, the Trustees found that the proposed compensation to be received by the Adviser from the Fund under the New Advisory Agreement was fair and reasonable under the circumstances and determined that the initial approval of the New Advisory Agreement was in the best interests of the Fund and its potential shareholders.
Nature, Extent and Quality of Services Provided by the Adviser
In connection with the approval of the New Advisory Agreement, the Trustees considered the materials furnished specifically in connection with the approval of the New Advisory Agreement, as well as other relevant information furnished throughout the year for the J.P. Morgan Funds complex and the Trustees’ experience with the Adviser and its services. The Trustees considered the background and experience of the Adviser’s senior management and investment personnel, as well as the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for theday-to-day management of the Fund. The Trustees also considered the investment strategy and investment process for the Fund, and the infrastructure supporting the portfolio management team, including personnel changes. In addition, the Trustees considered information about the structure and distribution strategy of the Fund, how it fits within the J.P. Morgan Funds lineup, and how it will be positioned against identified peers.
The Trustees also considered its knowledge of the nature and quality of the services provided by the Adviser to the J.P. Morgan Funds gained from their experience as Trustees of the J.P. Morgan Funds. In addition, they considered the overall reputation and capabilities of the Adviser and its affiliates, the commitment of the Adviser to provide high quality services to the J.P. Morgan Funds, their overall confidence in the Adviser’s integrity and the Adviser’s responsiveness to questions or concerns raised by them, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the J.P. Morgan Funds.
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Based upon these considerations and other factors, the Trustees concluded that they were satisfied with the nature, extent and quality of the investment advisory services to be provided to the Fund by the Adviser.
The Trustees also considered that JPMorgan Distribution Services, Inc. (“JPMDS”), an affiliate of the Adviser, and the Adviser, in its role as administrator, will earn fees from the Fund for providing shareholder and administrative services, respectively. The Trustees also considered the payments of Rule12b-1 fees to JPMDS, which also acts as the Fund’s distributor and that these fees are in turn generally paid to financial intermediaries that sell the Fund, including financial intermediaries that are affiliates of the Adviser. The Trustees also considered the fees paid to JPMorgan Chase Bank, N.A. (“JPMCB”) for custody and fund accounting and other related services. The Trustees also considered that anyfall-out benefits would be comparable to those related to the other actively managed funds in the complex and were consistent with the process of approving advisory agreements for new funds.
Fall-Out Benefits
The Trustees reviewed information regarding potential “fallout” or ancillary benefits received by the Adviser and its affiliates as a result of their relationship with the J.P. Morgan Funds. The Trustees also considered the Adviser’s allocation of fund brokerage for the J.P. Morgan Funds complex, including allocations to brokers who provide research to the Adviser.
Economies of Scale
The Trustees considered the extent to which the Fund may benefit from economies of scale. The Trustees considered that there may not be a direct relationship between economies of scale realized by the Fund and those realized by the Adviser as assets increase. The Trustees considered the extent to which the Fund was priced to scale and whether it would be appropriate to add advisory fee breakpoints, but noted that the Fund has implemented fee waivers and contractual expense limitations (“Fee Caps”) which allow the Fund’s shareholders to share potential economies of scale from the Fund’s inception and that the proposed fees are competitive with peer funds. The Trustees also considered that the Adviser has added or enhanced services to the J.P. Morgan Fund complex over time, noting the Adviser’s substantial investments in its business in support of the Fund, including investments in trading systems and technology (including cybersecurity improvements), attraction and retention of key talent, additions to analyst and portfolio management teams, and regulatory support enhancements. The Trustees concluded that the current fee structure was reasonable in light of the Fee Caps that the Adviser has in place that serve to limit the overall net expense ratios of the Fund at a competitive level. The Trustees concluded that the Fund’s shareholders received the benefits of potential economies of scale through the Fee Caps and the Adviser’s reinvestment in its operations to serve the Fund and its shareholders.
Investment Performance
The Trustees considered the Fund’s investment strategy and process, portfolio management team and competitive positioning against identified peer funds, and concluded that the prospects for competitive future performance were acceptable.
22
Advisory Fees and Expense Ratios
The Trustees considered the contractual advisory fee rate and administration fee rate that will be paid by the Fund to the Adviser and compared the combined rate to the information prepared by
Broadridge, using data from Lipper Inc., independent providers of investment company data (together, “Broadridge/Lipper”) concerning management fee rates paid by other funds in the same Broadridge/Lipper category as the Fund. The Trustees recognized that Broadridge/Lipper reported the Fund’s management fee rate as the combined contractual advisory fee and administration fee rates. The Trustees also reviewed information about other projected expenses and the expense ratios for the Fund. The Trustees considered the projected Fee Caps proposed for the Fund, and the net advisory fee rate after taking into account any projected waivers and/or reimbursements. The Trustees recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Trustees noted that the Fund’s estimated net advisory fees and total expenses, which were considered on aclass-by-class basis, were in line with identified peer funds. After considering the factors identified above, in light of the information, the Trustees concluded that the advisory fees were satisfactory.
23
J.P. Morgan Funds are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds.
Contact JPMorgan Distribution Services, Inc. at1-800-480-4111 for a fund prospectus. Investors should carefully consider the investment objectives and risk as well as charges and expenses of the mutual fund before investing. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing.
Investors may obtain information about the Securities Investor Protection Corporation (SIPC), including the SIPC brochure, by visiting www.sipc.org or by calling SIPC at202-371-8300.
The Fund files a complete schedule of its fund holdings for the first and third quarters of its fiscal year with the SEC on FormN-Q. The Fund’s FormsN-Q are available on the SEC’s website at http://www.sec.gov. Shareholders may request the FormN-Q without charge by calling1-800-480-4111.
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s holdings is available in the prospectus and Statement of Additional Information.
A copy of proxy policies and procedures is available without charge upon request by calling1-800-480-4111. A description of such policies and procedures is on the SEC’s website at www.sec.gov. The Trustees have delegated the authority to vote proxies for securities owned by the Fund to the Adviser. A copy of the Fund’s voting record for the most recent12-month period ended June 30 is available on the SEC’s website at www.sec.gov no later than August 31 of each year. The Fund’s proxy voting record will include, among other things, a brief description of the matter voted on for each fund security, and will state how each vote was cast, for example, for or against the proposal.
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Semi-Annual Report
J.P. Morgan Funds
December 31, 2018 (Unaudited)
JPMorgan SmartSpendingSM 2050 Fund
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s websitewww.jpmorganfunds.com and you will be notified by mail each time a report is posted and provided with a website to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action.
You may elect to receive shareholder reports and other communications from the Fund electronically anytime by contacting your financial intermediary (such as a broker dealer, bank, or retirement plan) or, if you are a direct investor, by going towww.jpmorganfunds.com/edelivery.
You may elect to receive paper copies of all future reports free of charge. Contact your financial intermediary or, if you invest directly with the Fund, email us atfunds.website.support@jpmorganfunds.com or call 1-800-480-4111. Your election to receive paper reports will apply to all funds held within your account(s).
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CONTENTS
Investments in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund’s share price is lower than when you invested.
Past performance is no guarantee of future performance. The general market views expressed in this report are opinions based on market and other conditions through the end of the reporting period and are subject to change without notice. These views are not intended to predict the future performance of the Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of the Fund.
Prospective investors should refer to the Fund’s prospectuses for a discussion of the Fund’s investment objective, strategies and risks. Call J.P. Morgan Funds Service Center at1-800-480-4111 for a prospectus containing more complete information about the Fund, including management fees and other expenses. Please read it carefully before investing.
CEO’S LETTER
February 14, 2019 (Unaudited)
Dear Shareholder,
While the U.S. economy largely outperformed other leading economies during the second half of 2018, record corporate profits and historically low unemployment were overshadowed in December by a sell-off in equity markets, unsettled global trade tensions and a political impasse that led to the temporary shutdown of large parts of the federal government.
| | |
![LOGO](https://capedge.com/proxy/N-CSRS/0001193125-19-066803/g652041g73t20.jpg) | | “Overall, economists generally remained optimistic about the fundamental strength of the U.S. economy at the end of 2018.” — George C.W. Gatch |
The second longest U.S. economic expansion on record extended through the third and fourth quarters of 2018. Gross domestic product advanced 3.4% in the third quarter of 2018, and was on pace to grow by about 3% for the full year 2018. In September, the U.S. jobless rate dipped to 3.7% - its lowest level in nearly 50 years - and stood at 3.9% at the end of the year. In response, the U.S. Federal Reserve raised interest rates in September and again in December.
U.S. aggregate corporate revenues and earnings reached record high levels in the second and third quarters of 2018. Though some profit growth was attributed to the temporary benefits of late-2017 tax cut legislation, the outlook for U.S. corporate earnings remained generally positive at the end of the year.
Equity prices in the U.S. largely rose during the third quarter of 2018. The S&P 500 Index hit record highs in August and remained elevated in September. However, early October saw a sharp sell-off in financial markets and the worst December for
the S&P 500 Index since 1931 erased all gains seen in the prior five months.
By the end of 2018, investors were confronted with several worrying developments. Leading economies, particularly China and the European Union, showed significant signs of slowing in the latter half of the year. While U.S.-China trade tariffs had little clear direct impact on the U.S. economy in 2018, a continuation or acceleration of protectionist policies could begin to hinder growth. Though the federal government shutdown ended subsequent to the end of the reporting period, the solution was a short-term budget agreement that failed to alleviate concerns about the possibility of future shutdowns.
Overall, economists generally remained optimistic about the fundamental strength of the U.S. economy at the end of 2018. While U.S. corporate profits and gross domestic product are expected to grow in the year ahead, the extent to which U.S. financial markets benefit remains to be seen, given the length of the current economic expansion.
We believe investors who maintain a patient approach and a well-diversified portfolio may be best positioned to navigate current market conditions. We look forward to managing your investment needs for years to come. Should you have any questions, please visit www.jpmorganfunds.com or contact the J.P. Morgan Funds Service Center at 1-800-480-4111.
Sincerely yours,
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George C.W. Gatch
CEO, Global Funds Management
J.P. Morgan Asset Management
JPMorgan SmartSpendingSM 2050 Fund
FUND COMMENTARY
SIX MONTHS ENDED DECEMBER 31, 2018 (Unaudited)
| | | | |
REPORTING PERIOD RETURN: | |
Fund (Class I Shares)* | | | (2.31)% | |
Bloomberg Barclays U.S. Aggregate Index | | | 1.65% | |
MSCI World Index (net of foreign withholding taxes) | | | (9.10)% | |
JPMorgan SmartSpending 2050 Fund Composite Benchmark | | | (2.62)% | |
| |
Net Assets as of 12/31/2018 | | $ | 28,976,432 | |
INVESTMENT OBJECTIVE**
The JPMorgan SmartSpending 2050 Fund (the “Fund”) seeks to provide total return consisting of current income and capital appreciation.
HOW DID THE MARKET PERFORM?
U.S. equity markets posted negative returns for the reporting period, though they generally outperformed equities in both developed markets and emerging markets. Global bond markets generally had a lackluster performance in the second half of 2018.
U.S. equity prices were largely supported by strong corporate earnings and revenue, low interest rates and an expanding domestic economy. In August, U.S. equity prices returned to record highs and remained elevated through September. Share prices fell sharply and market volatility spiked in early October, then prices rebounded slightly in November before plummeting again in December, erasing gains made over the previous five months.
In Europe, equity markets came under pressure from slowing economic growth, political tensions within the European Union (the “EU”) and uncertainty about Britain’s planned exit from the EU. Emerging markets equity prices fell as rising U.S. interest rates and signs that U.S.-China trade tariffs were curbing demand from Chinese manufacturers. Emerging markets debt generally provided small but positive returns during the reporting period.
WHAT WERE THE MAIN DRIVERS OF THE PORTFOLIO’S PERFORMANCE?
The Fund’s Class I Shares underperformed the Bloomberg Barclays U.S. Aggregate Index (the “Benchmark”) and outperformed the MSCI World Index (net of foreign withholding taxes) for the six months ended December 31, 2018. The Fund outperformed the JPMorgan SmartSpending 2050 Fund Composite Benchmark (the “Composite Benchmark”) (40%
MSCI World Index (net of foreign withholding taxes) and 60% Bloomberg Barclays U.S. Aggregate Index) over the same period.
Relative to the Benchmark, which does not include equity securities, the Fund’s allocations to global equity markets was a leading detractor from performance, as equity generally underperformed bonds during the reporting period.
Relative to the MSCI World Index, which does not include debt securities, the Fund’s allocation to fixed income securities contributed to performance.
Relative to the Composite Benchmark, the Fund’s increased allocation to short duration debt, as well as to floating rate loans and to high yield bonds (also called “junk bonds”), and its decreased allocation to global equity markets and emerging markets debt helped performance. Debt securities with shorter duration generally experience smaller changes in prices when interest rates rise or fall, as compared with longer duration securities.
HOW WAS THE PORTFOLIO POSITIONED?
The Fund invested in underlying J.P. Morgan Funds and third party exchange-traded funds to implement the Fund managers’ asset allocation decisions. The Fund’s portfolio managers used futures contracts to implement tactical asset allocations. The Fund’s portfolio managers used a systematic screening and selection process to choose the underlying funds in their construction of the Fund’s portfolio. Relative to its Composite Benchmark, the Fund invested in a broader range of asset classes. In addition, the portfolio managers utilized an active asset allocation approach to manage volatility of the Fund and“de-risk” the portfolio by reducing its overweight exposure to global equity markets and emerging markets debt while increasing the Fund’s allocation to short duration bonds and other credit, based on the portfolio managers’ quantitative and qualitative research.
| | | | | | |
| | | |
2 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
| | | | |
PORTFOLIO COMPOSITION BY ASSET CLASS*** | |
Fixed Income | | | 75.7 | % |
U.S. Equity | | | 13.2 | |
International Equity | | | 6.3 | |
Alternative Assets | | | 1.4 | |
U.S. Treasury Obligations | | | 1.4 | |
Short-Term Investments | | | 2.0 | |
* | | The return shown is based on net asset values calculated for shareholder transactions and may differ from the return shown in the financial highlights, which reflects adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
** | | The adviser seeks to achieve the Fund’s objective. There can be no guarantee it will be achieved. |
*** | | Percentages indicated are based on total investments as of December 31, 2018. The Fund’s portfolio composition is subject to change. |
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 3 | |
JPMorgan SmartSpendingSM 2050 Fund
FUND COMMENTARY
SIX MONTHS ENDED DECEMBER 31, 2018 (Unaudited) (continued)
| | | | | | | | | | | | | | |
AVERAGE ANNUAL TOTAL RETURNSAS OF DECEMBER 31, 2018 | |
| | | | |
| | INCEPTION DATE OF CLASS | | 6 MONTH* | | | 1 YEAR | | | SINCE INCEPTION | |
CLASS A SHARES | | December 30, 2016 | | | | | | | | | | | | |
With Sales Charge** | | | | | (6.88 | )% | | | (8.14 | )% | | | 0.90 | % |
Without Sales Charge | | | | | (2.47 | ) | | | (3.80 | ) | | | 3.26 | |
CLASS I SHARES | | December 30, 2016 | | | (2.31 | ) | | | (3.50 | ) | | | 3.55 | |
CLASS R2 SHARES | | December 30, 2016 | | | (2.60 | ) | | | (4.14 | ) | | | 2.87 | |
CLASS R3 SHARES | | December 30, 2016 | | | (2.50 | ) | | | (3.90 | ) | | | 3.13 | |
CLASS R4 SHARES | | December 30, 2016 | | | (2.39 | ) | | | (3.65 | ) | | | 3.38 | |
CLASS R5 SHARES | | December 30, 2016 | | | (2.32 | ) | | | (3.51 | ) | | | 3.53 | |
CLASS R6 SHARES | | December 30, 2016 | | | (2.23 | ) | | | (3.41 | ) | | | 3.64 | |
** | | Sales Charge for Class A Shares is 4.50%. |
LIFE OF FUND PERFORMANCE(12/30/16 to 12/31/18)
![LOGO](https://capedge.com/proxy/N-CSRS/0001193125-19-066803/g652041g48q40.jpg)
The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. For up-to-date month-end performance information please call 1-800-480-4111.
The Fund commenced operations on December 30, 2016.
The graph illustrates comparative performance for $1,000,000 invested in Class I Shares of the JPMorgan SmartSpendingSM 2050 Fund, the MSCI World Index (net of foreign withholding taxes), the Bloomberg Barclays U.S. Aggregate Bond Index and the JPMorgan SmartSpending 2050 Composite Benchmark from December 30, 2016 to December 31, 2018. The performance of the Fund may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares. The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index representingSEC-registered taxable and dollar denominated securities. It covers the U.S.
investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through, and asset-backed securities. The MSCI World Index (net of foreign withholding taxes) is a broad measure of the performance of developed countries’ equity markets. The JPMorgan SmartSpending 2050 Composite Benchmark is a composite benchmark of unmanaged indexes that includes 50% MSCI World Index (net of foreign withholding taxes) and 50% Bloomberg Barclays U.S. Aggregate Bond Index. Investors cannot invest directly in an index.
Class I Shares have a $1,000,000 minimum initial investment.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.
The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.
| | | | | | |
| | | |
4 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
JPMorgan SmartSpendingSM 2050 Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited)
| | | | | | | | |
INVESTMENTS | | SHARES | | | VALUE($) | |
Investment Companies — 76.5% | |
|
Fixed Income — 61.7% | |
| | |
JPMorgan Core Bond Fund Class R6 Shares (a) | | | 495,983 | | | | 5,594,693 | |
| | |
JPMorgan Core Plus Bond Fund Class R6 Shares (a) | | | 369,868 | | | | 2,966,343 | |
| | |
JPMorgan Emerging Markets Strategic Debt Fund Class R6 Shares (a) | | | 4,443 | | | | 33,630 | |
| | |
JPMorgan Floating Rate Income Fund Class R6 Shares (a) | | | 247,843 | | | | 2,218,191 | |
| | |
JPMorgan High Yield Fund Class R6 Shares (a) | | | 440,586 | | | | 2,991,580 | |
| | |
JPMorgan Managed Income Fund Class L Shares (a) | | | 405,566 | | | | 4,055,657 | |
| | | | | | | | |
| | |
Total Fixed Income | | | | | | | 17,860,094 | |
| | | | | | | | |
| | |
International Equity — 3.2% | | | | | | | | |
| | |
JPMorgan International Research Enhanced Equity Fund Class R6 Shares (a) | | | 60,367 | | | | 937,496 | |
| | | | | | | | |
|
U.S. Equity — 11.6% | |
| | |
JPMorgan Equity Index Fund Class R6 Shares (a) | | | 34,418 | | | | 1,318,536 | |
| | |
JPMorgan Growth Advantage Fund Class R6 Shares * (a) | | | 27,831 | | | | 522,106 | |
| | |
JPMorgan U.S. Equity Fund Class R6 Shares (a) | | | 70,258 | | | | 949,180 | |
| | |
JPMorgan Value Advantage Fund Class R6 Shares (a) | | | 18,431 | | | | 562,333 | |
| | | | | | | | |
| |
Total U.S. Equity | | | | 3,352,155 | |
| | | | | | | | |
| |
Total Investment Companies (Cost $22,672,785) | | | | 22,149,745 | |
| | | | | |
Exchange Traded Funds — 19.9% | | | | | | | | |
|
Alternative Assets — 1.4% | |
| | |
Schwab U.S. REIT ETF | | | 10,912 | | | | 420,221 | |
| | | | | | | | |
|
Fixed Income — 13.9% | |
| | |
iShares Core U.S. Aggregate Bond ETF | | | 13,353 | | | | 1,421,961 | |
| | |
iShares TIPS Bond ETF | | | 23,770 | | | | 2,603,053 | |
| | | | | | | | |
| |
Total Fixed Income | | | | 4,025,014 | |
| | | | | | | | |
| | |
International Equity — 3.0% | | | | | | | | |
| | |
iShares Core MSCI EAFE ETF | | | 7,905 | | | | 434,775 | |
| | |
iShares Core MSCI Emerging Markets ETF | | | 9,302 | | | | 438,589 | |
| | | | | | | | |
| |
Total International Equity | | | | 873,364 | |
| | | | | | | | |
| | |
U.S. Equity — 1.6% | | | | | | | | |
| | |
iShares Russell 2000 ETF | | | 454 | | | | 60,790 | |
| | |
iShares RussellMid-Cap ETF | | | 8,416 | | | | 391,176 | |
| | | | | | | | |
| |
Total U.S. Equity | | | | 451,966 | |
| | | | | | | | |
| |
Total Exchange Traded Funds (Cost $5,863,279) | | | | 5,770,565 | |
| | | | | |
| | | | | | | | |
INVESTMENTS | | PRINCIPAL AMOUNT($) | | | VALUE($) | |
U.S. Treasury Obligations — 1.4% | |
| | |
U.S. Treasury Notes 1.13%, 1/31/2019 (b) (Cost $404,748) | | | 405,000 | | | | 404,613 | |
| | | | | | | | |
| | |
| | SHARES | | | | |
Short-Term Investments — 2.0% | | | | | | | | |
| | |
Investment Companies — 2.0% | | | | | | | | |
| | |
JPMorgan U.S. Government Money Market Fund Class IM Shares, 2.46% (a) (c) (Cost $587,672) | | | 587,672 | | | | 587,672 | |
| | | | | | | | |
Total Investments — 99.8% (Cost $29,528,484) | | | | 28,912,595 | |
Other Assets Less Liabilities — 0.2% | | | | 63,837 | |
| | | | | | | | |
NET ASSETS — 100.0% | | | | 28,976,432 | |
| | | | | | | | |
Percentages indicated are based on net assets.
Abbreviations
| | |
EAFE | | Europe, Australasia and Far East |
ETF | | Exchange Traded Fund |
MSCI | | Morgan Stanley Capital International |
REIT | | Real Estate Investment Trust |
TIPS | | Treasury Inflation Protected Security |
| |
(a) | | Investment in affiliate. Fund is registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc. |
(b) | | All or a portion of this security is deposited with the broker as initial margin for futures contracts. |
(c) | | The rate shown is the current yield as of December 31, 2018. |
* | | Non-income producing security. |
Detailed information about investment portfolios of the underlying funds can be found in shareholder reports filed with the Securities and Exchange Commission (SEC) by each such underlying fund semi-annually on FormN-CSR and in certified portfolio holdings filed quarterly on FormN-Q, and are available for download from both the SEC’s as well as each respective underlying fund’s website. Detailed information about underlying J.P. Morgan Funds can also be found at www.jpmorganfunds.com or by calling1-800-480 4111.
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 5 | |
JPMorgan SmartSpendingSM 2050 Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited) (continued)
| | | | | | | | | | | | | | | | | | | | |
Futures contracts outstanding as of December 31, 2018: | |
DESCRIPTION | | NUMBER OF CONTRACTS | | | EXPIRATION DATE | | | TRADING CURRENCY | | | NOTIONAL AMOUNT ($) | | | VALUE AND UNREALIZED APPRECIATION (DEPRECIATION) ($) | |
|
Long Contracts | |
| | | | | |
Australia 10 Year Bond | | | 6 | | | | 03/2019 | | | | AUD | | | | 560,698 | | | | 5,671 | |
| | | | | |
S&P 500E-Mini Index | | | 7 | | | | 03/2019 | | | | USD | | | | 876,050 | | | | (51,117 | ) |
| | | | | |
U.S. Treasury 10 Year Note | | | 5 | | | | 03/2019 | | | | USD | | | | 610,234 | | | | 14,559 | |
| | | | | |
U.S. Treasury Ultra Bond | | | 4 | | | | 03/2019 | | | | USD | | | | 644,375 | | | | 35,022 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 4,135 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Short Contracts | | | | | | | | | | | | | | | | | | | | |
| | | | | |
EURO STOXX 50 Index | | | (16 | ) | | | 03/2019 | | | | EUR | | | | (544,311 | ) | | | 20,050 | |
| | | | | |
Euro-Bund | | | (2 | ) | | | 03/2019 | | | | EUR | | | | (374,752 | ) | | | (2,476 | ) |
| | | | | |
MSCI Emerging MarketsE-Mini Index | | | (9 | ) | | | 03/2019 | | | | USD | | | | (435,105 | ) | | | 7,576 | |
| | | | | |
Russell 2000E-Mini Index | | | (1 | ) | | | 03/2019 | | | | USD | | | | (67,480 | ) | | | 4,316 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 29,466 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | 33,601 | |
| | | | | | | | | | | | | | | | | | | | |
Abbreviations
| | |
AUD | | Australian Dollar |
EUR | | Euro |
MSCI | | Morgan Stanley Capital International |
USD | | United States Dollar |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | |
| | | |
6 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
THIS PAGE IS INTENTIONALLY LEFT BLANK
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 7 | |
STATEMENT OF ASSETS AND LIABILITIES
AS OF DECEMBER 31, 2018 (Unaudited)
| | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
ASSETS: | |
Investments innon-affiliates, at value | | $ | 6,175,178 | |
Investments in affiliates, at value | | | 22,737,417 | |
Receivables: | | | | |
Investment securities sold | | | 554,060 | |
Interest fromnon-affiliates | | | 2,016 | |
Dividends from affiliates | | | 6,962 | |
Variation margin on futures contracts | | | 193,148 | |
Due from Adviser | | | 18,352 | |
| | | | |
Total Assets | | | 29,687,133 | |
| | | | |
|
LIABILITIES: | |
Payables: | | | | |
Due to custodian | | | 5,544 | |
Investment securities purchased | | | 549,123 | |
Fund shares redeemed | | | 132,442 | |
Accrued liabilities: | | | | |
Administration fees | | | 8 | |
Distribution fees | | | 23 | |
Service fees | | | 2,207 | |
Custodian and accounting fees | | | 6,530 | |
Other | | | 14,824 | |
| | | | |
Total Liabilities | | | 710,701 | |
| | | | |
Net Assets | | $ | 28,976,432 | |
| | | | |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | |
| | | |
8 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
| | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
|
NET ASSETS: | |
Paid-in-Capital | | $ | 29,307,063 | |
Total distributable earnings (loss) (a) | | | (330,631 | ) |
| | | | |
Total Net Assets | | $ | 28,976,432 | |
| | | | |
|
Net Assets: | |
Class A | | $ | 21,334 | |
Class I | | | 28,848,380 | |
Class R2 | | | 21,161 | |
Class R3 | | | 21,267 | |
Class R4 | | | 21,373 | |
Class R5 | | | 21,436 | |
Class R6 | | | 21,481 | |
| | | | |
Total | | $ | 28,976,432 | |
| | | | |
|
Outstanding units of beneficial interest (shares) ($0.0001 par value; unlimited number of shares authorized): | |
Class A | | | 1,444 | |
Class I | | | 1,952,244 | |
Class R2 | | | 1,432 | |
Class R3 | | | 1,439 | |
Class R4 | | | 1,446 | |
Class R5 | | | 1,451 | |
Class R6 | | | 1,454 | |
| |
Net Asset Value (b): | | | | |
Class A — Redemption price per share | | $ | 14.78 | |
Class I — Offering and redemption price per share | | | 14.78 | |
Class R2 — Offering and redemption price per share | | | 14.78 | |
Class R3 — Offering and redemption price per share | | | 14.78 | |
Class R4 — Offering and redemption price per share | | | 14.78 | |
Class R5 — Offering and redemption price per share | | | 14.78 | |
Class R6 — Offering and redemption price per share | | | 14.78 | |
Class A maximum sales charge | | | 4.50 | % |
Class A maximum public offering price per share [net asset value per share/(100% — maximum sales charge)] | | $ | 15.48 | |
| | | | |
| |
Cost of investments innon-affiliates | | $ | 6,268,027 | |
Cost of investments in affiliates | | | 23,260,457 | |
(a) | Total distributable earnings have been aggregated to conform to the current presentation requirements for the adoption of the Securities and Exchange Commission’s Disclosure Update and Simplification Rule. See Note 8. |
(b) | Per share amounts may not recalculate due to rounding of net assets and/or shares outstanding. |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 9 | |
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED 31, 2018 (Unaudited)
| | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
INVESTMENT INCOME: | |
Dividend income fromnon-affiliates | | $ | 114,475 | |
Dividend income from affiliates | | | 368,966 | |
Interest income fromnon-affiliates | | | 3,829 | |
| | | | |
Total investment income | | | 487,270 | |
| | | | |
EXPENSES: | |
Investment advisory fees | | | 53,138 | |
Administration fees | | | 12,313 | |
Distribution fees: | | | | |
Class A | | | 28 | |
Class R2 | | | 54 | |
Class R3 | | | 27 | |
Service fees: | | | | |
Class A | | | 28 | |
Class I | | | 37,791 | |
Class R2 | | | 27 | |
Class R3 | | | 27 | |
Class R4 | | | 28 | |
Class R5 | | | 11 | |
Custodian and accounting fees | | | 12,550 | |
Professional fees | | | 19,965 | |
Trustees’ and Chief Compliance Officer’s fees | | | 12,413 | |
Printing and mailing costs | | | 13,020 | |
Registration and filing fees | | | 20,534 | |
Transfer agency fees (See Note 2.G.) | | | 161 | |
Other | | | 5,094 | |
| | | | |
Total expenses | | | 187,209 | |
| | | | |
Less fees waived | | | (89,336 | ) |
Less expense reimbursements | | | (70,198 | ) |
| | | | |
Net expenses | | | 27,675 | |
| | | | |
Net investment income (loss) | | | 459,595 | |
| | | | |
| |
REALIZED/UNREALIZED GAINS (LOSSES): | | | | |
Net realized gain (loss) on transactions from: | | | | |
Investments innon-affiliates | | | 109,589 | |
Investments in affiliates | | | 124,845 | |
Futures contracts | | | (50,806 | ) |
Foreign currency transactions | | | 390 | |
| | | | |
Net realized gain (loss) | | | 184,018 | |
| | | | |
Distributions of capital gains received from investment company affiliates | | | 196,507 | |
| | | | |
Change in net unrealized appreciation/depreciation on: | | | | |
Investments innon-affiliates | | | (528,023 | ) |
Investments in affiliates | | | (1,085,937 | ) |
Futures contracts | | | 87,912 | |
Foreign currency translations | | | 2,953 | |
| | | | |
Change in net unrealized appreciation/depreciation | | | (1,523,095 | ) |
| | | | |
Net realized/unrealized gains (losses) | | | (1,142,570 | ) |
| | | | |
Change in net assets resulting from operations | | $ | (682,975 | ) |
| | | | |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | |
| | | |
10 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED
| | | | | | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
| | Six Months Ended December 31, 2018 (Unaudited) | | | Year Ended June 30, 2018 | |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: | |
Net investment income (loss) | | $ | 459,595 | | | $ | 767,397 | |
Net realized gain (loss) | | | 184,018 | | | | 575,667 | |
Distributions of capital gains received from investment company affiliates | | | 196,507 | | | | 191,218 | |
Change in net unrealized appreciation/depreciation | | | (1,523,095 | ) | | | (261,376 | ) |
| | | | | | | | |
Change in net assets resulting from operations | | | (682,975 | ) | | | 1,272,906 | |
| | | | | | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS:(a) | | | | | | | | |
Class A | | | (975 | ) | | | (561 | ) |
Class C (b) | | | — | | | | (494 | ) |
Class I | | | (1,387,928 | ) | | | (848,963 | ) |
Class R2 | | | (889 | ) | | | (506 | ) |
Class R3 | | | (941 | ) | | | (539 | ) |
Class R4 | | | (993 | ) | | | (573 | ) |
Class R5 | | | (1,025 | ) | | | (590 | ) |
Class R6 | | | (1,046 | ) | | | (606 | ) |
| | | | | | | | |
Total distributions to shareholders | | | (1,393,797 | ) | | | (852,832 | ) |
| | | | | | | | |
|
CAPITAL TRANSACTIONS: | |
Change in net assets resulting from capital transactions | | | 599,146 | | | | (907,595 | ) |
| | | | | | | | |
|
NET ASSETS: | |
Change in net assets | | | (1,477,626 | ) | | | (487,521 | ) |
Beginning of period | | | 30,454,058 | | | | 30,941,579 | |
| | | | | | | | |
End of period | | $ | 28,976,432 | | | $ | 30,454,058 | |
| | | | | | | | |
(a) | The prior period distributions have been reclassified to conform to current period presentation for the adoption of the Securities and Exchange Commission’s Disclosure Update and Simplification Rule. See Note 8. Prior period balances were as follows: |
| | | | |
Class A | | | | |
From net investment income | | $ | (324 | ) |
From net realized gains | | | (237 | ) |
Class C(b) | | | | |
From net investment income | | | (259 | ) |
From net realized gains | | | (235 | ) |
Class I | | | | |
From net investment income | | | (511,666 | ) |
From net realized gains | | | (337,297 | ) |
Class R2 | | | | |
From net investment income | | | (270 | ) |
From net realized gains | | | (236 | ) |
Class R3 | | | | |
From net investment income | | | (303 | ) |
From net realized gains | | | (236 | ) |
Class R4 | | | | |
From net investment income | | | (336 | ) |
From net realized gains | | | (237 | ) |
Class R5 | | | | |
From net investment income | | | (353 | ) |
From net realized gains | | | (237 | ) |
Class R6 | | | | |
From net investment income | | | (369 | ) |
From net realized gains | | | (237 | ) |
(b) | Liquidated on February 26, 2018. |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 11 | |
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED (continued)
| | | | | | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
| | Six Months Ended December 31, 2018 (Unaudited) | | | Year Ended June 30, 2018 | |
CAPITAL TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Distributions reinvested | | $ | 975 | | | $ | 561 | |
| | | | | | | | |
Change in net assets resulting from Class A capital transactions | | $ | 975 | | | $ | 561 | |
| | | | | | | | |
Class C(a) | | | | | | | | |
Distributions reinvested | | $ | — | | | $ | 494 | |
Cost of shares redeemed | | | — | | | | (22,085 | ) |
| | | | | | | | |
Change in net assets resulting from Class C capital transactions | | $ | — | | | $ | (21,591 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Distributions reinvested | | $ | 1,387,928 | | | $ | 848,963 | |
Cost of shares redeemed | | | (794,651 | ) | | | (1,738,342 | ) |
| | | | | | | | |
Change in net assets resulting from Class I capital transactions | | $ | 593,277 | | | $ | (889,379 | ) |
| | | | | | | | |
Class R2 | | | | | | | | |
Distributions reinvested | | $ | 889 | | | $ | 506 | |
| | | | | | | | |
Change in net assets resulting from Class R2 capital transactions | | $ | 889 | | | $ | 506 | |
| | | | | | | | |
Class R3 | | | | | | | | |
Distributions reinvested | | $ | 941 | | | $ | 539 | |
| | | | | | | | |
Change in net assets resulting from Class R3 capital transactions | | $ | 941 | | | $ | 539 | |
| | | | | | | | |
Class R4 | | | | | | | | |
Distributions reinvested | | $ | 993 | | | $ | 573 | |
| | | | | | | | |
Change in net assets resulting from Class R4 capital transactions | | $ | 993 | | | $ | 573 | |
| | | | | | | | |
Class R5 | | | | | | | | |
Distributions reinvested | | $ | 1,025 | | | $ | 590 | |
| | | | | | | | |
Change in net assets resulting from Class R5 capital transactions | | $ | 1,025 | | | $ | 590 | |
| | | | | | | | |
Class R6 | | | | | | | | |
Distributions reinvested | | $ | 1,046 | | | $ | 606 | |
| | | | | | | | |
Change in net assets resulting from Class R6 capital transactions | | $ | 1,046 | | | $ | 606 | |
| | | | | | | | |
Total change in net assets resulting from capital transactions | | $ | 599,146 | | | $ | (907,595 | ) |
| | | | | | | | |
(a) | Liquidated on February 26, 2018. |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | |
| | | |
12 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
| | | | | | | | |
| | JPMorgan SmartSpendingSM 2050 Fund | |
| | Six Months Ended December 31, 2018 (Unaudited) | | | Year Ended June 30, 2018 | |
SHARE TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Reinvested | | | 65 | | | | 35 | |
| | | | | | | | |
Change in Class A Shares | | | 65 | | | | 35 | |
| | | | | | | | |
Class C(a) | | | | | | | | |
Reinvested | | | — | | | | 30 | |
Redeemed | | | — | | | | (1,371 | ) |
| | | | | | | | |
Change in Class C Shares | | | — | | | | (1,341 | ) |
| | | | | | | | |
Class I | | | | | | | | |
Reinvested | | | 92,616 | | | | 52,789 | |
Redeemed | | | (50,491 | ) | | | (108,604 | ) |
| | | | | | | | |
Change in Class I Shares | | | 42,125 | | | | (55,815 | ) |
| | | | | | | | |
Class R2 | | | | | | | | |
Reinvested | | | 59 | | | | 32 | |
| | | | | | | | |
Change in Class R2 Shares | | | 59 | | | | 32 | |
| | | | | | | | |
Class R3 | | | | | | | | |
Reinvested | | | 63 | | | | 33 | |
| | | | | | | | |
Change in Class R3 Shares | | | 63 | | | | 33 | |
| | | | | | | | |
Class R4 | | | | | | | | |
Reinvested | | | 66 | | | | 36 | |
| | | | | | | | |
Change in Class R4 Shares | | | 66 | | | | 36 | |
| | | | | | | | |
Class R5 | | | | | | | | |
Reinvested | | | 69 | | | | 36 | |
| | | | | | | | |
Change in Class R5 Shares | | | 69 | | | | 36 | |
| | | | | | | | |
Class R6 | | | | | | | | |
Reinvested | | | 70 | | | | 38 | |
| | | | | | | | |
Change in Class R6 Shares | | | 70 | | | | 38 | |
| | | | | | | | |
(a) | Liquidated on February 26, 2018. |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 13 | |
FINANCIAL HIGHLIGHTS
FOR THE PERIODS INDICATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Per share operating performance | |
| | | | | Investment operations | | | Distributions | |
| | Net asset value, beginning of period | | | Net investment income (loss) (b)(c) | | | Net realized and unrealized gains (losses) on investments | | | Total from investment operations | | | Net investment income | | | Net realized gain | | | Total distributions | |
JPMorgan SmartSpending 2050 Fund | |
Class A | |
Six Months Ended December 31, 2018 (Unaudited) | | $ | 15.86 | | | $ | 0.22 | | | $ | (0.60 | ) | | $ | (0.38 | ) | | $ | (0.39 | ) | | $ | (0.31 | ) | | $ | (0.70 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.35 | | | | 0.26 | | | | 0.61 | | | | (0.24 | ) | | | (0.17 | ) | | | (0.41 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.14 | | | | 0.64 | | | | 0.78 | | | | (0.12 | ) | | | — | | | | (0.12 | ) |
|
Class I | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.87 | | | | 0.24 | | | | (0.59 | ) | | | (0.35 | ) | | | (0.43 | ) | | | (0.31 | ) | | | (0.74 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.39 | | | | 0.25 | | | | 0.64 | | | | (0.26 | ) | | | (0.17 | ) | | | (0.43 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.16 | | | | 0.64 | | | | 0.80 | | | | (0.14 | ) | | | — | | | | (0.14 | ) |
|
Class R2 | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.83 | | | | 0.19 | | | | (0.60 | ) | | | (0.41 | ) | | | (0.33 | ) | | | (0.31 | ) | | | (0.64 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.29 | | | | 0.25 | | | | 0.54 | | | | (0.20 | ) | | | (0.17 | ) | | | (0.37 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.11 | | | | 0.64 | | | | 0.75 | | | | (0.09 | ) | | | — | | | | (0.09 | ) |
|
Class R3 | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.85 | | | | 0.21 | | | | (0.60 | ) | | | (0.39 | ) | | | (0.37 | ) | | | (0.31 | ) | | | (0.68 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.33 | | | | 0.25 | | | | 0.58 | | | | (0.22 | ) | | | (0.17 | ) | | | (0.39 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.13 | | | | 0.64 | | | | 0.77 | | | | (0.11 | ) | | | — | | | | (0.11 | ) |
|
Class R4 | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.86 | | | | 0.23 | | | | (0.59 | ) | | | (0.36 | ) | | | (0.41 | ) | | | (0.31 | ) | | | (0.72 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.37 | | | | 0.25 | | | | 0.62 | | | | (0.25 | ) | | | (0.17 | ) | | | (0.42 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.15 | | | | 0.64 | | | | 0.79 | | | | (0.13 | ) | | | — | | | | (0.13 | ) |
|
Class R5 | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.87 | | | | 0.24 | | | | (0.59 | ) | | | (0.35 | ) | | | (0.43 | ) | | | (0.31 | ) | | | (0.74 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.39 | | | | 0.25 | | | | 0.64 | | | | (0.26 | ) | | | (0.17 | ) | | | (0.43 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.16 | | | | 0.64 | | | | 0.80 | | | | (0.14 | ) | | | — | | | | (0.14 | ) |
|
Class R6 | |
Six Months Ended December 31, 2018 (Unaudited) | | | 15.88 | | | | 0.25 | | | | (0.60 | ) | | | (0.35 | ) | | | (0.44 | ) | | | (0.31 | ) | | | (0.75 | ) |
Year Ended June 30, 2018 | | | 15.66 | | | | 0.41 | | | | 0.25 | | | | 0.66 | | | | (0.27 | ) | | | (0.17 | ) | | | (0.44 | ) |
December 30, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.17 | | | | 0.64 | | | | 0.81 | | | | (0.15 | ) | | | — | | | | (0.15 | ) |
(a) | Annualized for periods less than one year, unless otherwise noted. |
(b) | Net investment income (loss) is affected by the timing of distributions from Underlying Funds. |
(c) | Calculated based upon average shares outstanding. |
(d) | Not annualized for periods less than one year. |
(e) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset values for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
(f) | Does not include expenses of Underlying Funds. |
(g) | Certainnon-recurring expenses incurred by the Fund were not annualized for the year ended June 30, 2018 and the period ended June 30, 2017. |
(h) | Commencement of operations. |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | |
| | | |
14 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Ratios/Supplemental data | |
| | | | | | | | | Ratios to average net assets(a) | | | | |
Net asset value, end of period | | | Total return (excludes sales charge) (d)(e) | | | Net assets, end of period | | | Net expenses (f) | | | Net investment income (loss) (b) | | | Expenses without waivers, reimbursements and earnings credits (f) | | | Portfolio turnover rate (d) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
$ | 14.78 | | | | (2.41 | )% | | $ | 21,334 | | | | 0.43 | % | | | 2.73 | % | | | 1.46 | % | | | 23 | % |
| 15.86 | | | | 3.90 | | | | 21,866 | | | | 0.43 | (g) | | | 2.21 | (g) | | | 1.70 | (g) | | | 30 | |
| 15.66 | | | | 5.23 | | | | 21,050 | | | | 0.45 | (g) | | | 1.85 | (g) | | | 3.76 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.25 | ) | | | 28,848,380 | | | | 0.18 | | | | 3.03 | | | | 1.23 | | | | 23 | |
| 15.87 | | | | 4.12 | | | | 30,322,835 | | | | 0.19 | (g) | | | 2.46 | (g) | | | 1.36 | (g) | | | 30 | |
| 15.66 | | | | 5.36 | | | | 30,794,263 | | | | 0.19 | (g) | | | 2.09 | (g) | | | 1.26 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.60 | ) | | | 21,161 | | | | 0.84 | | | | 2.38 | | | | 1.77 | | | | 23 | |
| 15.83 | | | | 3.46 | | | | 21,731 | | | | 0.85 | (g) | | | 1.80 | (g) | | | 2.00 | (g) | | | 30 | |
| 15.66 | | | | 5.02 | | | | 21,009 | | | | 0.84 | (g) | | | 1.44 | (g) | | | 4.09 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.50 | ) | | | 21,267 | | | | 0.60 | | | | 2.63 | | | | 1.53 | | | | 23 | |
| 15.85 | | | | 3.74 | | | | 21,813 | | | | 0.60 | (g) | | | 2.05 | (g) | | | 1.75 | (g) | | | 30 | |
| 15.66 | | | | 5.15 | | | | 21,035 | | | | 0.59 | (g) | | | 1.69 | (g) | | | 3.82 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.33 | ) | | | 21,373 | | | | 0.34 | | | | 2.88 | | | | 1.28 | | | | 23 | |
| 15.86 | | | | 3.96 | | | | 21,895 | | | | 0.35 | (g) | | | 2.30 | (g) | | | 1.50 | (g) | | | 30 | |
| 15.66 | | | | 5.27 | | | | 21,060 | | | | 0.35 | (g) | | | 1.94 | (g) | | | 3.57 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.26 | ) | | | 21,436 | | | | 0.19 | | | | 3.03 | | | | 1.13 | | | | 23 | |
| 15.87 | | | | 4.11 | | | | 21,942 | | | | 0.21 | (g) | | | 2.44 | (g) | | | 1.36 | (g) | | | 30 | |
| 15.66 | | | | 5.35 | | | | 21,076 | | | | 0.20 | (g) | | | 2.09 | (g) | | | 3.43 | (g) | | | 8 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 14.78 | | | | (2.23 | ) | | | 21,481 | | | | 0.09 | | | | 3.14 | | | | 1.06 | | | | 23 | |
| 15.88 | | | | 4.24 | | | | 21,976 | | | | 0.10 | (g) | | | 2.55 | (g) | | | 1.25 | (g) | | | 30 | |
| 15.66 | | | | 5.40 | | | | 21,086 | | | | 0.10 | (g) | | | 2.19 | (g) | | | 3.33 | (g) | | | 8 | |
SEE NOTES TO FINANCIAL STATEMENTS.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 15 | |
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018
1. Organization
JPMorgan Trust IV (the “Trust”) was formed on November 11, 2015, as a Delaware statutory trust, pursuant to a Declaration of Trust dated November 11, 2015 and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as anopen-end management investment company.
The following is a separate fund of the Trust (the “Fund”) covered by this report:
| | | | |
| | Classes Offered | | Diversified/Non-Diversified |
JPMorgan SmartSpendingSM 2050 Fund | | Class A, Class I, Class R2, Class R3, Class R4, Class R5 and Class R6 | | Diversified |
The investment objective of the Fund is to seek to provide total return consisting of current income and capital appreciation.
The Fund commenced operations on December 30, 2016.
At its meeting held in February 2018, the Board approved the liquidation of the Fund’s Class C Shares effective on February 26, 2018 and a change to the distribution frequency of net investment income from monthly to annually beginning February 2018.
Class A Shares generally provide for afront-end sales charge. No sales charges are assessed with respect to Class I, Class R2, Class R3, Class R4, Class R5 and Class R6 Shares. Certain Class A Shares, for whichfront-end sales charges have been waived, may be subject to a CDSC as described in the Fund’s prospectus. All classes of shares have equal rights as to earnings, assets and voting privileges, except that each class may bear different transfer agency, distribution and service fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements.
J.P. Morgan Investment Management Inc. (“JPMIM”), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co. (“JPMorgan”), acts as Adviser (the “Adviser”) and Administrator (the “Administrator”) to the Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund is an investment company and, thus, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 — Investment Companies, which is part of U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
A. Valuation of Investments — The valuation of investments is in accordance with GAAP and the Fund’s valuation policies set forth by and under the supervision and responsibility of the Board of Trustees (the “Board”), which established the following approach to valuation, as described more fully below: (i) investments for which market quotations are readily available shall be valued at their market value and (ii) all other investments for which market quotations are not readily available shall be valued at their fair value as determined in good faith by the Board.
The Administrator has established the J.P. Morgan Asset Management Americas Valuation Committee (“AVC”) to assist the Board with the oversight and monitoring of the valuation of the Fund’s investments. The Administrator implements the valuation policies of the Fund’s investments, as directed by the Board. The AVC oversees and carries out the policies for the valuation of investments held in the Fund. This includes monitoring the appropriateness of fair values based on results of ongoing valuation oversight including, but not limited to, consideration of macro or security specific events, market events and pricing vendor and broker due diligence. The Administrator is responsible for discussing and assessing the potential impacts to the fair values on an ongoing basis, and at least on a quarterly basis with the AVC and the Board.
Equities and other exchange-traded instruments are valued at the last sale price or official market closing price on the primary exchange on which the instrument is traded before the net asset values (“NAV”) of the Fund are calculated on a valuation date. Certain foreign equity instruments, as well as certain derivatives with equity reference obligations, are valued by applying international fair value factors provided by approved affiliated and unaffiliated pricing vendors or third party broker-dealers (collectively referred to as “Pricing Services”). The factors seek to adjust the local closing price for movements of local markets post closing, but prior to the time the NAVs are calculated. Investments inopen-end investment companies, excluding exchange-traded funds (“ETFs”) (the “Underlying Funds”), are valued at each Underlying Fund’s NAV per share as of the report date.
Fixed income instruments are valued based on prices received from Pricing Services. The Pricing Services use multiple valuation techniques to determine the valuation of fixed income instruments. In instances where sufficient market activity exists, the Pricing Services may utilize a market-based approach through which trades or quotes from market makers are used to determine the valuation of these instruments. In instances where sufficient market activity may not exist, the Pricing Services also utilize proprietary valuation models which may consider market transactions in comparable securities and the various relationships between securities in determining fair value and/or market characteristics in order to estimate the relevant cash flows, which are then discounted to calculate the fair values.
Futures contracts are generally valued on the basis of available market quotations.
Valuations reflected in this report are as of the report date. As a result, changes in valuation due to market events and/or issuer related events after the report date and prior to issuance of the report are not reflected herein.
| | | | | | |
| | | |
16 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
The various inputs that are used in determining the valuation of the Fund’s investments are summarized into the three broad levels listed below.
• | | Level 1 — Unadjusted inputs using quoted prices in active markets for identical investments. |
• | | Level 2 — Other significant observable inputs including, but not limited to, quoted prices for similar investments, inputs other than quoted prices that are observable for investments (such as interest rates, prepayment speeds, credit risk, etc.) or other market corroborated inputs. |
• | | Level 3 — Significant inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s assumptions in determining the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement. The inputs or methodology used for valuing instruments are not necessarily an indication of the risk associated with investing in those instruments.
The following table represents each valuation input as presented on the Schedule of Portfolio Investments (“SOI”):
| | | | | | | | | | | | | | | | |
| | Level 1 Quoted prices | | | Level 2 Other significant observable inputs | | | Level 3 Significant unobservable inputs | | | Total | |
Total Investments in Securities(a) | | $ | 28,507,982 | | | $ | 404,613 | | | $ | — | | | $ | 28,912,595 | |
| | | | | | | | | | | | | | | | |
Appreciation in Other Financial Instruments | | | | | | | | | | | | | | | | |
Futures Contracts (a) | | $ | 67,144 | | | $ | 20,050 | | | $ | — | | | $ | 87,194 | |
| | | | | | | | | | | | | | | | |
Depreciation in Other Financial Instruments | | | | | | | | | | | | | | | | |
Futures Contracts (a) | | $ | (53,593 | ) | | $ | — | | | $ | — | | | $ | (53,593 | ) |
| | | | | | | | | | | | | | | | |
(a) | All portfolio holdings designated in level 1 and level 2 are disclosed individually on the SOI. Level 2 consists of foreign futures with equity reference obligations and a U.S. Treasury Note held as initial margin for futures contracts. Please refer to the SOI for asset class specifics of portfolio holdings. |
B. Futures Contracts — The Fund used treasury and index futures contracts to gain exposure to or to overweight or underweight allocations among various sectors or markets, maintain liquidity or minimize transaction costs. The Fund also buys futures contracts to invest incoming cash in the market or sells futures in response to cash outflows, thereby simulating an invested position in the underlying index while maintaining a cash balance for liquidity.
Futures contracts provide for the delayed delivery of the underlying instrument at a fixed price or are settled for a cash amount based on the change in the value of the underlying instrument at a specific date in the future. Upon entering into a futures contract, the Fund is required to deposit with the broker, cash or securities in an amount equal to a certain percentage of the contract amount, which is referred to as the initial margin deposit. Subsequent payments, referred to as variation margin, are made or received by the Fund periodically and are based on changes in the market value of open futures contracts. Changes in the market value of open futures contracts are recorded as Change in net unrealized appreciation/ depreciation on the Statement of Operations. Realized gains or losses, representing the difference between the value of the contract at the time it was opened and the value at the time it was closed, are reported on the Statement of Operations at the closing or expiration of the futures contract. Securities deposited as initial margin are designated in the SOIs and cash deposited, which is considered restricted, is recorded on the Statement of Assets and Liabilities. A receivable from and/or a payable to brokers for the daily variation margin is also recorded on the Statement of Assets and Liabilities.
The use of futures contracts exposes the Fund to equity price and interest rate risks. The Fund may be subject to the risk that the change in the value of the futures contract may not correlate perfectly with the underlying instrument. Use of long futures contracts subjects the Fund to risk of loss in excess of the amounts shown on the Statement of Assets and Liabilities, up to the notional amount of the futures contracts. Use of short futures contracts subjects the Fund to unlimited risk of loss. The Fund may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Fund’s credit risk is limited to failure of the exchange or board of trade. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of a futures contract can vary from the previous day’s settlement price, which could effectively prevent liquidation of positions.
The tables below disclose the volume of the Fund’s futures contracts activity during the six months ended December 31, 2018:
| | | | | | | | |
| | Average Notional Balance | | | Ending Notional Balance | |
Long Futures Contracts: | | | | | | | | |
Equity | | $ | 1,335,425 | | | $ | 876,050 | |
Interest Rate | | | 2,226,986 | | | | 1,815,307 | |
| | |
Short Futures Contracts: | | | | | | | | |
Equity | | | 693,377 | | | | 1,046,896 | |
Interest Rate | | | 1,170,680 | | | | 374,752 | |
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 17 | |
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 (continued)
The Fund’s futures contracts are not subject to master netting arrangements (the right to close out all transactions traded with a counterparty and net amounts owed or due across transactions).
C. Summary of Derivatives Information — The following table presents the value of derivatives held as of December 31, 2018, by their primary underlying risk exposure and respective location on the Statement of Assets and Liabilities:
| | | | | | |
Derivative Contracts | | Statement of Assets and Liabilities Location | | | |
Gross Assets: | | | | Futures Contracts (a) | |
Equity contracts | | Receivables, Net Assets — Unrealized Appreciation | | $ | 31,942 | |
Interest rate contracts | | Receivables, Net Assets — Unrealized Appreciation | | | 55,252 | |
| | | | | | |
Total | | | | $ | 87,194 | |
| | | | | | |
| | |
Gross Liabilities: | | | | | |
Equity contracts | | Payables, Net Assets — Unrealized Depreciation | | $ | (51,117 | ) |
Interest rate contracts | | Payables, Net Assets — Unrealized Depreciation | | | (2,476 | ) |
| | | | | | |
Total | | | | $ | (53,593 | ) |
| | | | | | |
(a) | This amount represents the cumulative appreciation (depreciation) of futures contracts as reported on the SOI. The Statement of Assets and Liabilities only reflect the current day variation margin receivable/payable from/to brokers. |
The following tables present the effect of derivatives on the Statement of Operations for the six months ended December 31, 2018, by primary underlying risk exposure:
| | | | |
Amount of Realized Gain (Loss) on Derivatives Recognized in Statement of Operations | |
Derivative Contracts | | Futures Contracts | |
Equity contracts | | $ | (50,394 | ) |
Interest rate contracts | | | (412 | ) |
| | | | |
Total | | $ | (50,806 | ) |
| | | | |
| | | | |
Amount of Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Statement of Operations | |
Derivative Contracts | | Futures Contracts | |
Equity contracts | | $ | 27,942 | |
Interest rate contracts | | | 59,970 | |
| | | | |
Total | | $ | 87,912 | |
| | | | |
The Fund’s derivatives contracts held at December 31, 2018 are not accounted for as hedging instruments under GAAP.
D. Investment Transactions with Affiliates — The Fund invested in Underlying Funds which are advised by the Adviser or its affiliates. An issuer which is under common control with the Fund may be considered an affiliate. For the purposes of the financial statements, the Fund assumes the issuers listed in the table below to be affiliated issuers. Underlying Funds’ distributions may be reinvested into the Underlying Funds. Reinvestment amounts are included in the purchase cost amounts in the table below. Included in the purchases and sales amounts in the table below are exchanges between certain share classes of the affiliated Underlying Funds. Such exchanges are not treated as purchases and sales for the purpose of recognizing realized gains (losses) or portfolio turnover.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the six months ended December 31, 2018 | | | | |
Security Description | | Value at June 30, 2018 | | | Purchases at Cost | | | Proceeds from Sales | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciation/ (Depreciation) | | | Value at December 31, 2018 | | | Shares at December 31, 2018 | | | Dividend Income | | | Capital Gain Distributions | |
JPMorgan Commodities Strategy Fund Class R6 Shares (a) | | $ | 494,851 | | | $ | — | | | $ | 476,264 | | | $ | (20,231 | ) | | $ | 1,644 | | | $ | — | | | | — | | | $ | — | | | $ | — | |
JPMorgan Core Bond Fund Class R6 Shares (a) | | | 5,828,240 | | | | 201,625 | | | | 438,648 | | | | (11,248 | ) | | | 14,724 | | | | 5,594,693 | | | | 495,983 | | | | 88,969 | | | | 5,601 | |
JPMorgan Core Plus Bond Fund Class R6 Shares (a) | | | 3,140,912 | | | | 52,463 | | | | 215,533 | | | | (6,738 | ) | | | (4,761 | ) | | | 2,966,343 | | | | 369,868 | | | | 52,463 | | | | — | |
JPMorgan Emerging Markets Strategic Debt Fund Class R6 Shares (a) | | | 907,176 | | | | 7,110 | | | | 878,198 | | | | (38,977 | ) | | | 36,519 | | | | 33,630 | | | | 4,443 | | | | 7,110 | | | | — | |
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| | | |
18 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the six months ended December 31, 2018 | | | | |
Security Description | | Value at June 30, 2018 | | | Purchases at Cost | | | Proceeds from Sales | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciation/ (Depreciation) | | | Value at December 31, 2018 | | | Shares at December 31, 2018 | | | Dividend Income | | | Capital Gain Distributions | |
JPMorgan Equity Index Fund Class R6 Shares (a) | | $ | 2,193,385 | | | $ | 20,593 | | | $ | 801,790 | | | $ | 144,179 | | | $ | (237,831 | ) | | $ | 1,318,536 | | | | 34,418 | | | $ | 15,815 | | | $ | 4,778 | |
JPMorgan Floating Rate Income Fund Class R6 Shares (a) | | | 1,072,446 | | | | 1,247,756 | | | | — | | | | — | | | | (102,011 | ) | | | 2,218,191 | | | | 247,843 | | | | 47,649 | | | | — | |
JPMorgan Growth Advantage Fund Class R6 Shares* (a) | | | 645,666 | | | | 44,922 | | | | 63,303 | | | | 20,678 | | | | (125,857 | ) | | | 522,106 | | | | 27,831 | | | | — | | | | 44,922 | |
JPMorgan High Yield Fund Class R6 Shares (a) | | | 2,717,806 | | | | 731,184 | | | | 291,673 | | | | (4,086 | ) | | | (161,651 | ) | | | 2,991,580 | | | | 440,586 | | | | 84,237 | | | | — | |
JPMorgan International Research Enhanced Equity Fund Class R6 Shares (a) | | | 1,450,397 | | | | 34,379 | | | | 364,181 | | | | 29,229 | | | | (212,328 | ) | | | 937,496 | | | | 60,367 | | | | 34,379 | | | | — | |
JPMorgan Managed Income Fund Class L Shares (a) | | | — | | | | 4,056,863 | | | | — | | | | — | | | | (1,206 | ) | | | 4,055,657 | | | | 405,566 | | | | 11,642 | | | | 745 | |
JPMorgan U.S. Equity Fund Class R6 Shares (a) | | | 1,050,823 | | | | 162,450 | | | | 72,619 | | | | 12,039 | | | | (203,513 | ) | | | 949,180 | | | | 70,258 | | | | 6,971 | | | | 111,431 | |
JPMorgan U.S. Government Money Market Fund Class IM Shares, 2.46% (a)(b) | | | 1,009,019 | | | | 2,179,349 | | | | 2,600,696 | | | | — | | | | — | | | | 587,672 | | | | 587,672 | | | | 8,047 | | | | — | |
JPMorgan Value Advantage Fund Class R6 Shares (a) | | | 567,227 | | | | 84,772 | | | | — | | | | — | | | | (89,666 | ) | | | 562,333 | | | | 18,431 | | | | 11,684 | | | | 29,030 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 21,077,948 | | | $ | 8,823,466 | | | $ | 6,202,905 | | | $ | 124,845 | | | $ | (1,085,937 | ) | | $ | 22,737,417 | | | | | | | $ | 368,966 | | | $ | 196,507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) | Investment in affiliate. Fund is registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc. |
(b) | The rate shown is the current yield as of December 31, 2018. |
* | Non-income producing security. |
E. Foreign Currency Translation — The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions.
The Fund does not isolate the effect of changes in foreign exchange rates from changes in market prices on securities held. Accordingly, such changes are included within Change in net unrealized appreciation/depreciation on investments on the Statement of Operations.
Reported realized foreign currency gains and losses arise from the disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. These reported realized foreign currency gains and losses are included in Net realized gain (loss) on foreign currency transactions on the Statement of Operations. Unrealized foreign currency gains and losses arise from changes (due to changes in exchange rates) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at year end are included in Change in net unrealized appreciation/depreciation on foreign currency translations on the Statement of Operations.
F. Security Transactions and Investment Income — Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on a specifically identified cost basis. Interest income is determined on the basis of coupon interest accrued using the effective interest method which adjusts for amortization of premiums and accretion of discounts. Distributions of net investment income and realized capital gains from the Underlying Funds and ETFs, if any, are recorded on theex-dividend date.
G. Allocation of Income and Expenses — Expenses directly attributable to a fund are charged directly to that fund, while the expenses attributable to more than one fund of the Trust are allocated among the respective funds. In calculating the NAV of each class, investment income, realized and unrealized gains and losses and expenses, other than class-specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day.
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| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 19 | |
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 (continued)
Transfer agency fees are class-specific expenses. The amount of the transfer agency fees charged to each class of the Fund for the six months ended December 31, 2018 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | | Class I | | | Class R2 | | | Class R3 | | | Class R4 | | | Class R5 | | | Class R6 | | | Total | |
Transfer agency fees | | $ | 5 | | | $ | 136 | | | $ | 4 | | | $ | 3 | | | $ | 3 | | | $ | 3 | | | $ | 7 | | | $ | 161 | |
The Fund invests in Underlying Funds and ETFs and, as a result, bears a portion of the expenses incurred by these Underlying Funds and ETFs. These expenses are not reflected in the expenses shown on the Statement of Operations and are not included in the ratios to average net assets shown in the Financial Highlights. Certain expenses of affiliated Underlying Funds and ETFs are waived as described in Note 3.F.
H. Federal Income Taxes — The Fund is treated as a separate taxable entity for Federal income tax purposes. The Fund’s policy is to comply with the provisions of the Internal Revenue Code (the “Code”), applicable to regulated investment companies and to distribute to shareholders all of its distributable net investment income and net realized capital gains on investments. Accordingly, no provision for Federal income tax is necessary. Management has reviewed the Fund’s tax positions for all open tax years and has determined that as of December 31, 2018, no liability for income tax is required in the Fund’s financial statements for net unrecognized tax benefits. However, management’s conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Fund’s Federal tax returns for the prior three fiscal years remain, or since inception if shorter, subject to examination by the Internal Revenue Service.
I. Distributions to Shareholders — Distributions from net investment income are generally declared and paid monthly and are declared separately for each class. No class has preferential dividend rights; differences in per share rates are due to differences in separate class expenses. Net realized capital gains, if any, are distributed at least annually. The amount of distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from GAAP. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition — “temporary differences”), such amounts are reclassified within the capital accounts based on their Federaltax-basis treatment.
3. Fees and Other Transactions with Affiliates
A. Investment Advisory Fee — Pursuant to an Investment Advisory Agreement, the Adviser supervises the investments of the Fund and for such services is paid a fee. The fee is accrued daily and paid monthly at an annual rate of 0.35% of the Fund’s average daily net assets.
The Adviser waived Investment Advisory fees and/or reimbursed expenses as outlined in Note 3.F.
B. Administration Fee — Pursuant to an Administration Agreement, the Administrator provides certain administration services to the Fund. In consideration of these services during the six months ended December 31, 2018, the Administrator received a fee that was accrued daily and paid monthly at an annual rate of 0.15% of the first $25 billion of the average daily net assets of all funds in the J.P. Morgan Funds Complex covered by the Administration Agreement (excluding certain funds of funds and money market funds) and 0.075% of the average daily net assets in excess of $25 billion of all such funds. For the six months ended December 31, 2018, the effective annualized rate was 0.08% of the Fund’s average daily net assets, notwithstanding any fee waivers and/or expense reimbursements.
The Administrator waived Administration fees as outlined in Note 3.F.
Effective January 1, 2019, the Administrator receives a fee accrued daily and paid monthly at an annual rate of 0.075% of the first $10 billion of the Fund’s average daily net assets, 0.050% of the Fund’s average daily net assets between $10 billion and $20 billion, 0.025% of the Fund’s average daily net assets between $20 billion and $25 billion and 0.01% of the Fund’s daily average net assets in excess of $25 billion.
JPMorgan Chase Bank, N.A. (“JPMCB”), a wholly-owned subsidiary of JPMorgan, serves as the Fund’ssub-administrator (the“Sub-administrator”). For its services asSub-administrator, JPMCB receives a portion of the fees payable to the Administrator.
C. Distribution Fees — Pursuant to a Distribution Agreement, JPMorgan Distribution Services, Inc. (“JPMDS”), an indirect, wholly-owned subsidiary of JPMorgan, serves as the Trust’s principal underwriter and promotes and arranges for the sale of the Fund’s shares.
The Board has adopted a Distribution Plan (the “Distribution Plan”) for Class A, Class R2 and Class R3 Shares of the Fund in accordance with Rule12b-1 under the 1940 Act. Class I, Class R4, Class R5 and Class R6 do not charge a distribution fee. The Distribution Plan provides that the Fund shall pay distribution fees, including payments to JPMDS, at annual rates of 0.25%, 0.50% and 0.25% of the average daily net assets of Class A, Class R2 and Class R3 Shares, respectively.
D. Service Fees — The Trust, on behalf of the Fund, has entered into a Shareholder Servicing Agreement with JPMDS under which JPMDS provides certain support services to the shareholders. For performing these services, JPMDS receives a fee, except for Class R6 Shares which do not charge a service fee, that is accrued daily and paid monthly equal to a percentage of the average daily net assets as shown in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | | Class I | | | R2 Class | | | R3 Class | | | R4 Class | | | R5 Class | |
| | | 0.25 | % | | | 0.25 | % | | | 0.25 | % | | | 0.25 | % | | | 0.25 | % | | | 0.10 | % |
| | | | | | |
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20 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
JPMDS has entered into shareholder services contracts with affiliated and unaffiliated financial intermediaries who provide shareholder services and other related services to their clients or customers who invest in the Fund under which JPMDS will pay all or a portion of such fees earned to financial intermediaries for performing such services.
JPMDS waived service fees as outlined in Note 3.F.
E. Custodian and Accounting Fees — JPMCB provides portfolio custody and accounting services to the Fund. For performing these services, the Fund pays JPMCB transaction and asset-based fees that vary according to the number of transactions and positions, plusout-of-pocket expenses. The amounts paid directly to JPMCB by the Fund for custody and accounting services are included in Custodian and accounting fees on the Statement of Operations. Interest income earned on cash balances at the custodian, if any, is included in Interest income from affiliates in the Statement of Operations. Prior to March 1, 2018, payments to the custodian were reduced by credits earned by the Fund, based on uninvested cash balances held by the custodian. Such earnings credits, if any, are presented separately on the Statement of Operations.
Interest expense paid to the custodian related to cash overdrafts, if any, is included in Interest expense to affiliates on the Statement of Operations.
F. Waivers and Reimbursements — The Adviser, Administrator and JPMDS have contractually agreed to waive fees and/or reimburse expenses to the extent that total annual operating expenses of the Fund, Underlying Funds and ETFs (excluding dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation, extraordinary expenses incurred by the Fund and any Underlying Fund and ETFs and acquired fund fees incurred by an Underlying Fund and ETFs) exceed the percentages of the Fund’s average daily net assets as shown in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | | Class I | | | R2 Class | | | R3 Class | | | R4 Class | | | R5 Class | | | R6 Class | |
| | | 0.74 | % | | | 0.49 | % | | | 1.15 | % | | | 0.90 | % | | | 0.65 | % | | | 0.50 | % | | | 0.40 | % |
The expense limitation agreement was in effect for the six months ended December 31, 2018 and is in place until at least October 31, 2019.
For the six months ended December 31, 2018, the Fund’s service providers waived fees and/or reimbursed expenses for the Fund as follows. None of these parties expect the Fund to repay any such waived fees and reimbursed expenses in future years.
| | | | | | | | | | | | | | | | | | | | |
| | Contractual Waivers | | | | |
| | Investment Advisory Fees | | | Administration Fees | | | Service Fees | | | Total | | | Contractual Reimbursement | |
| | $ | 53,138 | | | $ | 12,305 | | | $ | 23,893 | | | $ | 89,336 | | | $ | 70,198 | |
The Underlying Funds may impose separate advisory and servicing fees. To avoid charging a servicing fee at an effective rate above 0.25% for Class A, Class I, Class R2, Class R3 and Class R4 Shares and above 0.10% for Class R5 Shares, JPMDS may waive servicing fees with respect to the Fund in an amount equal to the weighted averagepro-rata amount of servicing fees charged by the affiliated Underlying Funds. These waivers may be in addition to any waivers required to meet the Fund’s contractual expense limitations, but will not exceed the Fund’s servicing fees.
G. Other — Certain officers of the Trust are affiliated with the Adviser, the Administrator and JPMDS. Such officers, with the exception of the Chief Compliance Officer, receive no compensation from the Fund for serving in their respective roles.
The Board appointed a Chief Compliance Officer to the Fund in accordance with Federal securities regulations. The Fund, along with other affiliated funds, makes reimbursement payments, on apro-rata basis, to the Administrator for a portion of the fees associated with the Office of the Chief Compliance Officer. Such fees are included in Trustees’ and Chief Compliance Officer’s fees on the Statement of Operations.
The Trust adopted a Trustee Deferred Compensation Plan (the “Plan”) which allows the Independent Trustees to defer the receipt of all or a portion of compensation related to performance of their duties as Trustees. The deferred fees are invested in various J.P. Morgan Funds until distribution in accordance with the Plan.
The Fund may use related party broker-dealers. For the six months ended December 31, 2018, the Fund did not incur any brokerage commissions with broker-dealers affiliated with the Adviser.
The SEC has granted an exemptive order permitting the Fund to invest in certain financial instruments in addition to Underlying Funds and securities.
4. Investment Transactions
During the six months ended December 31, 2018, purchases and sales of investments (excluding short-term investments) were as follows:
| | | | | | | | |
| | Purchases (excluding U.S. Government) | | | Sales (excluding U.S. Government) | |
| | $ | 7,153,419 | | | $ | 6,783,582 | |
During the six months ended December 31, 2018, there were no purchases or sales of U.S. Government securities.
| | | | | | | | |
| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 21 | |
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 (continued)
5. Federal Income Tax Matters
For Federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments held at December 31, 2018 were as follows:
| | | | | | | | | | | | | | | | |
| | Aggregate Cost | | | Gross Unrealized Appreciation | | | Gross Unrealized Depreciation | | | Net Unrealized Appreciation (Depreciation) | |
| | $ | 29,528,484 | | | $ | 313,045 | | | $ | 895,333 | | | $ | (582,288 | ) |
At June 30, 2018, the Fund did not have any net capital loss carryforwards.
6. Borrowings
The Fund relies upon an exemptive order granted by the SEC (the “Order”) permitting the establishment and operation of an Interfund Lending Facility (the “Facility”). The Facility allows the Fund to directly lend and borrow money to or from any other fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions. The Interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. The Order was granted to JPMorgan Trust II and may be relied upon by the Fund because the Fund and the series of JPMorgan Trust II are both investment companies in the same “group of investment companies” (as defined in Section 12(d)(1)(G) of the 1940 Act).
The Trust and JPMCB have entered into a financing arrangement. Under this arrangement, JPMCB provides an unsecured, uncommitted credit facility in the aggregate amount of $100 million to certain of the J.P. Morgan Funds, including the Fund. Advances under the arrangement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions. Interest on borrowings is payable at a rate determined by JPMCB at the time of borrowing. This agreement has been extended until November 4, 2019.
The Fund had no borrowings outstanding from another fund or from the unsecured, uncommitted credit facility during the six months ended December 31, 2018.
The Trust, along with certain other trusts (“Borrowers”), has entered into a joint syndicated senior unsecured revolving credit facility totaling $1.5 billion (“Credit Facility”) with various lenders and The Bank of New York Mellon, as administrative agent for the lenders. Effective August 14, 2018, the Fund was added to the Credit facility. This Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Under the terms of the Credit Facility, a borrowing fund must have a minimum of $25,000,000 in adjusted net asset value and not exceed certain adjusted net asset coverage ratios prior to and during the time in which any borrowings are outstanding. If a fund does not comply with the aforementioned requirements, the fund must remediate within three business days with respect to the $25,000,000 minimum adjusted net asset value or within one business day with respect to certain asset coverage ratios or the administrative agent at the request of, or with the consent of, the lenders may terminate the Credit Facility and declare any outstanding borrowings to be due and payable immediately.
Interest associated with any borrowing under the Credit Facility is charged to the borrowing fund at a rate of interest equal to 1.00% plus the greater of the federal funds effective rate or one month LIBOR. The annual commitment fee to maintain the Credit Facility is 0.15% and is incurred on the unused portion of the Credit Facility and is allocated to all participating funds pro rata based on their respective net assets. Effective August 14, 2018, this agreement has been amended and restated for a term of 364 days, unless extended.
The Fund did not utilize the Credit Facility during the six months ended December 31, 2018.
7. Risks, Concentrations and Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown. The amount of exposure would depend on future claims that may be brought against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
As of December 31, 2018, all of the Fund’s shares were held by the Adviser.
Because of the Fund’s investments in the Underlying Funds and ETFs, the Fund indirectly pays a portion of the expenses incurred by the Underlying Funds and ETFs. As a result, the cost of investing in the Fund may be higher than the cost of investing in a mutual fund that invests directly in Individual securities and financial instruments. The Fund is also subject to certain risks related to the Underlying Funds’ and ETFs’ investments in securities and financial instruments such as equity securities, foreign and emerging markets securities and real estate securities. These securities are subject to risks specific to their structure, sector or market.
The Fund invests in unaffiliated ETFs. ETFs are pooled investment vehicles whose ownership interests are purchased and sold on a securities exchange. ETFs may be structured as investment companies, depositary receipts or other pooled investment vehicles and may be passively or actively managed. Passively managed ETFs generally seek to track the performance of a particular market index, including broad-based market indexes, as well as indexes relating to particular sectors, markets, regions or industries. Actively managed ETFs do not seek to track the
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22 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
performance of a particular market index. The price movement of an index-based ETF may not track the underlying index and may result in a loss. In addition, ETFs may trade at a price below or above their NAV (also known as a discount or premium, respectively).
In addition, the Underlying Funds and ETFs may use derivative instruments in connection with their individual investment strategies including futures contracts, forward foreign currency exchange contracts, options, swaps and other derivatives, which are also subject to specific risks related to their structure, sector or market and may be riskier than investments in other types of securities.
Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic and market conditions and could result in losses that significantly exceed the Fund’s original investment. Derivatives also expose the Fund to counterparty risk (the risk that the derivative counterparty will not fulfill its contractual obligations), including credit risk of the derivative counterparty.
Specific risks and concentrations present in the Underlying Funds and ETFs are disclosed within their individual financial statements and registration statements, as appropriate.
8. New Accounting Pronouncements
In August 2018, the Financial Accounting Standard Board (“FASB”) issuedAccounting Standard Update (“ASU”)2018-13 (“ASU2018-13”) Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which adds, removes, and modifies certain aspects of the fair value disclosure. ASU2018-13 amendments are the result of a broader disclosure project, FASB Concepts StatementConceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements, to improve the effectiveness of the fair value disclosure requirements. ASU2018-13 is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect to the Funds’ net assets or results of operation.
In August 2018, the SEC adopted their Disclosure Update and Simplification Rule (the “Rule”). The Rule is part of the SEC’s overall project to improve disclosure effectiveness by amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect on the Fund’s net assets or results of operation.
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DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 23 | |
SCHEDULE OF SHAREHOLDER EXPENSES
(Unaudited)
Hypothetical $1,000 Investment
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund (not including expenses of the Underlying Funds) and to compare these ongoing costs with the ongoing costs of investing in other mutual funds. The examples assume that you had a $1,000 investment in each Class at the beginning of the reporting period, July 1, 2018, and continued to hold your shares at the end of the reporting period, December 31, 2018.
Actual Expenses
For each Class of the Fund in the table below, the first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of each Class under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees, and expenses of the Underlying Funds. Therefore, the second line for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2018 | | | Ending Account Value December 31, 2018 | | | Expenses Paid During the Period* | | | Annualized Expense Ratio | |
JP Morgan SmartSpending 2050 Fund | | | | | | | | | | | | | | | | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000.00 | | | $ | 975.90 | | | $ | 2.14 | | | | 0.43 | % |
Hypothetical | | | 1,000.00 | | | | 1,023.04 | | | | 2.19 | | | | 0.43 | |
Class I | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 977.50 | | | | 0.90 | | | | 0.18 | |
Hypothetical | | | 1,000.00 | | | | 1,024.30 | | | | 0.92 | | | | 0.18 | |
Class R2 | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 974.00 | | | | 4.18 | | | | 0.84 | |
Hypothetical | | | 1,000.00 | | | | 1,020.97 | | | | 4.28 | | | | 0.84 | |
Class R3 | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 975.00 | | | | 2.99 | | | | 0.60 | |
Hypothetical | | | 1,000.00 | | | | 1,022.18 | | | | 3.06 | | | | 0.60 | |
Class R4 | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 976.70 | | | | 1.69 | | | | 0.34 | |
Hypothetical | | | 1,000.00 | | | | 1,023.49 | | | | 1.73 | | | | 0.34 | |
Class R5 | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 977.40 | | | | 0.95 | | | | 0.19 | |
Hypothetical | | | 1,000.00 | | | | 1,024.25 | | | | 0.97 | | | | 0.19 | |
Class R6 | | | | | | | | | | | | | | | | |
Actual | | | 1,000.00 | | | | 977.70 | | | | 0.45 | | | | 0.09 | |
Hypothetical | | | 1,000.00 | | | | 1,024.75 | | | | 0.46 | | | | 0.09 | |
* | Expenses are equal to each Class’ respective annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
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24 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT
(Unaudited)
The Board of Trustees has established various standing committees composed of Trustees with diverse backgrounds, to which the Board of Trustees has assigned specific subject matter responsibilities to further enhance the effectiveness of the Board’s oversight and decision making. The Board of Trustees and its investment committees (money market and alternative products, equity, and fixed income) meet regularly throughout the year and consider factors that are relevant to their annual consideration of investment advisory agreements at each meeting. They also meet for the specific purpose of considering investment advisory agreement annual renewals. The Board of Trustees held meetings in person in June and August 2018 at which the Trustees considered the continuation of the investment advisory agreement for the Fund whose semi-annual report is contained herein (the “Advisory Agreement”). At the June meeting, the Board’s investment committees met to review and consider performance, expense and related information for the Fund and the other J.P. Morgan Funds overseen by the Board in which the Fund may invest (“Underlying Funds”). Each investment committee reported to the full Board, which then considered the investment committee’s preliminary findings. At the August meeting, the Trustees continued their review and consideration. The Trustees, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of any party to the Advisory Agreement or any of their affiliates, approved the continuation of the Advisory Agreement on August 15, 2018.
As part of their review of the Advisory Agreement, the Trustees considered and reviewed performance and other information about the Fund and Underlying Funds received from the Adviser. This information includes the Fund’s and Underlying Funds’ performance as compared to the performance of the Fund’s and the Underlying Funds’ peers and benchmarks and analyses by the Adviser of the Fund’s and Underlying Funds’ performance. In addition, the Trustees have engaged an independent management consulting firm (“independent consultant”) to report on the performance of certain J.P. Morgan Funds at each of the Trustees’ regular meetings. In addition, in preparation for the June and August meetings, the Trustees requested, received and evaluated extensive materials from the Adviser, including, with respect to the Fund and/or Underlying Funds, performance and expense information compiled by Broadridge, using data from Lipper Inc., independent providers of investment company data (together, “Broadridge/Lipper”). The Trustees’ independent consultant also provided additional analyses of the performance of certain J.P. Morgan Funds with greater than two years of performance history. Before voting on the Advisory Agreement, the Trustees reviewed the Advisory Agreement with representatives of the Adviser, counsel to the Trust and independent legal counsel
and received a memorandum from independent legal counsel to the Trustees discussing the legal standards for their consideration of the Advisory Agreement. The Trustees also discussed
the Advisory Agreement in executive sessions with independent legal counsel at which no representatives of the Adviser were present.
A summary of the material factors evaluated by the Trustees in determining whether to approve the Advisory Agreement is provided below. Each Trustee attributed different weights to the various factors and no factor alone was considered determinative. The Trustees considered information provided with respect to the Fund and Underlying Funds throughout the year, as well as materials furnished specifically in connection with the annual review process. From year to year, the Trustees consider and place emphasis on relevant information in light of changing circumstances in market and economic conditions.
After considering and weighing the factors and information they had received, the Trustees found that the compensation to be received by the Adviser from the Fund under the Advisory Agreement was fair and reasonable under the circumstances and determined that the continuance of the Advisory Agreement was in the best interests of the Fund and its shareholders.
Nature, Extent and Quality of Services Provided by the Adviser
The Trustees received and considered information regarding the nature, extent and quality of the services provided to the Fund under the Advisory Agreement. The Trustees took into account information furnished throughout the year at Trustee meetings, as well as the materials furnished specifically in connection with this annual review process. The Trustees considered the background and experience of the Adviser’s senior management and the expertise of, and the amount of attention given to the Fund by, investment personnel of the Adviser. In addition, the Trustees reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for theday-to-day management of the Fund and the infrastructure supporting the team, including personnel changes. The Trustees also considered information provided by the Adviser and JPMorgan Distribution Services, Inc. (“JPMDS”) about the structure and distribution strategy of the Fund. The Trustees reviewed information relating to the Adviser’s risk governance model and reports showing the Adviser’s compliance structure and ongoing compliance processes. The Trustees also considered the quality of the administrative services provided by the Adviser in its role as administrator.
The Trustees also considered their knowledge of the nature and quality of the services provided by the Adviser and its affiliates to the Fund and Underlying Funds gained from their experience as Trustees of the J.P. Morgan Funds. In addition, they considered the overall reputation and capabilities of the Adviser and its affiliates, the commitment of the Adviser to provide high quality service to the Fund and Underlying Funds, their overall confidence in the Adviser’s integrity and the Adviser’s responsiveness to questions or concerns raised by them, including the Adviser’s willingness to consider and implement
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| | | |
DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 25 | |
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT
(Unaudited) (continued)
organizational and operational changes designed to improve investment results and the services provided to the Fund and Underlying Funds.
Based upon these considerations and other factors, the Trustees concluded that they were satisfied with the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser.
Costs of Services Provided and Profitability to the Adviser and its Affiliates
The Trustees received and considered information regarding the profitability to the Adviser and its affiliates in providing services to the Fund and Underlying Funds. The Trustees reviewed and discussed this information. The Trustees recognized that this information is not audited and represents the Adviser’s determination of its and its affiliates’ revenues from the contractual services provided to the Fund, less expenses of providing such services. Expenses include direct and indirect costs and are calculated using an allocation methodology developed by the Adviser. The Trustees also recognized that it is difficult to make comparisons of profitability from fund investment advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the fact that publicly-traded fund managers’ operating profits and net income are net of distribution and marketing expenses. Based upon their review, the Trustees concluded that the profitability to the Adviser under the Advisory Agreement was not unreasonable in light of the services and benefits provided to the Fund.
The Trustees also considered that JPMDS, an affiliate of the Adviser, and the Adviser earn fees from the Fund and/or Underlying Funds for providing shareholder and administrative services, respectively. These fees were shown separately in the profitability analysis presented to the Trustees. The Trustees also considered the payments of Rule12b-1 fees to JPMDS, which also acts as the Fund’s distributor and that these fees are in turn generally paid to financial intermediaries that sell the Fund, including financial intermediaries that are affiliates of the
Adviser. The Trustees also considered the fees paid to JPMorgan Chase Bank, N.A. (“JPMCB”) for custody and fund accounting and other related services for the Fund and/or Underlying Funds.
Fall-Out Benefits
The Trustees reviewed information regarding potential“fall-out” or ancillary benefits received by the Adviser and its affiliates as a result of their relationship with the J.P. Morgan Funds, including the benefits received by the Adviser and its affiliates in connection with the Fund’s investments in the
Underlying Funds. The Board also reviewed the Adviser’s allocation of fund brokerage for the J.P. Morgan Funds complex, including allocations to brokers who provide research to the Adviser.
Economies of Scale
The Trustees considered the extent to which the Fund may benefit from economies of scale. The Trustees considered that there may not be a direct relationship between economies of scale realized by the Fund and those realized by the Adviser as assets increase. The Trustees considered the extent to which the Fund was priced to scale and whether it would be appropriate to add advisory fee breakpoints, but noted that the Fund has implemented fee waivers and contractual expense limitations (“Fee Caps”) which allows the Fund’s shareholders to share potential economies of scale from the Fund’s inception and that the fees remain competitive with peer funds. The Trustees also considered that the Adviser has added or enhanced services to the Fund over time, noting the Adviser’s substantial investments in its business in support of the Fund, including investments in trading systems and technology (including cybersecurity improvements), attraction and retention of key talent, additions to analyst and portfolio management teams, and regulatory support enhancements. The Trustees concluded that the current fee structure was reasonable in light of the Fee Caps that the Adviser has in place that serve to limit the overall net expense ratios of the Fund at competitive levels. The Trustees concluded that the Fund’s shareholders received the benefits of potential economies of scale through the Fee Caps and the Adviser’s reinvestment in its operations to serve the Fund and its shareholders.
Independent Written Evaluation of the Fund’s Chief Compliance Officer
The Trustees noted that, upon their direction, the Chief Compliance Officer for the Fund had prepared an independent written evaluation in order to assist the Trustees in determining the reasonableness of the proposed management fees. The Trustees considered the written evaluation in determining whether to continue the Advisory Agreement.
Fees Relative to Adviser’s Other Clients
The Trustees received and considered information about the nature and extent of investment advisory services and fee rates offered to other clients of the Adviser, including institutional separate accounts and/or fundssub-advised by the Adviser, for investment management styles substantially similar to that of the Fund. The Trustees considered the complexity of investment management for registered mutual funds relative to the Adviser’s other clients and noted differences in the regulatory, legal and other risks and responsibilities of providing services to the different clients. The Trustees considered that serving as an adviser to a registered mutual fund involves greater
| | | | | | |
| | | |
26 | | | | J.P. MORGAN FUNDS | | DECEMBER 31, 2018 |
responsibilities and risks than acting as asub-adviser and observed thatsub-advisory fees may be lower than those charged by the Adviser to the Fund. The Trustees also noted that the adviser, not the mutual fund, pays thesub-advisory fee and that many responsibilities related to the advisory function are retained by the primary adviser. The Trustees concluded that the fee rates charged to the Fund in comparison to those charged to the Adviser’s other clients were reasonable.
Investment Performance
The Trustees received and considered absolute and/or relative performance information for the Fund in a report prepared by Broadridge/Lipper. The Trustees considered the total return performance information, which included the ranking of the Fund within a performance universe made up of funds with the same Broadridge/Lipper investment classification and objective (the “Universe”), as well as a subset of funds within the Universe (the “Peer Group”), by total return for the applicableone-year period. The Trustees reviewed a description of Broadridge/Lipper’s methodology for selecting mutual funds in the Fund’s Peer Group and Universe. The Broadridge/Lipper materials provided to the Trustees highlighted information with respect to certain representative classes to assist the Trustees in their review. As part of this review, the Trustees also reviewed the Fund’s performance against its benchmark and considered the performance information provided for the Fund at regular Board meetings by the Adviser. The Trustees also engaged with the Adviser to consider what steps might be taken to improve performance, as applicable. The Broadridge/Lipper performance data noted by the Trustees as part of their review and the determinations made by the Trustees with respect to the Fund’s performance for certain representative classes are summarized below:
The Trustees noted that based upon the Universe, the Fund’s performance for both Class A and Class I shares was in the third
quintile for theone-year period ended December 31, 2017. The Trustees discussed the performance and investment strategy of the Fund with the Adviser and, based upon these discussions and various other factors, the Trustees concluded that the Fund’s performance was satisfactory.
Advisory Fees and Expense Ratios
The Trustees considered the contractual advisory fee rate and administration fee rate paid by the Fund to the Adviser and compared the combined rate to the information prepared by Broadridge/Lipper concerning management fee rates paid by other funds in the same Broadridge/Lipper category as the Fund. The Trustees recognized that Broadridge/Lipper reported the Fund’s management fee rate as the combined contractual advisory fee and administration fee rates. The Trustees also reviewed information about other expenses and the expense ratios for the Fund. The Trustees considered the Fee Caps currently in place for the Fund, the net advisory fee rate after taking into account any waivers and/or reimbursements, and where deemed appropriate by the Trustees, additional waivers and/or reimbursements. The Trustees recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Trustees’ determinations as a result of the review of the Fund’s advisory fees and expense ratios for certain representative classes are summarized below:
The Trustees noted that based upon the Universe, the Fund’s net advisory fee and actual total expenses for Class I shares were in the first and second quintiles, respectively. After considering the factors identified above, in light of this information, the Trustees concluded that the advisory fee was satisfactory in light of the services provided to the Fund and that such fees would be for services provided in addition to, rather than duplicative of, services provided under the advisory agreements of the Underlying Funds in which the Fund invests.
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DECEMBER 31, 2018 | | J.P. MORGAN FUNDS | | | | | 27 | |
J.P. Morgan Funds are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds.
Contact JPMorgan Distribution Services, Inc. at1-800-480-4111 for a fund prospectus. You can also visit us at www.jpmorganfunds.com. Investors should carefully consider the investment objectives and risk as well as charges and expenses of the mutual fund before investing. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing.
Investors may obtain information about the Securities Investor Protection Corporation (SIPC), including the SIPC brochure, by visiting www.sipc.org or by calling SIPC at202-371-8300.
The Fund files a complete schedule of its fund holdings for the first and third quarters of its fiscal year with the SEC onForm N-Q. The Fund’s FormsN-Q are available on the SEC’s website at http://www.sec.gov. Shareholders may request the FormN-Q without charge by calling1-800-480-4111 or by visiting the J.P. Morgan Funds’ website at www.jpmorganfunds.com.
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s holdings is available in the prospectuses and Statement of Additional Information.
A copy of proxy policies and procedures is available without charge upon request by calling1-800-480-4111 and on the Fund’s website at www.jpmorganfunds.com. A description of such policies and procedures is on the SEC’s website at www.sec.gov. The Trustees have delegated the authority to vote proxies for securities owned by the Fund to the Adviser. A copy of the Fund’s voting record for the most recent12-month period ended June 30 is available on the SEC’s website at www.sec.gov or at the Fund’s website at www.jpmorganfunds.com no later than August 31 of each year. The Fund’s proxy voting record will include, among other things, a brief description of the matter voted on for each fund security, and will state how each vote was cast, for example, for or against the proposal.
![LOGO](https://capedge.com/proxy/N-CSRS/0001193125-19-066803/g673150g03z62.jpg)
![LOGO](https://capedge.com/proxy/N-CSRS/0001193125-19-066803/g652041g64u74.jpg)
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.
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| | © JPMorgan Chase & Co., 2018. All rights reserved. December 2018. | | SAN-SS2050-1218 |
J.P. Morgan Funds
Semi-Annual Report
December 31, 2018 (Unaudited)
JPMorgan Value Plus Fund
Investments in the Fund are not deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund’s share price is lower than when you invested.
Past performance is no guarantee of future performance. The general market views expressed in this report are opinions based on market and other conditions through the end of the reporting period and are subject to change without notice. These views are not intended to predict the future performance of the Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of the Fund.
Prospective investors should refer to the Fund’s prospectus for a discussion of the Fund’s investment objective, strategy and risks. Call J.P. Morgan Funds Service Center at1-800-480-4111 for a prospectus containing more complete information about the Fund, including management fees and other expenses. Please read it carefully before investing.
CEO’S LETTER
February 14, 2018 (Unaudited)
Dear Shareholders,
While the U.S. economy largely outperformed other leading economies during the second half of 2018, record corporate profits and historically low unemployment were overshadowed in December by asell-off in equity markets, unsettled global trade tensions and a political impasse that led the temporary shutdown of large parts of the federal government.
The second longest U.S. economic expansion on record extended through the third and fourth quarters of 2018. Gross domestic product advanced 3.4% in the third quarter of 2018, and was on pace to grow by about 3% for the full year 2018. In September, the U.S. jobless rate dipped to 3.7% - its lowest level in nearly 50 years - and stood at 3.9% at the end of the year. In response, the U.S. Federal Reserve raised interest rates in September and again in December.
U.S. aggregate corporate revenues and earnings reached record high levels in the second and third quarters of 2018. Though some profit growth was attributed to the temporary benefits of late-2017 tax cut legislation, the outlook for U.S. corporate earnings remained generally positive at the end of the year.
Equity prices in the U.S. largely held their ground in the third quarter of 2018. The S&P 500 Index hit record highs in August and remained elevated in September. However, early October saw a sharpsell-off in financial markets and the worst December for the S&P 500 Index since 1931 erased all gains made in the prior five months.
By the end of 2018, investors were confronted with several worrying developments. Leading economies, particularly China and the European Union, showed significant signs of slowing in the latter half of the year. While U.S.-China trade tariffs had little clear direct impact on the U.S. economy in 2018, a continuation or acceleration of protectionist policies could begin to hinder growth. Though the federal government shutdown ended subsequent to the end of the reporting period, the solution was a short-term budget agreement that failed to alleviate concerns about the possibility of future shutdowns.
Overall, economists generally remained optimistic about the fundamental strength of the U.S. economy at the end of 2918. While U.S. corporate profits and gross domestic product are expected to grow in the year ahead, the extent to which U.S. financial markets benefit remains to be seen, given the length of the current economic expansion.
We believe investors who maintain a patient approach and a well-diversified portfolio may be best positioned to navigate from current market conditions. We look forward to managing your investment needs for years to come. Should you have any questions, please visit www.jpmorganfunds.com or contact the J.P. Morgan Funds Service Center at1-800-480-4111.
Sincerely yours,
George C.W. Gatch
CEO, Global Funds Management & J.P. Morgan Asset Management
1
Fund Summary
SIX MONTHS ENDED DECEMBER 31, 2018 (Unaudited)
| | | | |
REPORTING PERIOD RETURN: | | | | |
Fund (Class I Shares)* | | | (11.39)% | |
Russell 1000 Value Index | | | (6.69)% | |
| |
Net Assets as of 12/31/2018 | | | $ 11,813,571 | |
Investment objective** and strategies
The JPMorgan Value Plus Fund (the “Fund”) seeks to provide long-term capital appreciation. Under normal circumstances, the Fund primarily takes long and short positions in equity securities of large companies. Large companies are companies with market capitalizations equal to those within the universe of the Russell 1000 Value Index at the time of purchase. As of the reconstitution of the Russell 1000 Value Index on June 22, 2018, the market capitalizations of the companies in the index ranged from $310 million to $771.47 billion. In implementing its main strategies, the Fund invests primarily in equity securities, including common stocks and real estate investment trusts (REITs).
| | |
TOP TEN LONG POSITIONS OF THE PORTFOLIO*** |
| |
1. FMC Corp. | | 3.4% |
2. CVS Health Corp. | | 3.3 |
3. Lennar Corp., Class A | | 3.1 |
4. Pfizer, Inc. | | 2.9 |
5. Bank of America Corp. | | 2.9 |
6. Berkshire Hathaway, Inc., Class B | | 2.7 |
7. Cigna Corp. | | 2.5 |
8. Charter Communications, Inc., Class A | | 2.3 |
9. Comcast Corp., Class A | | 2.3 |
10. Lincoln National Corp. | | 2.1 |
|
TOP TEN SHORT POSITIONS OF THE PORTFOLIO**** |
| |
1. Albemarle Corp. | | 8.0% |
2. Lam Research Corp. | | 7.2 |
3. Exxon Mobil Corp. | | 5.9 |
4. Linde plc (United Kingdom) | | 5.0 |
5. Torchmark Corp. | | 4.8 |
6. Scotts Miracle-Gro Co. (The) | | 4.8 |
7. Acuity Brands, Inc. | | 4.2 |
8. Xilinx, Inc. | | 3.9 |
9. Air Products & Chemicals, Inc. | | 3.6 |
10. Citrix Systems, Inc. | | 3.6 |
2
| | |
LONG POSITION PORTFOLIO COMPOSITION BY SECTOR*** |
| |
Health Care | | 19.4% |
Financials | | 18.3 |
Consumer Discretionary | | 12.1 |
Industrials | | 10.1 |
Materials | | 10.1 |
Communication Services | | 9.1 |
Energy | | 8.3 |
Information Technology | | 4.5 |
Real Estate | | 1.5 |
Consumer Staples | | 1.4 |
Utilities | | 0.8 |
Short-Term Investments | | 4.4 |
|
SHORT POSITION PORTFOLIO COMPOSITION BY SECTOR**** |
| |
Materials | | 28.6% |
Information Technology | | 17.6 |
Consumer Discretionary | | 13.6 |
Energy | | 12.1 |
Industrials | | 9.0 |
Financials | | 6.6 |
Health Care | | 6.4 |
Consumer Staples | | 5.0 |
Communication Services | | 1.1 |
* | The return shown is based on net asset values calculated for shareholder transactions and may differ from the return shown in the financial highlights, which reflects adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
** | The adviser seeks to achieve the Fund’s objective. There can be no guarantee it will be achieved. |
*** | Percentages indicated are based on total long investments as of December 31, 2018. The Fund’s portfolio composition is subject to change. |
**** | Percentages indicated are based on total short investments as of December 31, 2018. The Fund’s portfolio composition is subject to change. |
3
JPMorgan Value Plus Fund
FUND SUMMARY
SIX MONTHS ENDED DECEMBER 31, 2018 (Unaudited) (continued)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2018
| | | | | | | | | | | | | | | | |
| | INCEPTION DATE | | | | | | | | | SINCE | |
| | OF CLASS | | | 6 MONTH* | | | 1 YEAR | | | INCEPTION | |
CLASS A SHARES | | | August 31, 2016 | | | | | | | | | | | | | |
With Sales Charge** | | | | | | | (16.11)% | | | | (19.46)% | | | | 4.70% | |
Without Sales Charge | | | | | | | (11.47) | | | | (15.01) | | | | 7.15 | |
CLASS C SHARES | | | August 31, 2016 | | | | | | | | | | | | | |
With CDSC*** | | | | | | | (12.71) | | | | (16.44) | | | | 6.59 | |
Without CDSC | | | | | | | (11.71) | | | | (15.44) | | | | 6.59 | |
CLASS I SHARES | | | August 31, 2016 | | | | (11.39) | | | | (14.83) | | | | 7.39 | |
* Not annualized.
** Sales Charge for Class A Shares is 5.25%.
*** Assumes a 1% CDSC (contingent deferred sales charge) for the 6 month and one year periods and 0% CDSC thereafter.
LIFE OF FUND PERFORMANCE (8/31/16 TO 12/31/18)
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The performance quoted is past performance and is not a guarantee of future results. Mutual funds are subject to certain market risks. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data shown. Forup-to-datemonth-end performance information please call1-800-480-4111.
4
The Fund commenced operations on August 31, 2016.
The graph illustrates comparative performance for $1,000,000 invested in Class I Shares of the JPMorgan Value Plus Fund and the Russell 1000 Value Index from August 31, 2016 to December 31, 2018. The performance of the Fund assumes reinvestment of all dividends and capital gain distributions, if any, and does not include a sales charge. The performance of the Russell 1000 Value Index does not reflect the deduction of expenses or a sales charge associated with a mutual fund and approximates the minimum possible dividend reinvestment of the securities included in the benchmark, if applicable. The dividend is reinvested after deduction of withholding tax, applying the maximum rate tonon-resident institutional investors who do not benefit from double taxation treaties. The Russell 1000 Value Index is an unmanaged index, which measures the performance of those Russell 1000 companies with lowerprice-to-book ratios and lower forecasted growth values. Investors cannot invest directly in an index.
Class I Shares have a $1,000,000 minimum initial investment.
Since the Fund’s inception, it has not experienced any shareholder activity. If shareholder activity had occurred, the Fund’s performance may have been impacted.
Fund performance may reflect the waiver of the Fund’s fees and reimbursement of expenses for certain periods since the inception date. Without these waivers and reimbursements, performance would have been lower. Also, performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemptions of Fund shares.
The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.
5
JPMorgan Value Plus Fund
SCHEDULE OF PORTFOLIO INVESTMENTS
AS OF DECEMBER 31, 2018 (Unaudited)
| | | | | | | | |
Investments | | Shares | | | Value ($) |
|
LONG POSITIONS - 115.8% | |
|
COMMON STOCKS - 110.8% | |
| | |
Aerospace & Defense - 2.2% | | | | | | | | |
General Dynamics Corp. | | | 1,000 | | | | 157,210 | |
United Technologies Corp. | | | 1,000 | | | | 106,480 | |
| | | | | | | | |
| | | | | | | 263,690 | |
| | | | | | | | |
Airlines - 5.4% | | | | | | | | |
American Airlines Group, Inc. | | | 8,300 | | | | 266,513 | |
Delta Air Lines, Inc.(a) | | | 3,542 | | | | 176,746 | |
Southwest Airlines Co. | | | 4,131 | | | | 192,009 | |
| | | | | | | | |
| | | | | | | 635,268 | |
| | | | | | | | |
Auto Components - 2.5% | | | | | | | | |
Aptiv plc | | | 600 | | | | 36,942 | |
Delphi Technologies plc | | | 6,400 | | | | 91,648 | |
Lear Corp. | | | 400 | | | | 49,144 | |
Magna International, Inc. (Canada) | | | 2,500 | | | | 113,625 | |
| | | | | | | | |
| | | | | | | 291,359 | |
| | | | | | | | |
Automobiles - 1.4% | | | | | | | | |
General Motors Co.(a) | | | 4,959 | | | | 165,878 | |
| | | | | | | | |
| | |
Banks - 12.0% | | | | | | | | |
Bank of America Corp.(a) | | | 16,012 | | | | 394,536 | |
Cathay General Bancorp | | | 800 | | | | 26,824 | |
Citigroup, Inc.(a) | | | 5,334 | | | | 277,688 | |
Citizens Financial Group, Inc. | | | 1,600 | | | | 47,568 | |
East West Bancorp, Inc. | | | 600 | | | | 26,118 | |
First Republic Bank | | | 1,410 | | | | 122,529 | |
Huntington Bancshares, Inc. | | | 8,337 | | | | 99,377 | |
KeyCorp(a) | | | 12,325 | | | | 182,163 | |
Regions Financial Corp. | | | 6,200 | | | | 82,956 | |
SVB Financial Group* | | | 375 | | | | 71,220 | |
Wells Fargo & Co.(a) | | | 1,796 | | | | 82,760 | |
| | | | | | | | |
| | | | | | | 1,413,739 | |
| | | | | | | | |
Biotechnology - 0.7% | | | | | | | | |
Alexion Pharmaceuticals, Inc.* | | | 300 | | | | 29,208 | |
Biogen, Inc.* | | | 200 | | | | 60,184 | |
| | | | | | | | |
| | | | | | | 89,392 | |
| | | | | | | | |
Building Products - 0.2% | | | | | | | | |
Owens Corning | | | 500 | | | | 21,990 | |
| | | | | | | | |
| | |
Capital Markets - 1.9% | | | | | | | | |
Morgan Stanley | | | 3,963 | | | | 157,133 | |
State Street Corp. | | | 1,013 | | | | 63,890 | |
| | | | | | | | |
| | | | | | | 221,023 | |
| | | | | | | | |
Chemicals - 8.4% | | | | | | | | |
Celanese Corp. | | | 2,036 | | | | 183,179 | |
DowDuPont, Inc. | | | 2,910 | | | | 155,627 | |
Eastman Chemical Co.(a) | | | 2,508 | | | | 183,360 | |
FMC Corp.(a) | | | 6,300 | | | | 465,948 | |
| | | | | | | | |
| | | | | | | 988,114 | |
| | | | | | | | |
Construction & Engineering - 0.3% | |
KBR, Inc. | | | 2,300 | | | | 34,914 | |
| | | | | | | | |
|
Containers & Packaging - 2.0% | |
Crown Holdings, Inc.* | | | 3,900 | | | | 162,123 | |
| | | | | | | | |
Investments | | Shares | | | Value ($) |
Westrock Co. | | | 2,000 | | | | 75,520 | |
| | | | | | | | |
| | | | | | | 237,643 | |
| | | | | | | | |
Diversified Financial Services - 3.1% | |
Berkshire Hathaway, Inc., Class B* | | | 1,800 | | | | 367,524 | |
| | | | | | | | |
|
Diversified Telecommunication Services - 1.9% | |
Verizon Communications, Inc. | | | 3,900 | | | | 219,258 | |
| | | | | | | | |
| | |
Electric Utilities - 0.9% | | | | | | | | |
NextEra Energy, Inc. | | | 600 | | | | 104,292 | |
| | | | | | | | |
| | |
Electrical Equipment - 1.2% | | | | | | | | |
Eaton Corp. plc | | | 2,080 | | | | 142,813 | |
| | | | | | | | |
| | |
Entertainment - 0.8% | | | | | | | | |
Walt Disney Co. (The) | | | 900 | | | | 98,685 | |
| | | | | | | | |
|
Equity Real Estate Investment Trusts (REITs) - 1.7% | |
Brixmor Property Group, Inc. | | | 2,300 | | | | 33,787 | |
Prologis, Inc. | | | 2,000 | | | | 117,440 | |
Vornado Realty Trust | | | 900 | | | | 55,827 | |
| | | | | | | | |
| | | | | | | 207,054 | |
| | | | | | | | |
Food Products - 1.2% | | | | | | | | |
Mondelez International, Inc., Class A | | | 3,400 | | | | 136,102 | |
| | | | | | | | |
|
Health Care Equipment & Supplies - 4.3% | |
Boston Scientific Corp.* | | | 1,500 | | | | 53,010 | |
Medtronic plc | | | 2,700 | | | | 245,592 | |
Zimmer Biomet Holdings, Inc. | | | 1,975 | | | | 204,847 | |
| | | | | | | | |
| | | | | | | 503,449 | |
| | | | | | | | |
Health Care Providers & Services - 9.3% | |
Cigna Corp. | | | 1,800 | | | | 341,856 | |
CVS Health Corp.(a) | | | 6,900 | | | | 452,088 | |
UnitedHealth Group, Inc.(a) | | | 700 | | | | 174,384 | |
Universal Health Services, Inc., Class B | | | 1,100 | | | | 128,216 | |
| | | | | | | | |
| | | | | | | 1,096,544 | |
| | | | | | | | |
Hotels, Restaurants & Leisure - 1.4% | |
Arcos Dorados Holdings, Inc., Class A (Uruguay) | | | 5,300 | | | | 41,870 | |
Caesars Entertainment Corp.* | | | 11,300 | | | | 76,727 | |
Cheesecake Factory, Inc. (The) | | | 1,000 | | | | 43,510 | |
| | | | | | | | |
| | | | | | | 162,107 | |
| | | | | | | | |
Household Durables - 6.1% | | | | | | | | |
Lennar Corp., Class A(a) | | | 10,838 | | | | 424,308 | |
Meritage Homes Corp.* | | | 1,400 | | | | 51,408 | |
Taylor Morrison Home Corp., Class A* | | | 6,400 | | | | 101,760 | |
Toll Brothers, Inc. | | | 3,100 | | | | 102,083 | |
Whirlpool Corp. | | | 400 | | | | 42,748 | |
| | | | | | | | |
| | | | | | | 722,307 | |
| | | | | | | | |
Insurance - 4.2% | | | | | | | | |
Athene Holding Ltd., Class A* | | | 2,800 | | | | 111,524 | |
Lincoln National Corp.(a) | | | 5,512 | | | | 282,821 | |
Principal Financial Group, Inc. | | | 1,000 | | | | 44,170 | |
Willis Towers Watson plc | | | 400 | | | | 60,744 | |
| | | | | | | | |
| | | | | | | 499,259 | |
| | | | | | | | |
SEE NOTES TO FINANCIAL STATEMENTS.
6
| | | | | | | | |
Investments | | Shares | | | Value ($) |
Internet & Direct Marketing Retail - 1.9% | |
Expedia Group, Inc. | | | 2,000 | | | | 225,300 | |
| | | | | | | | |
| | |
IT Services - 1.8% | | | | | | | | |
Alliance Data Systems Corp. | | | 200 | | | | 30,016 | |
InterXion Holding NV (Netherlands)* | | | 3,400 | | | | 184,144 | |
| | | | | | | | |
| | | | | | | 214,160 | |
| | | | | | | | |
Machinery - 1.8% | | | | | | | | |
PACCAR, Inc. | | | 2,900 | | | | 165,706 | |
Stanley Black & Decker, Inc. | | | 400 | | | | 47,896 | |
| | | | | | | | |
| | | | | | | 213,602 | |
| | | | | | | | |
Media - 5.8% | | | | | | | | |
Altice USA, Inc., Class A | | | 3,700 | | | | 61,124 | |
Charter Communications, Inc., Class A*(a) | | | 1,100 | | | | 313,467 | |
Comcast Corp., Class A(a) | | | 9,100 | | | | 309,855 | |
| | | | | | | | |
| | | | | | | 684,446 | |
| | | | | | | | |
Metals & Mining - 1.3% | | | | | | | | |
Alumina Ltd., ADR (Australia) | | | 5,423 | | | | 34,978 | |
United States Steel Corp.(a) | | | 6,366 | | | | 116,116 | |
| | | | | | | | |
| | | | | | | 151,094 | |
| | | | | | | | |
Multiline Retail - 0.4% | | | | | | | | |
Dollar Tree, Inc.* | | | 500 | | | | 45,160 | |
| | | | | | | | |
|
Oil, Gas & Consumable Fuels - 9.7% | |
Chevron Corp. | | | 1,500 | | | | 163,185 | |
Diamondback Energy, Inc. | | | 1,388 | | | | 128,668 | |
EOG Resources, Inc. | | | 2,039 | | | | 177,821 | |
Euronav NV (Belgium) | | | 8,100 | | | | 56,133 | |
Marathon Petroleum Corp. | | | 1,600 | | | | 94,416 | |
Occidental Petroleum Corp.(a) | | | 3,366 | | | | 206,605 | |
Parsley Energy, Inc., Class A* | | | 3,000 | | | | 47,940 | |
Pioneer Natural Resources Co.(a) | | | 2,039 | | | | 268,169 | |
| | | | | | | | |
| | | | | | | 1,142,937 | |
| | | | | | | | |
Pharmaceuticals - 8.1% | | | | | | | | |
Bristol-Myers Squibb Co. | | | 1,500 | | | | 77,970 | |
Eli Lilly & Co. | | | 600 | | | | 69,432 | |
Johnson & Johnson | | | 1,000 | | | | 129,050 | |
Merck & Co., Inc. | | | 3,700 | | | | 282,717 | |
Pfizer, Inc.(a) | | | 9,242 | | | | 403,413 | |
| | | | | | | | |
| | | | | | | 962,582 | |
| | | | | | | | |
Road & Rail - 0.6% | | | | | | | | |
Kansas City Southern | | | 700 | | | | 66,815 | |
| | | | | | | | |
|
Semiconductors & Semiconductor Equipment - 3.4% | |
Analog Devices, Inc.(a) | | | 1,900 | | | | 163,077 | |
NXP Semiconductors NV (Netherlands) | | | 1,500 | | | | 109,920 | |
Texas Instruments, Inc. | | | 1,400 | | | | 132,300 | |
| | | | | | | | |
| | | | | | | 405,297 | |
| | | | | | | | |
Software - 0.0%(b) | | | | | | | | |
Microsoft Corp. | | | 13 | | | | 1,320 | |
| | | | | | | | |
|
Textiles, Apparel & Luxury Goods - 0.4% | |
Tapestry, Inc. | | | 1,500 | | | | 50,625 | |
| | | | | | | | |
| | | | | | | | |
Investments | | Shares | | | Value ($) |
|
Tobacco - 0.4% | |
Altria Group, Inc. | | | 1,000 | | | | 49,390 | |
| | | | | | | | |
|
Wireless Telecommunication Services - 2.1% | |
T-Mobile US, Inc.* | | | 3,900 | | | | 248,079 | |
| | | | | | | | |
TOTAL COMMON STOCKS (Cost $13,958,104) | | | | 13,083,211 | |
| | | | | | | | |
| | |
Investments | | Shares | | | Value ($) |
|
SHORT-TERM INVESTMENTS - 5.0% | |
|
INVESTMENT COMPANIES - 5.0% | |
JPMorgan U.S. Government Money Market Fund Class Institutional Shares, 2.40%(c)(d)(Cost $595,194) | | | 595,194 | | | | 595,194 | |
| | | | | | | | |
TOTAL LONG POSITIONS (Cost $14,553,298) | | | | 13,678,405 | |
| | | | | | | | |
| | |
Investments | | Shares | | | Value ($) |
|
SHORT POSITIONS - (15.8)% | |
|
COMMON STOCKS - (15.8)% | |
|
Air Freight & Logistics - (0.3)% | |
CH Robinson Worldwide, Inc. | | | (420 | ) | | | (35,318 | ) |
| | | | | | | | |
|
Auto Components - (0.2)% | |
Garrett Motion, Inc. (Switzerland)* | | | (1,831 | ) | | | (22,595 | ) |
| | | | | | | | |
|
Banks - (0.3)% | |
First Financial Bankshares, Inc. | | | (600 | ) | | | (34,614 | ) |
| | | | | | | | |
|
Chemicals - (4.1)% | |
Air Products & Chemicals, Inc. | | | (425 | ) | | | (68,021 | ) |
Albemarle Corp. | | | (1,935 | ) | | | (149,130 | ) |
Linde plc (United Kingdom) | | | (595 | ) | | | (92,844 | ) |
LyondellBasell Industries NV, Class A | | | (600 | ) | | | (49,896 | ) |
PPG Industries, Inc. | | | (300 | ) | | | (30,669 | ) |
Scotts Miracle-Gro Co. (The) | | | (1,445 | ) | | | (88,810 | ) |
| | | | | | | | |
| | | | | | | (479,370 | ) |
| | | | | | | | |
Containers & Packaging - (0.2)% | | | | | | | | |
Ball Corp. | | | (620 | ) | | | (28,508 | ) |
| | | | | | | | |
|
Electrical Equipment - (0.7)% | |
Acuity Brands, Inc. | | | (689 | ) | | | (79,201 | ) |
| | | | | | | | |
|
Energy Equipment & Services - (0.4)% | |
Helmerich & Payne, Inc. | | | (750 | ) | | | (35,955 | ) |
Schlumberger Ltd. | | | (475 | ) | | | (17,138 | ) |
| | | | | | | | |
| | | | | | | (53,093 | ) |
| | | | | | | | |
Food & Staples Retailing - (0.8)% | | | | | | | | |
Costco Wholesale Corp. | | | (172 | ) | | | (35,038 | ) |
Sysco Corp. | | | (943 | ) | | | (59,089 | ) |
| | | | | | | | |
| | | | | | | (94,127 | ) |
| | | | | | | | |
7
| | | | | | | | |
Investments | | Shares | | | Value ($) |
Health Care Equipment & Supplies - (1.0)% | |
Baxter International, Inc. | | | (618 | ) | | | (40,677 | ) |
Edwards Lifesciences Corp.* | | | (269 | ) | | | (41,202 | ) |
Stryker Corp. | | | (244 | ) | | | (38,247 | ) |
| | | | | | | | |
| | | | | | | (120,126 | ) |
| | | | | | | | |
Hotels, Restaurants & Leisure - (0.2)% | |
Brinker International, Inc. | | | (725 | ) | | | (31,886 | ) |
| | | | | | | | |
|
Insurance - (0.8)% | |
Torchmark Corp. | | | (1,199 | ) | | | (89,361 | ) |
| | | | | | | | |
|
Interactive Media & Services - (0.2)% | |
Snap, Inc., Class A* | | | (3,553 | ) | | | (19,577 | ) |
| | | | | | | | |
|
Internet & Direct Marketing Retail - (0.3)% | |
Booking Holdings, Inc.* | | | (19 | ) | | | (32,726 | ) |
| | | | | | | | |
|
Multiline Retail - (0.4)% | |
Kohl’s Corp. | | | (719 | ) | | | (47,698 | ) |
| | | | | | | | |
|
Oil, Gas & Consumable Fuels - (1.5)% | |
ConocoPhillips | | | (999 | ) | | | (62,288 | ) |
Exxon Mobil Corp. | | | (1,624 | ) | | | (110,740 | ) |
| | | | | | | | |
| | | | | | | (173,028 | ) |
| | | | | | | | |
Paper & Forest Products - (0.2)% | | | | | | | | |
Domtar Corp. | | | (708 | ) | | | (24,872 | ) |
| | | | | | | | |
|
Professional Services - (0.4)% | |
Thomson Reuters Corp. (Canada) | | | (1,094 | ) | | | (52,851 | ) |
| | | | | | | | |
|
Semiconductors & Semiconductor Equipment - (2.2)% | |
Applied Materials, Inc. | | | (1,065 | ) | | | (34,868 | ) |
Lam Research Corp. | | | (982 | ) | | | (133,719 | ) |
Micron Technology, Inc.* | | | (619 | ) | | | (19,641 | ) |
Xilinx, Inc. | | | (860 | ) | | | (73,246 | ) |
| | | | | | | | |
| | | | | | | (261,474 | ) |
| | | | | | | | |
Software - (0.6)% | | | | | | | | |
Citrix Systems, Inc. | | | (655 | ) | | | (67,111 | ) |
| | | | | | | | |
|
Specialty Retail - (0.8)% | |
Bed Bath & Beyond, Inc. | | | (1,818 | ) | | | (20,580 | ) |
Home Depot, Inc. (The) | | | (358 | ) | | | (61,511 | ) |
TJX Cos., Inc. (The) | | | (320 | ) | | | (14,317 | ) |
| | | | | | | | |
| | | | | | | (96,408 | ) |
| | | | | | | | |
Textiles, Apparel & Luxury Goods - (0.2)% | |
Lululemon Athletica, Inc.* | | | (184 | ) | | | (22,376 | ) |
| | | | | | | | |
| |
TOTAL COMMON STOCKS (Proceeds $(2,181,752)) | | | | (1,866,320 | ) |
| | | | | | | | |
| |
TOTAL SHORT POSITIONS (Proceeds $(2,181,752)) | | | | (1,866,320 | ) |
| | | | | | | | |
| |
Total Investments - 100.0% (Cost $12,371,546) | | | | 11,812,085 | |
| | | | | | | | |
Other Assets in Excess of Liabilities - 0.0%(b) | | | | 1,486 | |
| | | | | | | | |
Net Assets - 100.0% | | | | 11,813,571 | |
| | | | | | | | |
| |
Percentages indicated are based on net assets.
Abbreviations
ADR | American Depositary Receipt |
(a) | All or a portion of this security is segregated as collateral for short sales. The total value of securities segregated as collateral is $3,546,140. |
(b) | Amount rounds to less than 0.1% of net assets. |
(c) | Investment in affiliate. Fund is registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc. |
(d) | The rate shown is the current yield as of December 31, 2018. |
* | Non-income producing security. |
8
| | | | |
| | JPMorgan Value Plus Fund | |
| |
ASSETS: | | | | |
Investments innon-affiliates, at value | | $ | 13,083,211 | |
Investments in affiliates, at value | | | 595,194 | |
Receivables: | | | | |
Dividends fromnon-affiliates | | | 24,150 | |
Dividends from affiliates | | | 1,005 | |
Due from Adviser | | | 2,080 | |
| | | | |
Total Assets | | | 13,705,640 | |
| | | | |
| |
LIABILITIES: | | | | |
Payables: | | | | |
Securities sold short, at value | | | 1,866,320 | |
Dividend expense tonon-affiliates on securities sold short | | | 2,322 | |
Interest expense tonon-affiliates on securities sold short | | | 967 | |
Accrued liabilities: | | | | |
Administration fees | | | 3 | |
Distribution fees | | | 21 | |
Service fees | | | 359 | |
Custodian and accounting fees | | | 6,309 | |
Trustees’ and Chief Compliance Officer’s fees | | | 20 | |
Other | | | 15,748 | |
| | | | |
Total Liabilities | | | 1,892,069 | |
| | | | |
Net Assets | | $ | 11,813,571 | |
| | | | |
| |
NET ASSETS: | | | | |
Paid-in-Capital | | $ | 12,710,875 | |
Total distributable earnings (loss) (a) | | | (897,304) | |
| | | | |
Total Net Assets | | $ | 11,813,571 | |
| | | | |
| |
Net Assets: | | | | |
Class A | | $ | 23,491 | |
Class C | | | 23,219 | |
Class I | | | 11,766,861 | |
Total | | $ | 11,813,571 | |
| |
Outstanding units of beneficial interest (shares) | | | | |
($0.0001 par value; unlimited number of shares authorized): | | | | |
Class A | | | 1,649 | |
Class C | | | 1,633 | |
Class I | | | 825,501 | |
| |
Net Asset Value (b): | | | | |
Class A - Redemption price per share | | $ | 14.25 | |
Class C - Offering price per share (c) | | | 14.22 | |
Class I - Offering and redemption price per share | | | 14.25 | |
Class A maximum sales charge | | | 5.25% | |
Class A maximum public offering price per share | | | | |
[net asset value per share/(100% – maximum sales charge)] | | $ | 15.04 | |
| | | | |
| |
Cost of investments innon-affiliates | | $ | 13,958,104 | |
Cost of investments in affiliates | | | 595,194�� | |
Proceeds from securities sold short | | | 2,181,752 | |
(a) Total distributable earnings have been aggregated to conform to the current presentation requirements for the adoption of the Securities and Exchange Commission’s Disclosure Update and Simplification Rule. See Note 8.
(b) Per share amounts may not recalculate due to rounding of net assets and/or shares outstanding. (c) Redemption price for Class C Shares varies based upon length of time the shares are held.
9
| | | | |
| | JPMorgan | |
| | Value Plus Fund | |
INVESTMENT INCOME: | | | | |
Interest income fromnon-affiliates | | $ | 1 | |
Dividend income fromnon-affiliates | | | 147,643 | |
Dividend income from affiliates | | | 3,921 | |
Total investment income | | | 151,565 | |
| |
EXPENSES: | | | | |
Investment advisory fees | | | 50,729 | |
Administration fees | | | 5,485 | |
Distribution fees: | | | | |
Class A | | | 34 | |
Class C | | | 100 | |
Service fees: | | | | |
Class A | | | 34 | |
Class C | | | 33 | |
Class I | | | 16,843 | |
Custodian and accounting fees | | | 12,013 | |
Professional fees | | | 28,136 | |
Trustees’ and Chief Compliance Officer’s fees | | | 12,577 | |
Printing and mailing costs | | | 2,970 | |
Registration and filing fees | | | 55 | |
Transfer agency fees (See Note 2.G.) | | | 174 | |
Other | | | 4,227 | |
Dividend expense tonon-affiliates on securities sold short | | | 23,758 | |
Interest expense tonon-affiliates on securities sold short | | | 7,103 | |
Total expenses | | | 164,271 | |
Less fees waived | | | (67,345 | ) |
Less expense reimbursements | | | (2,047 | ) |
Net expenses | | | 94,879 | |
Net investment income (loss) | | | 56,686 | |
| |
REALIZED/UNREALIZED GAINS (LOSSES): | | | | |
Net realized gain (loss) on transactions from: | | | | |
Investments innon-affiliates | | | (255,018 | ) |
Securities sold short | | | (8,171 | ) |
Net realized gain (loss) | | | (263,189 | ) |
Change in net unrealized appreciation/depreciation on: | | | | |
Investments innon-affiliates | | | (1,616,280 | ) |
Securities sold short | | | 306,356 | |
Change in net unrealized appreciation/depreciation | | | (1,309,924 | ) |
Net realized/unrealized gains (losses) | | | (1,573,113 | ) |
Change in net assets resulting from operations | | $ | (1,516,427 | ) |
10
| | | | | | | | |
| | JPMorgan Value Plus Fund | |
| | Six Months Ended December 31, 2018 (Unaudited) | | | Year Ended June 30, 2018 | |
| |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS: | | | | | | | | |
Net investment income (loss) | | $ | 56,686 | | | $ | 102,506 | |
Net realized gain (loss) | | | (263,189 | ) | | | 1,350,617 | |
Change in net unrealized appreciation/depreciation | | | (1,309,924 | ) | | | (447,809) | |
| | | | |
Change in net assets resulting from operations | | | (1,516,427 | ) | | | 1,005,314 | |
| | | | |
| | |
DISTRIBUTIONS TO SHAREHOLDERS:(a) | | | | | | | | |
Class A | | | (2,052 | ) | | | (3,178) | |
Class C | | | (1,909 | ) | | | (3,052) | |
Class I | | | (1,058,642 | ) | | | (1,614,779) | |
| | | | |
Total distributions to shareholders | | | (1,062,603 | ) | | | (1,621,009) | |
| | | | |
| | |
CAPITAL TRANSACTIONS: | | | | | | | | |
Change in net assets resulting from capital transactions | | | 1,062,603 | | | | 1,621,009 | |
| | | | |
| | |
NET ASSETS: | | | | | | | | |
Change in net assets | | | (1,516,427 | ) | | | 1,005,314 | |
Beginning of period | | | 13,329,998 | | | | 12,324,684 | |
| | | | |
End of period | | $ | 11,813,571 | | | $ | 13,329,998 | |
| | | | |
(a) The prior period distributions have been reclassified to conform to current period presentation for the adoption of the Securities and Exchange Commission’s Disclosure Update and Simplification Rule. See Note 8. Prior period balances were as follows:
| | | | |
Class A | | | | |
From net investment income | | $ | (134 | ) |
From net realized gains | | | (3,044 | ) |
Class C | | | | |
From net investment income | | | (11 | ) |
From net realized gains | | | (3,041 | ) |
Class I | | | | |
From net investment income | | | (97,632 | ) |
From net realized gains | | | (1,517,147 | ) |
11
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS INDICATED (continued)
| | | | | | | | |
| | JPMorgan Value Plus Fund | |
| | Six Months Ended | | | | |
| | December 31, 2018 | | | Year Ended | |
| | (Unaudited) | | | June 30, 2018 | |
| |
CAPITAL TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Distributions reinvested | | | 2,052 | | | | 3,178 | |
| | | | |
Change in net assets resulting from Class A capital transactions | | $ | 2,052 | | | $ | 3,178 | |
| | | | |
Class C | | | | | | | | |
Distributions reinvested | | | 1,909 | | | | 3,052 | |
| | | | |
Change in net assets resulting from Class C capital transactions | | $ | 1,909 | | | $ | 3,052 | |
| | | | |
Class I | | | | | | | | |
Proceeds from shares issued | | $ | — | | | $ | 792,738 | |
Distributions reinvested | | | 1,058,642 | | | | 1,614,779 | |
Cost of shares redeemed | | | — | | | | (792,738) | |
| | | | |
Change in net assets resulting from Class I capital transactions | | $ | 1,058,642 | | | $ | 1,614,779 | |
| | | | |
Total change in net assets resulting from capital transactions | | $ | 1,062,603 | | | $ | 1,621,009 | |
| | | | |
| | |
SHARE TRANSACTIONS: | | | | | | | | |
Class A | | | | | | | | |
Reinvested | | | 136 | | | | 178 | |
| | | | |
Change in Class A Shares | | | 136 | | | | 178 | |
Class C | | | | | | | | |
Reinvested | | | 127 | | | | 172 | |
| | | | |
Change in Class C Shares | | | 127 | | | | 172 | |
| | | | |
Class I | | | | | | | | |
Issued | | | — | | | | 41,701 | |
Reinvested | | | 69,919 | | | | 90,035 | |
Redeemed | | | — | | | | (41,701) | |
| | | | |
Change in Class I Shares | | | 69,919 | | | | 90,035 | |
| | | | |
SEE NOTES TO FINANCIAL STATEMENTS.
12
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2018 (Unaudited)
| | | | |
| | JPMorgan | |
| | Value Plus | |
| | Fund | |
INCREASE (DECREASE) IN CASH | | | | |
Cash flows provided (used) by operating activities: | | | | |
Increase in net assets resulting from operations | | $ | (1,516,427) | |
Adjustments to reconcile net increase / decrease in net assets resulting from operations to net cash provided (used) by operating activities: | | | | |
Purchase of investment securities | | | (9,733,857) | |
Proceeds from disposition of investment securities | | | 9,547,746 | |
Covers of investment securities sold short | | | (1,283,588) | |
Proceeds from investment securities sold short | | | 1,578,994 | |
Purchases of short-term investments - affiliates, net | | | (128,928) | |
Change in unrealized (appreciation) / depreciation on investments | | | 1,616,280 | |
Change in unrealized (appreciation) / depreciation on investment securities sold short | | | (306,356) | |
Net realized (gain) / loss on investments | | | 255,018 | |
Net realized (gain) / loss on investments securities sold short | | | 8,171 | |
Increase in dividends receivable fromnon-affiliates | | | (13,533) | |
Increase in dividends receivable from affiliates | | | (617) | |
Increase in due from Adviser | | | (2,080) | |
Decrease in dividend expenses tonon-affiliates on securities sold short | | | (355) | |
Decrease in interest expense tonon-affiliates on securities sold short | | | (78) | |
Decrease in advisory fees payable | | | (8,480) | |
Increase in administration fees payable | | | 3 | |
Decrease in distribution fees payable | | | (1) | |
Increase in custodian and accounting fees payable | | | 1,695 | |
Increase in Trustees’ and Chief Compliance Office fees payable | | | 20 | |
Increase in service fees payable | | | 359 | |
Decrease in other accrued expenses payable | | | (13,985) | |
| | | | |
Net cash provided (used) by operating activities | | | 1 | |
| | | | |
| |
Cash flows provided (used) by financing activities: | | | | |
Decrease in due to custodian | | | (1) | |
| | | | |
Net cash provided (used) by financing activities | | | (1) | |
| | | | |
Net increase / (decrease) in cash | | | - | |
| | | | |
| |
Cash: | | | | |
Net increase (decrease) in unrestricted and restricted cash and deposit at broker | | | - | |
Restricted and unrestricted cash and deposit at broker at beginning of period | | | - | |
| | | | |
Restricted and unrestricted cash and deposit at broker at end of period | | $ | - | |
| | | | |
Supplemental disclosure of cash flow information:
For the six months ended December 31, 2018, the Fund paid $7,181 in interest expenses for securities sold short.
For purposes of reporting the Statement of Cash Flows, the Fund considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash equivalents.
SEE NOTES TO FINANCIAL STATEMENTS.
13
FINANCIAL HIGHLIGHTS
FOR THE PERIODS INDICATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Per share operating performance | | | Ratios/Supplemental data | |
| | | | | Investment operations | | | Distributions | | | | | | | | | | | | Ratios to average net assets (a) | | | | | | | |
| | Net asset value, beginning of period | | | Net investment income (loss) (b) | | | Net realized and unrealized gains (losses) on investments | | | Total from investment operations | | | Net investment income | | | Net realized gain | | | Total distributions | | | Net asset value, end of period | | | Total return (excludes sales charge) (c)(d) | | | Net assets, end of period | | | Net expenses (including dividend and interest expense for securities sold short) (e)(f) | | | Net investment income (loss) | | | Expenses without waivers, reimbursements and earnings credits (including dividend and interest expense for securities sold short) (f) | | | Portfolio turnover rate (excluding securities sold short) (c) | | | Portfolio turnover rate (including securities sold short) (c) | |
| | | | |
JPMorgan Value Plus Fund | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended December 31, 2018 (Unaudited) | | | $17.54 | | | | $0.05 | | | | $(1.99) | | | | $(1.94) | | | | $(0.09) | | | | $ (1.26) | | | | $ (1.35) | | | | $14.25 | | | | (11.47)% | | | | $23,491 | | | | 1.66% | | | | 0.59% | | | | 2.95% | | | | 63% | | | | 73% | |
Year Ended June 30, 2018 | | | 18.42 | | | | 0.10 | | | | 1.39 | | | | 1.49 | | | | (0.09) | | | | (2.28) | | | | (2.37) | | | | 17.54 | | | | 7.89 | | | | 26,539 | | | | 1.58(g) | | | | 0.52(g) | | | | 3.24(g) | | | | 115 | | | | 133 | |
August 31, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.06 | | | | 3.39 | | | | 3.45 | | | | (0.03) | | | | — | | | | (0.03) | | | | 18.42 | | | | 22.99 | | | | 24,599 | | | | 1.58(g) | | | | 0.44(g) | | | | 3.04(g) | | | | 91 | | | | 110 | |
Class C | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended December 31, 2018 (Unaudited) | | | 17.46 | | | | 0.01 | | | | (1.98) | | | | (1.97) | | | | (0.01) | | | | (1.26) | | | | (1.27) | | | | 14.22 | | | | (11.71) | | | | 23,219 | | | | 2.15 | | | | 0.09 | | | | 3.45 | | | | 63 | | | | 73 | |
Year Ended June 30, 2018 | | | 18.36 | | | | — (i) | | | | 1.39 | | | | 1.39 | | | | (0.01) | | | | (2.28) | | | | (2.29) | | | | 17.46 | | | | 7.35 | | | | 26,298 | | | | 2.08(g) | | | | 0.03(g) | | | | 3.75(g) | | | | 115 | | | | 133 | |
August 31, 2016 (h) through June 30, 2017 | | | 15.00 | | | | (0.01) | | | | 3.38 | | | | 3.37 | | | | (0.01) | | | | — | | | | (0.01) | | | | 18.36 | | | | 22.47 | | | | 24,497 | | | | 2.08(g) | | | | (0.06)(g) | | | | 3.50(g) | | | | 91 | | | | 110 | |
Class I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended December 31, 2018 (Unaudited) | | | 17.57 | | | | 0.07 | | | | (2.00) | | | | (1.93) | | | | (0.13) | | | | (1.26) | | | | (1.39) | | | | 14.25 | | | | (11.39) | | | | 11,766,861 | | | | 1.40 | | | | 0.84 | | | | 2.43 | | | | 63 | | | | 73 | |
Year Ended June 30, 2018 | | | 18.44 | | | | 0.14 | | | | 1.40 | | | | 1.54 | | | | (0.13) | | | | (2.28) | | | | (2.41) | | | | 17.57 | | | | 8.17 | | | | 13,277,161 | | | | 1.33(g) | | | | 0.77(g) | | | | 2.37(g) | | | | 115 | | | | 133 | |
August 31, 2016 (h) through June 30, 2017 | | | 15.00 | | | | 0.10 | | | | 3.38 | | | | 3.48 | | | | (0.04) | | | | — | | | | (0.04) | | | | 18.44 | | | | 23.22 | | | | 12,275,588 | | | | 1.33(g) | | | | 0.69(g) | | | | 2.65(g) | | | | 91 | | | | 110 | |
(a) | Annualized for periods less than one year, unless otherwise noted. |
(b) | Calculated based upon average shares outstanding. |
(c) | Not annualized for periods less than one year. |
(d) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset values for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
(e) | Includes earnings credits and interest expense, if applicable, each of which is less than 0.005% unless otherwise noted. |
(f) | The net expenses and expenses without waivers, reimbursements and earnings credits (excluding dividend and interest expense for securities sold short) for Class A are 1.20% and 2.49% for the period ended December 31, 2018, 1.20% and 2.86% for the year ended June 30, 2018 and 1.17% and 2.65% for the period ended June 30, 2017; for Class C are 1.69% and 2.99% for the period ended December 31, 2018, 1.70% and 3.37% for the year ended June 30, 2018 and 1.67% and 3.11% for the period ended June 30, 2017 and for Class I are 0.94% and 1.97% for the period ended December 31, 2018, 0.95% and 1.99% for the year ended June 30, 2018 and 0.93% and 2.26% for period ended June 30, 2017, respectively. |
(g) | Certainnon-recurring expenses incurred by the Fund were not annualized for the year ended June 30, 2018 and the period ended June 30, 2017. |
(h) | Commencement of operations. |
(i) | Amount rounds to less than $0.005. |
SEE NOTES TO FINANCIAL STATEMENTS.
14
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2018 (Unaudited)
1. Organization
JPMorgan Trust IV (“JPM IV”) was formed on November 11, 2015, as a Delaware statutory trust, pursuant to a Declaration of Trust dated November 11, 2015, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as anopen-end management investment company.
The following is a separate fund of the Trust (the “Fund”) covered by this report:
| | | | |
| | | | Diversified/Non- |
| | Classes Offered | | Diversified |
|
JPMorgan Value Plus Fund | | Class A, Class C and Class I | | Diversified |
The investment objective of the Fund is to seek to provide long-term capital appreciation.
The Fund commenced operations on August 31, 2016. Currently, the Fund is not publicly offered for investment.
Class A Shares generally provide for afront-end sales charge while Class C Shares provide for a contingent deferred sales charge (“CDSC”). No sales charges are assessed with respect to Class I. Certain Class A Shares, for whichfront-end sales charges have been waived, may be subject to a CDSC as described in the Fund’s prospectus. Beginning on November 14, 2017, Class C Shares automatically convert to Class A Shares after ten years. All classes of shares have equal rights as to earnings, assets and voting privileges, except that each class may bear different transfer agency, distribution and service fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements.
J.P. Morgan Investment Management Inc. (“JPMIM”), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co. (“JPMorgan”), acts as Adviser (the “Adviser”) and Administrator (the “Administrator”) to the Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of their financial statements. The Fund is an investment company and, thus, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
A. Valuation of Investments — The valuation of investments is in accordance with GAAP and the Fund’s valuation policies set forth by and under the supervision and responsibility of the Board of Trustees (the “Board”), which established the following approach to valuation, as described more fully below: (i) investments for which market quotations are readily available shall be valued at their market value and (ii) all other investments for which market quotations are not readily available shall be valued at their fair value as determined in good faith by the Board.
The Administrator has established the J.P. Morgan Asset Management Americas Valuation Committee (“AVC”) to assist the Board with the oversight and monitoring of the valuation of the Fund’s investments. The Administrator implements the valuation policies of the Fund’s investments, as directed by the Board. The AVC oversees and carries out the policies for the valuation of investments held in the Fund. This includes monitoring the appropriateness of fair values based on results of ongoing valuation oversight including, but not limited to, consideration of macro or security specific events, market events and pricing vendor and broker due diligence. The Administrator is responsible for discussing and assessing the potential impacts to the fair values on an ongoing basis, and at least on a quarterly basis with the AVC and the Board.
Equities and other exchange-traded instruments are valued at the last sale price or official market closing price on the primary exchange on which the instrument is traded before the net asset value (“NAV”) of the Fund is calculated on a valuation date. Investments inopen-end investment companies (the “Underlying Funds”) are valued at each Underlying Fund’s NAV per share as of the report date.
Valuations reflected in this report are as of the report date. As a result, changes in valuation due to market events and/or issuer related events after the report date and prior to issuance of the report are not reflected herein.
The various inputs that are used in determining the valuation of the Fund’s investments are summarized into the three broad levels listed below.
• | Level 1 — Unadjusted inputs using quoted prices in active markets for identical investments. |
• | Level 2 — Other significant observable inputs including, but not limited to, quoted prices for similar investments, inputs other than quoted prices that are observable for investments (such as interest rates, prepayment speeds, credit risk, etc.) or other market corroborated inputs. |
• | Level 3 — Significant inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s assumptions in determining the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input, both individually and in the aggregate, that is significant to the fair value measurement. The inputs or methodology used for valuing instruments are not necessarily an indication of the risk associated with investing in those instruments.
15
The following table represents each valuation input as presented on the Schedule of Portfolio Investments (“SOI”):
| | | | | | | | | | | | | | | | |
| | | | | Level 2 | | | Level 3 | | | | |
| | Level 1 | | | Other significant | | | Significant | | | | |
| | Quoted prices | | | observable inputs | | | unobservable inputs | | | Total | |
| | | | |
Total Investments in Securities(a) | | $ | 13,678,405 | | | $ | – | | | $ | – | | | $ | 13,678,405 | |
| | | | |
Total Liabilities for Securities Sold Short (a) | | $ | (1,866,320 | ) | | $ | – | | | $ | – | | | $ | (1,866,320) | |
| | | | |
(a) | Portfolio holdings designated as level 1 are disclosed individually on the SOI. Please refer to the SOI for industry specifics of portfolio holdings. |
There were no transfers among any levels during the six months ended December 31, 2018.
B. Restricted Securities — Certain securities held by the Fund may be subject to legal or contractual restrictions on resale. Restricted securities generally are resold in transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Disposal of these securities may involve time-consuming negotiations and expense. Prompt sale at the current valuation may be difficult and could adversely affect the net asset value of the Fund.
As of December 31, 2018, the Fund had no investments in restricted securities.
C. Short Sales — The Fund engaged in short sales as part of its normal investment activities. In a short sale, the Fund sells securities it does not own in anticipation of a decline in the market value of those securities. In order to deliver securities to the purchaser, the Fund borrows securities from a broker. To close out a short position, the Fund delivers the same securities to the broker.
The Fund is required to pledge cash or securities to the broker as collateral for the securities sold short. Collateral requirements are calculated daily based on the current market value of the short positions. Cash collateral deposited with the broker is recorded as Deposits at broker for securities sold short, while cash collateral deposited at the Fund’s custodian for the benefit of the broker is recorded as Restricted cash for securities sold short on the Statement of Assets and Liabilities. Securities segregated as collateral are denoted on the SOI. The Fund may receive or pay the net of the following amounts: (i) a portion of the income from the investment of cash collateral; (ii) the broker’s fee on the borrowed securities (calculated daily based upon the market value of each borrowed security and a variable rate that is dependent on availability of the security); and (iii) a financing charge for the difference between the market value of the short position and cash collateral deposited with the broker. The net amounts of income or fees are included as Interest income or Interest expense on securities sold short on the Statement of Operations.
The Fund is obligated to pay the broker dividends declared on short positions when a position is open on the record date. Dividends on short positions are reported onex-dividend date on the Statement of Operations as Dividend expense on securities sold short. Liabilities for securities sold short are reported at market value on the Statement of Assets and Liabilities and the change in market value is recorded as Change in net unrealized appreciation (depreciation) on the Statement of Operations. Short sale transactions may result in unlimited losses as the security’s price increases and the short position loses value. There is no upward limit on the price a borrowed security could attain. The Fund is also subject to risk of loss if the broker were to fail to perform its obligations under the contractual terms.
The Fund will record a realized loss if the price of the borrowed security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will record a realized gain if the price of the borrowed security declines between those dates.
As of December 31, 2018, the Fund had outstanding short sales as listed on the SOI.
D. Securities Lending — Effective October 5, 2018, the Fund became authorized to engage in securities lending in order to generate additional income. The Fund is able to lend to approved borrowers. Citibank N.A. (“Citibank”) serves as lending agent for the Fund, pursuant to a Securities Lending Agency Agreement (the “Securities Lending Agency Agreement”). Securities loaned are collateralized by cash equal to at least 100% of the market value plus accrued interest on the securities lent, which is invested in an affiliated money market fund. The Fund retains loan fees and the interest on cash collateral investments but is required to pay the borrower a rebate for the use of cash collateral. In cases where the lent security is of high value to borrowers, there may be a negative rebate (i.e. a net payment to the Fund). Upon termination of a loan, the Fund is required to return to the borrower an amount equal to the cash collateral, plus any rebate owed to the borrowers. The remaining maturities of the securities lending transactions are considered overnight and continuous. Loans are subject to termination by the Fund or the borrower at any time.
The net income earned on the securities lending (after payment of rebates and Citibank’s fee) is included on the Statement of Operations as Income from securities lending (net). The Fund also receives payments from the borrower during the period of the loan, equivalent to dividends and interest earned on the securities loaned, which are recorded as Dividend or Interest income, respectively, on the Statement of Operations.
Under the Securities Lending Agency Agreement, Citibank marks to market the loaned securities on a daily basis. In the event the cash received from the borrower is less than 102% of the value of the loaned securities (105% for loans ofnon-U.S. securities), Citibank requests additional cash from the borrower so as to maintain a collateralization level of at least 102% of the value of the loaned securities plus accrued interest (105% for loans ofnon-U.S. securities).
16
The value of securities out on loan is recorded as an asset on the Statement of Assets and Liabilities. The value of the cash collateral received is recorded as a liability on the Statement of Assets and Liabilities and details of Collateral Investments are disclosed on the SOI.
The Fund bears the risk of loss associated with the Collateral Investments and is not entitled to additional collateral from the borrower to cover any such losses. To the extent that the value of the Collateral Investments declines below the amount owed to a borrower, the Fund may incur losses that exceed the amount it earned on lending the security. Upon termination of a loan, the Fund may use leverage (borrow money) to repay the borrower for cash collateral posted if the Adviser does not believe that it is prudent to sell the Collateral Investments to fund the payment of this liability. Securities lending activity is subject to master netting arrangements.
Securities lending also involves counterparty risks, including the risk that the loaned securities may not be returned in a timely manner or at all. Subject to certain conditions, Citibank has agreed to indemnify the Fund from losses resulting from a borrower’s failure to return a loaned security.
The Fund did not lend out any securities during the period October 5, 2018 through December 31, 2018.
E. Investment Transactions with Affiliates —The Fund invested in an Underlying Fund which is advised by the Adviser or its affiliates. An issuer which is under common control with the Fund may be considered an affiliate. For the purposes of the financial statements, the Fund assumes the issuer listed in the table below to be an affiliated issuer. Underlying Fund distributions may be reinvested into the Underlying Fund. Reinvestment amounts are included in the purchase cost amounts in the table below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
For the six months ended December 31, 2018 | |
Security Description | | Value at June 30, 2018 | | | Purchases at Cost | | | Proceeds from sales | | | Net Realized Gain (Loss) | | | Change in Unrealized Appreciations/ (Depreciation) | | | Value at December 31, 2018 | | | Shares at December 31, 2018 | | | Dividend Income | | | Capital Gain Distributions | |
JPMorgan U.S. Government Money Market Fund Class Institutional Shares, 2.40%(a)(b) | | | $466,266 | | | | $3,329,403 | | | | $3,200,475 | | | | $— | | | | $— | | | | $595,194 | | | | $595,194 | | | | $3,921 | | | | $— | |
(a) | Investment in affiliate. Fund is registered under the Investment Company Act of 1940, as amended, and advised by J.P. Morgan Investment Management Inc. |
(b) | The rate shown is the current yield as of December 31, 2018. |
F. Security Transactions and Investment Income — Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on a specifically identified cost basis. Interest income and interest expense on securities sold short, if any, is determined on the basis of coupon interest accrued using the effective interest method which adjusts for amortization of premiums and accretion of discounts. Dividend income, net of foreign tax withheld, if any, and dividend expense on securities sold short, are recorded on theex-dividend date or when the Fund first learns of the dividend.
To the extent such information is publicly available, the Fund records distributions received in excess of income earned from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Fund adjusts the estimated amounts of the components of distributions (and consequently their net investment income) as necessary once the issuers provide information about the actual composition of the distributions.
G. Allocation of Income and Expenses — Expenses directly attributable to a fund are charged directly to that fund, while the expenses attributable to more than one fund of the Trust are allocated among the respective funds. In calculating the NAV of each class, investment income, realized and unrealized gains and losses and expenses, other than class specific expenses, are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day.
Transfer agency fees are class-specific expenses. The amount of the transfer agency fees charged to each class of the Fund for the six months ended December 31, 2018 are as follows:
| | | | | | | | | | | | | | | | |
| | Class A | | | Class C | | | Class I | | | Total | |
| | | | |
Transfer agency fees | | $ | 36 | | | $ | 36 | | | $ | 102 | | | $ | 174 | |
H. Federal Income Taxes — The Fund is treated as a separate taxable entity for Federal income tax purposes. The Fund’s policy is to comply with the provisions of the Internal Revenue Code (the “Code”), applicable to regulated investment companies and to distribute to shareholders all of its distributable net investment income and net realized capital gains on investments. Accordingly, no provision for Federal income tax is necessary. Management has reviewed the Fund’s tax positions for all open tax years and has determined that as of December 31, 2018, no liability for income tax is required in the Fund’s financial statements for net unrecognized tax benefits. However, management’s conclusions may be subject to future review based on changes in, or the interpretation of, the accounting standards or tax laws and regulations. The Fund’s Federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.
I. Distributions to Shareholders — Distributions from net investment income, if any, are generally declared and paid at least annually with respect to the Fund. Distributions are declared separately for each class. No class has preferential dividend rights; differences in per share rates are due to differences in separate class expenses. Net realized capital gains, if any, are distributed by the Fund at least annually. The amount of distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from
17
GAAP. To the extent these “book/tax” differences are permanent in nature (i.e., that they result from other than timing of recognition — “temporary differences”), such amounts are reclassified within the capital accounts based on their Federaltax-basis treatment.
3. Fees and Other Transactions with Affiliates
A. Investment Advisory Fee — Pursuant to an Investment Advisory Agreement, the Adviser supervises the investments of the Fund and for such services is paid a fee. The fee is accrued daily and paid monthly at an annual rate of 0.75% of the Fund’s average daily net assets. The Adviser waived Investment Advisory fees and/or reimbursed expenses as outlined in Note 3.F.
B. Administration Fee — Pursuant to an Administration Agreement, the Administrator provides certain administration services to the Fund. In consideration of these services during the six months ended December 31, 2018, the Administrator received a fee that was accrued daily and paid monthly at an annual rate of 0.15% of the first $25 billion of the average daily net assets of all funds in the J.P. Morgan Funds Complex covered by the Administration Agreement (excluding certain funds of funds and money market funds) and 0.075% of the average daily net assets in excess of $25 billion of all such funds. For the six months ended December 31, 2018, the effective annualized rate was 0.08% of the Fund’s average daily net assets, notwithstanding any fee waivers and/or expense reimbursements.
The Administrator waived Administration fees as outlined in Note 3.F.
Effective January 1, 2019, the Administrator receives a fee accrued daily and paid monthly at an annual rate of 0.075% of the first $10 billion of the Fund’s average daily net assets, 0.050% of the Fund’s average daily net assets between $10 billion and $20 billion, 0.025% of the Fund’s average daily net assets between $20 billion and $25 billion and 0.01% of the Fund’s daily average net assets in excess of $25 billion.
JPMorgan Chase Bank, N.A. (“JPMCB”), a wholly-owned subsidiary of JPMorgan, serves as the Fund’ssub-administrator (the“Sub-administrator”). For its services asSub-administrator, JPMCB receives a portion of the fees payable to the Administrator.
C. Distribution Fees —Pursuant to a Distribution Agreement, JPMorgan Distribution Services, Inc. (“JPMDS”), an indirect, wholly-owned subsidiary of JPMorgan, serves as the Trust’s principal underwriter and promotes and arranges for the sale of the Fund’s shares.
The Board has adopted a Distribution Plan (the “Distribution Plan”) for Class A and Class C Shares of the Fund in accordance with Rule12b-1 under the 1940 Act. The Class I Shares do not charge a distribution fee. The Distribution Plan provides that the Fund shall pay distribution fees, including payments to JPMDS, at annual rates of 0.25% and 0.75% of the average daily net assets of Class A and Class C Shares, respectively.
In addition, JPMDS is entitled to receive thefront-end sales charges from purchases of Class A Shares and the CDSC from redemptions of Class C Shares and certain Class A Shares for whichfront-end sales charges have been waived.
D. Service Fees — The Trust, on behalf of the Fund, has entered into a Shareholder Servicing Agreement with JPMDS under which JPMDS provides certain support services to the shareholders. For performing these services, JPMDS receives a fee that is accrued daily and paid monthly at an annual rate of 0.25% for Class A, Class C and Class I Shares.
JPMDS has entered into shareholder services contracts with affiliated and unaffiliated financial intermediaries who provide shareholder services and other related services to their clients or customers who invest in the Fund under which JPMDS will pay all or a portion of such fees earned to financial intermediaries for performing such services.
JPMDS waived service fees as outlined in Note 3.F.
E. Custodian and Accounting Fees — JPMCB provides portfolio custody and accounting services to the Fund. For performing these services, the Fund pays JPMCB transaction and asset-based fees that vary according to the number of transactions and positions, plusout-of-pocket expenses. The amounts paid directly to JPMCB by the Fund for custody and accounting services are included in Custodian and accounting fees on the Statement of Operations. Interest income earned on cash balances at the custodian, if any, is included in Interest income from affiliates on the Statement of Operations. Prior to March 1, 2018, payments to the custodian were reduced by credits earned by the Fund, based on uninvested cash balances held by the custodian. Such earnings credits, if any, are presented separately on the Statement of Operations.
Interest expense paid to the custodian related to cash overdrafts, if any, is included in Interest expense to affiliates on the Statement of Operations.
F. Waivers and Reimbursements — The Adviser, Administrator and/or JPMDS have contractually agreed to waive fees and/or reimburse the Fund to the extent that total annual operating expenses (excluding acquired fund fees and expenses other than certain money market fund fees as described below, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation, and extraordinary
expenses) exceed the percentages of the Fund’s average daily net assets as shown in the table below:
| | | | | | |
| | Class A | | Class C | | Class I |
| | 1.20% | | 1.70% | | 0.95% |
The expense limitation agreement was in effect for the six months ended December 31, 2018 and is in place until at least October 31, 2019.
For the six months ended December 31, 2018, the Fund’s service providers waived fees and/or reimbursed expenses for the Fund as follows. None of these parties expect the Fund to repay any such waived fees and/or reimbursed expenses in future years.
| | | | | | | | | | |
| | Contractual Waivers | | |
| | | | | |
| | Investment Advisory Fees | | Administration Fees | | Service Fees | | Total | | Reimbursements |
| | $50,728 | | $5,482 | | $10,758 | | $66,968 | | $2,047 |
Additionally, the Fund may invest in one or more money market funds advised by the Adviser or its affiliates (affiliated money market funds). The Adviser, Administrator and/or JPMDS, as shareholder servicing agent, have contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the respective net fees each collects from the affiliated money market funds on the Fund’s investment in such affiliated money market funds.
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The amount of waivers resulting from investments in these money market funds for the six months ended December 31, 2018 was $377.
G. Other — Certain officers of the Trust are affiliated with the Adviser, the Administrator and JPMDS. Such officers, with the exception of the Chief Compliance Officer, receive no compensation from the Fund for serving in their respective roles.
The Board appointed a Chief Compliance Officer to the Fund in accordance with Federal securities regulations. The Fund, along with other affiliated funds, makes reimbursement payments, on apro-rata basis, to the Administrator for a portion of the fees associated with the Office of the Chief
Compliance Officer. Such fees are included in Trustees’ and Chief Compliance Officer’s fees on the Statement of Operations.
The Trust adopted a Trustee Deferred Compensation Plan (the “Plan”) which allows the Independent Trustees to defer the receipt of all or a portion of compensation related to performance of their duties as Trustees. The deferred fees are invested in various J.P. Morgan Funds until distribution in accordance with the Plan.
The Fund may use related party broker-dealers. For the six months ended December 31, 2018, the Fund did not incur any brokerage commissions with broker-dealers affiliated with the Adviser.
The Securities and Exchange Commission (“SEC”) has granted an exemptive order permitting the Fund to engage in principal transactions with
J.P. Morgan Securities, Inc., an affiliated broker, involving taxable money market instruments, subject to certain conditions.
4. Investment Transactions
During the six months ended December 31, 2018, purchases and sales of investments (excluding short-term investments) were as follows:
| | | | | | | | | | | | | | | | | | |
| | Purchases | | | | Sales | | | | | | | | Covers on | | | |
| | (excluding | | | | (excluding | | | | Securities | | | | Securities | | | |
| | U.S. Government) | | | | U.S. Government) | | | | Sold Short | | | | Sold Short | | | |
| | $ 9,733,858 | | | | $ 9,546,119 | | | | $ 1,578,993 | | | | $ 1,283,588 | | | | |
During the six months ended December 31, 2018, there were no purchases or sales of U.S. Government securities.
5. Federal Income Tax Matters
For Federal income tax purposes, the estimated cost and unrealized appreciation (depreciation) in value of investments held at December 31, 2018 were as follows:
| | | | | | | | | | | | | | | | |
| | | | Gross | | | | Gross | | | | Net Unrealized | | | |
| | Aggregate | | Unrealized | | | | Unrealized | | | | Appreciation | | | |
| | Cost | | Appreciation | | | | Depreciation | | | | (Depreciation) | | | |
| |
| | $12,371,546* | | $784,926 | | | | $1,344,387 | | | | $(559,461) | | | | |
*The tax cost includes the proceeds from short sales which may result in a net negative cost.
6. Borrowings
The Fund relies upon an exemptive order granted by the SEC (the “Order”) permitting the establishment and operation of an Interfund Lending Facility (the “Facility”). The Facility allows the Fund to directly lend and borrow money to or from any other fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions. The Interfund loan rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. The Order was granted to JPMorgan Trust II and may be relied upon by the Fund because the Fund and the series of JPMorgan Trust II are all investment companies in the same “group of investment companies” (as defined in Section 12(d)(1)(G) of the 1940 Act).
The Trust and JPMCB have entered into a financing arrangement. Under this arrangement, JPMCB provides an unsecured, uncommitted credit facility in the aggregate amount of $100 million to certain of the J.P. Morgan Funds, including the Fund. Advances under the arrangement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to the Fund’s borrowing restrictions. Interest on borrowings is payable at a rate determined by JPMCB at the time of borrowing. This agreement has been extended until November 5, 2018.
The Fund had no borrowings outstanding from another fund or from the unsecured, uncommitted credit facility during the six months ended December 31, 2018.
7. Risks, Concentrations and Indemnifications
In the normal course of business, the Fund entered into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown. The amount of exposure would depend on future claims that may be brought against the Fund. However, based on experience, the Fund expects the risk of loss to be remote.
As of December 31, 2018, all of the Fund’s shares were held by the Adviser.
As of December 31, 2018, the Fund pledged a significant portion of its assets for securities sold short to Scotiabank.
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Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic and market conditions and could result in losses that significantly exceed the Fund’s original investment. Many derivatives create leverage thereby causing the Fund to be more volatile than it would have been if it had not used derivatives. Derivatives also expose the Fund to counterparty risk (the risk that the derivative counterparty will not fulfill its contractual obligations), including credit risk of the derivative counterparty.
8. New Accounting Pronouncements
In August 2016, the Financial Accounting Standards Board (“FASB”) issuedAccounting Standards Update (“ASU”)2016-18 (“ASU2016-18”) Statement of Cash Flows (Topic 230) Restricted Cash,which clarifies guidance on the classification of certain cash receipts and cash payments on the Statement of Cash Flows. ASU2016-18 is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Management has evaluated the implications of these changes and the amendments are included in the financial statements.
In August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure
Requirements for Fair Value Measurement, which adds, removes, and modifies certain aspects of the fair value disclosure. ASU2018-13 amendments are the result of a broader disclosure project, FASB Concepts StatementConceptual Framework for Financial Reporting — Chapter 8: Notes to Financial Statements, to improve the effectiveness of the fair value disclosure requirements. ASU2018-13 is effective for the fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019; early adoption is permitted. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect to the Fund’s net assets or results of operation.
In August 2018, the SEC adopted their Disclosure Update and Simplification Rule (the “Rule”). The Rule is part of the SEC’s overall project to improve disclosure effectiveness by amending certain disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded in light of other SEC disclosure requirements, U.S. GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. We have evaluated the implications of these changes and the amendments are included in the financial statements, which had no effect on the Fund’s net assets or results of operation.
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SCHEDULE OF SHAREHOLDER EXPENSES (Unaudited)
Hypothetical $1,000 Investment
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including investment advisory fees, administration fees, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these ongoing costs with the ongoing costs of investing in other mutual funds. The examples assume that you had a $1,000 investment in each Class at the beginning of the reporting period, July 1, 2018 and continued to hold your shares at the end of the reporting period, December 31, 2018.
Actual Expenses
For each Class of the Fund in the table below, the first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of each Class under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested.
| | | | | | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2018 | | Ending Account Value December 31, 2018 | | Expenses Paid During the Period* | | Annualized Expense Ratio |
JPMorgan Value Plus Fund | | | | | | | | | | | | | | | | | | | | |
Class A | | | | | | | | | | | | | | | | | | | | |
Actual | | | | $1,000.00 | | | | | $885.30 | | | | | $7.89 | | | | | 1.66 | % |
Hypothetical | | | | 1,000.00 | | | | | 1,016.84 | | | | | 8.44 | | | | | 1.66 | |
Class C | | | | | | | | | | | | | | | | | | | | |
Actual | | | | 1,000.00 | | | | | 882.90 | | | | | 10.20 | | | | | 2.15 | |
Hypothetical | | | | 1,000.00 | | | | | 1,014.37 | | | | | 10.92 | | | | | 2.15 | |
Class I | | | | | | | | | | | | | | | | | | | | |
Actual | | | | 1,000.00 | | | | | 886.10 | | | | | 6.66 | | | | | 1.40 | |
Hypothetical | | | | 1,000.00 | | | | | 1,018.15 | | | | | 7.12 | | | | | 1.40 | |
* | Expenses are equal to each Class’ respective annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect theone-half year period). |
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BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENT
(Unaudited)
The Board of Trustees has established various standing committees composed of Trustees with diverse backgrounds, to which the Board of Trustees has assigned specific subject matter responsibilities to further enhance the effectiveness of the Board’s oversight and decision making. The Board of Trustees and its investment committees (money market and alternative products, equity, and fixed income) meet regularly throughout the year and consider factors that are relevant to their annual consideration of investment advisory agreements at each meeting. They also meet for the specific purpose of considering investment advisory agreement annual renewals. The Board of Trustees held meetings in person in June and August 2018, at which the Trustees considered the continuation of the investment advisory agreement for the Fund whose semi-annual report is contained herein (an “Advisory Agreement”). At the June meeting, the Board’s investment committees met to review and consider performance, expense and related information for the J.P. Morgan Funds. Each investment committee reported to the full Board, which then considered the investment committee’s preliminary findings. At the August meeting, the Trustees continued their review and consideration. The Trustees, including a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of any party to the Advisory Agreements or any of their affiliates, approved the continuation of the Advisory Agreement on August 15, 2018.
As part of their review of the Advisory Agreement, the Trustees considered and reviewed performance and other information about the Fund received from the Adviser. This information includes the Fund’s performance as compared to the performance of its peers and benchmarks and analyses by the Adviser of the Fund’s performance. In addition, the Trustees have engaged an independent management consulting firm (“independent consultant”) to report on the performance of certain J.P. Morgan Funds at each of the Trustees’ regular meetings. In addition, in preparation for the June and August meetings, the Trustees requested, received and evaluated extensive materials from the Adviser, including performance and expense information compiled by Broadridge, using data from Lipper Inc., independent providers of investment company data (together, “Broadridge/Lipper”). . Before voting on the Advisory Agreements, the Trustees reviewed the Advisory Agreement with representatives of the Adviser, counsel to the Trust and independent legal counsel, and received a memorandum from independent legal counsel to the Trustees discussing the legal standards for their consideration of the Advisory Agreement. The Trustees also discussed the Advisory Agreement in executive session with independent legal counsel at which no representatives of the Adviser were present.
A summary of the material factors evaluated by the Trustees in determining whether to approve the Advisory Agreement is provided below. Each Trustee attributed different weights to the various factors, and no factor alone was considered determinative. The Trustees considered information provided with respect to the Fund throughout the year, as well as materials furnished specifically in connection with the annual review process. From year to year, the Trustees consider and place emphasis on relevant information in light of changing circumstances in market and economic conditions.
After considering and weighing the factors and information they had received, the Trustees found that the compensation to be received by the Adviser from the Fund under the applicable Advisory Agreement was fair and reasonable, under the circumstances, and that the continuance of the Advisory Agreement was in the best interests of the Fund and its shareholders.
Nature, Extent and Quality of Services Provided by the Adviser
The Trustees received and considered information regarding the nature, extent and quality of the services provided to the Fund under the Advisory Agreement. The Trustees took into account information furnished throughout the year at Trustee meetings, as well as the materials furnished specifically in connection with this annual review process. The Trustees considered the background and experience of
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the Adviser’s senior management and the expertise of, and the amount of attention given to the Fund by, investment personnel of the Adviser. In addition, the Trustees reviewed the qualifications, backgrounds and responsibilities of the portfolio management team primarily responsible for theday-to-day management of the Fund and the infrastructure supporting the team, including personnel changes. The Trustees also considered information provided by the Adviser and JPMorgan Distribution Services, Inc. (“JPMDS”) about the structure and distribution strategy of the Fund. The Trustees reviewed information relating to the Adviser’s risk governance model and reports showing the Adviser’s compliance structure and ongoing compliance processes. The Trustees also considered the quality of the administrative services provided by the Adviser in its role as administrator.
The Trustees also considered their knowledge of the nature and quality of the services provided by the Adviser and its affiliates to the Funds gained from their experience as Trustees of the J.P. Morgan Funds. In addition, they considered the overall reputation and capabilities of the Adviser and its affiliates, the commitment of the Adviser to provide high quality service to the Fund, their overall confidence in the Adviser’s integrity and the Adviser’s responsiveness to questions or concerns raised by them, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Fund.
Based upon these considerations and other factors, the Trustees concluded that they were satisfied with the nature, extent and quality of the investment advisory services provided to the Fund by the Adviser.
Costs of Services Provided and Profitability to the Adviser and its Affiliates
The Trustees received and considered information regarding the profitability to the Adviser and its affiliates in providing services to the Fund. The Trustees reviewed and discussed this information. The Trustees recognized that this information is not audited and represents the Adviser’s determination of its and its affiliates’ revenues from the contractual services provided to the Funds, less expenses of providing such services. Expenses include direct and indirect costs and are calculated using an allocation methodology developed by the Adviser. The Trustees also recognized that it is difficult to make comparisons of profitability from fund investment advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the fact that publicly-traded fund managers’ operating profits and net income are net of distribution and marketing expenses. Based upon their review, the Trustees concluded that the profitability to the Adviser under the Advisory Agreement was not unreasonable in light of the services and benefits provided to the Fund.
The Trustees also considered that JPMDS, an affiliate of the Adviser, and the Adviser earn fees from the Fund for providing shareholder and administrative services, respectively. These fees were shown separately in the profitability analysis presented to the Trustees. The Trustees also considered the payments of Rule12b-1 fees to JPMDS, which also acts as the Fund’s distributor and that these fees are in turn generally paid to financial intermediaries that sell the Fund, including financial intermediaries that are affiliates of the Adviser. The Trustees also considered the fees paid to JPMorgan Chase Bank, N.A. (“JPMCB”) for custody and fund accounting, and other related services.
Fall-Out Benefits
The Trustees reviewed information regarding potential“fall-out” or ancillary benefits received by the Adviser and its affiliates as a result of their relationship with the Funds. The Trustees also reviewed the Adviser’s allocation of fund brokerage for the J.P. Morgan Funds complex, including allocations to brokers who provide research to the Adviser.
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Economies of Scale
The Trustees considered the extent to which the Fund may benefit from economies of scale. The Trustees considered that there may not be a direct relationship between economies of scale realized by the Fund and those realized by the Adviser as assets increase. The Trustees considered the extent to which the Fund was priced to scale and whether it would be appropriate to add advisory fee breakpoints, but noted that the Fund has implemented fee waivers and contractual expense limitations (“Fee Caps”) which allow the Fund’s shareholders to share potential economies of scale from a Fund’s inception and that the fees remain competitive with peer funds. The Trustees also considered that the Adviser has added or enhanced services to the Fund over time, noting the Adviser’s substantial investments in its business in support of the Fund, including investments in trading systems and technology (including cybersecurity improvements), attraction and retention of key talent, additions to analyst and portfolio management teams, and regulatory support enhancements. The Trustees concluded that the current fee structure was reasonable in light of the Fee Caps that the Adviser has in place that serve to limit the overall net expense ratios of the Fund at competitive levels. The Trustees concluded that the Fund’s shareholders received the benefits of potential economies of scale through the Fee Caps and the Adviser’s reinvestment in its operations to serve the Fund and its shareholders.
Independent Written Evaluation of the Fund’s Chief Compliance Officer
The Trustees noted that, upon their direction, the Chief Compliance Officer for the Fund had prepared an independent written evaluation in order to assist the Trustees in determining the reasonableness of the proposed management fees. In determining whether to continue the Advisory Agreements, the Trustees considered the Chief Compliance Officer’s report.
Fees Relative to Adviser’s Other Clients
The Trustees received and considered information about the nature and extent of investment advisory services and fee rates offered to other clients of the Adviser, including institutional separate accounts and/or fundssub-advised by the Adviser, for investment management styles substantially similar to that of the Fund. The Trustees considered the complexity of investment management for registered mutual funds relative to the Adviser’s other clients and noted differences in the regulatory, legal and other risks and responsibilities of providing services to the different clients. The Trustees considered that serving as an adviser to a registered mutual fund involves greater responsibilities and risks than acting as asub-adviser and observed thatsub-advisory fees may be lower than those charged by the Adviser to the Fund. The Trustees also noted that the adviser, not the mutual fund, pays thesub-advisory fee and that many responsibilities related to the advisory function are retained by the primary adviser. The Trustees concluded that the fee rates charged to the Fund in comparison to those charged to the Adviser’s other clients were reasonable.
Investment Performance
The Trustees received and considered absolute and/or relative performance information for the Fund in a report prepared by Broadridge/Lipper. The Trustees considered the total return performance information, which included the ranking of the Fund within a performance universe made up of funds with the same Broadridge/Lipper investment classification and objective (the “Universe”), as well as asub-set of funds within the Universe (the “Peer Group”), by total return for applicableone-, three- and five-year periods. The Trustees reviewed a description of Broadridge/Lipper’s methodology for selecting mutual funds in the Fund’s Peer Group and Universe. The Broadridge/Lipper materials provided to the Trustees highlighted information with respect to certain representative classes to assist the Trustees in their review. As part of this review, the Trustees also reviewed the Fund’s performance against its benchmark and considered the performance information provided for the Fund at regular Board meetings by the Adviser. The Trustees also engaged with the Adviser to consider what steps might be taken to improve performance, as applicable. The Broadridge/Lipper performance data noted by the Trustees as part of
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their review and the determinations made by the Trustees with respect to the Fund’s performance for certain representative classes are summarized below:
The Trustees noted that the Value Plus Fund’s performance for both Class A and Class I shares was in the fourth quintile, based upon the Universe, for theone-year period ended December 31, 2017. The Trustees discussed the performance and investment strategy of the Fund with the Advisor and, based upon this discussion and various other factors, the Trustees concluded that the Fund’s performance was satisfactory under the circumstances.
Advisory Fees and Expense Ratios
The Trustees considered the contractual advisory fee rate and administration fee rate paid by the Fund to the Adviser and compared the combined rate to the information prepared by Broadridge/Lipper concerning management fee rates paid by other funds in the same Broadridge/Lipper category as the Fund. The Trustees recognized that Broadridge/Lipper reported the Fund’s management fee rate as the combined contractual advisory fee and administration fee rates. The Trustees also reviewed information about other expenses and the expense ratios for the Fund. The Trustees considered the Fee Caps currently in place for the Fund and considered the net advisory fee rate after taking into account any waivers and/or reimbursements, and where deemed appropriate by the Trustees, additional waivers and/or reimbursements. The Trustees recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The Trustees’ determinations as a result of the review of the Fund’s advisory fees and expense ratios for certain representative classes are summarized below:
The Trustees noted that the Value Plus Fund’s net advisory fee and actual total expenses for both Class A and Class I shares were in the first quintile, based upon both the Peer Group and the Universe. After considering the factors identified above, in light of this information, the Trustees concluded that the advisory fee was satisfactory.
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J.P. Morgan Funds are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds.
Contact JPMorgan Distribution Services, Inc. at1-800-480-4111 for a fund prospectus. Investors should carefully consider the investment objectives and risk as well as charges and expenses of the mutual fund before investing. The prospectus contains this and other information about the mutual fund. Read the prospectus carefully before investing.
Investors may obtain information about the Securities Investor Protection Corporation (SIPC), including the SIPC brochure, by visiting www.sipc.org or by calling SIPC at202-371-8300.
The Fund files a complete schedule of its fund holdings for the first and third quarters of its fiscal year with the SEC on FormN-Q. The Fund’s FormsN-Q are available on the SEC’s website at http://www.sec.gov. Shareholders may request the FormN-Q without charge by calling1-800-480-4111.
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s holdings is available in the prospectus and Statement of Additional Information.
A copy of proxy policies and procedures is available without charge upon request by calling1-800-480-4111. A description of such policies and procedures is on the SEC’s website at www.sec.gov. The Trustees have delegated the authority to vote proxies for securities owned by the Fund to the Adviser. A copy of the Fund’s voting record for the most recent12-month period ended June 30 is available on the SEC’s website at www.sec.gov no later than August 31 of each year. The Fund’s proxy voting record will include, among other things, a brief description of the matter voted on for each fund security, and will state how each vote was cast, for example, for or against the proposal.
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ITEM 2. CODE OF ETHICS.
Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so.
The registrant must briefly describe the nature of any amendment, during the period covered by the report, to a provision of its code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item. The registrant must file a copy of any such amendment as an exhibit pursuant to Item 13(a)(1), unless the registrant has elected to satisfy paragraph (f) of this Item by positing its code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by undertaking to provide its code of ethics to any person without charge, upon request, pursuant to paragraph (f)(3) of this Item.
If the registrant has, during the period covered by the report, granted a waiver, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or third party, that relates to one or more items set forth in paragraph (b) of this Item, the registrant must briefly describe the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver.
Not applicable to a semi-annual report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant’s board of directors has determined that the registrant either:
(i) Has at least one audit committee financial expert serving on its audit committee; or
(ii) Does not have an audit committee financial expert serving on its audit committee.
(2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is “independent.” In order to be considered “independent” for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or
(ii) Be an “interested person” of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C.80a-2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert.
Not applicable to a semi-annual report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed for each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category.
(d) Disclose, under the caption All Other Fees, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee’spre-approval policies and procedures described in paragraph (c)(7) of Rule2-01 of RegulationS-X.
(2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule2-01 of RegulationS-X.
(f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
(g) Disclose the aggregatenon-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including anysub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant’s audit committee of the board of directors has considered whether the provision ofnon-audit services that were rendered to the registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were notpre-approved pursuant to paragraph (c)(7)(ii) of Rule2-01 of RegulationS-X is compatible with maintaining the principal accountant’s independence.
Not applicable to a semi-annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) If the registrant is a listed issuer as defined in Rule10A-3 under the Exchange Act (17CFR240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule10A-3(d) under the Exchange Act (17CFR240.10A-3(d)) regarding an exemption from the listing standards for all audit committees.
Not applicable to a semi-annual report.
ITEM 6. INVESTMENTS.
File Schedule I – Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth inSection 210.12-12 of RegulationS-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form.
Included in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OFCLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASE OF EQUITY SECURITIES BYCLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR240.14a-101), or this Item.
No material changes to report.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant’s principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant’s disclosure controls and procedures (as defined in Rule30a-3(c) under the Act (17 CFR270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule30a-3(b) under the Act (17 CFR270.30a-3(b)) and Rules13a-15(b) or15d-15(b) under the Exchange Act (17 CFR240.13a-15(b) or240.15d-15(b)).
The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on FormN-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on FormN-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Disclose any change in the registrant’s internal control over financial reporting (as defined in Rule30a-3(d) under the Act (17 CFR270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
There were no changes in the Registrant’s internal control over financial reporting that occurred during the last fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
| (a) | File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. |
(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit.
Not applicable.
(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule30a-2(a) under the Act (17 CFR270.30a-2).
Certifications pursuant to Rule30a-2(a) under the Investment Company Act of 1940 are attached hereto.
(3) Any written solicitation to purchase securities under Rule23c-1 under the Act (17 CFR270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons.
Not applicable.
| (b) | A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule30a-2(b) under the Act of 1940. |
Certifications pursuant to Rule30a-2(b) under the Investment Company Act of 1940 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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JPMorgan Trust IV |
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By: | | /s/ Brian S. Shlissel |
| | Brian S. Shlissel President and Principal Executive Officer March 07, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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By: | | /s/ Brian S. Shlissel |
| | Brian S. Shlissel President and Principal Executive Officer March 07, 2019 |
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By: | | /s/ Timothy J. Clemens |
| | Timothy J. Clemens Treasurer and Principal Financial Officer March 07, 2019 |