UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-4321
JPMorgan Value Opportunities Fund, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
Registrant's telephone number, including area code: (202) 842-5665
Date of fiscal year end: December 31, 2005
Date of reporting period: June 30, 2005
Michael W. Stockton
Secretary
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005
Item 1 - Semi-Annual Report for the Period Ended June 30, 2005
SEMI-ANNUAL REPORT
Six Months ended June 30, 2005 (Unaudited)
JPMorgan Funds
Value Opportunities Fund
JPMorgan (logo)
Asset Management
Contents
President's Letter 1
Portfolio of Investments 5
Financial Statements 9
Notes to Financial Statements 12
Financial Highlights 19
Schedule of Shareholder Expenses 21
Investments in the Fund are not bank 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 for future performance. The general market
views expressed in this report are opinions based on current market conditions
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, strategies and risks. Call JPMorgan Funds
Service Center at 1-800-480-4111 for a prospectus containing more complete
information about the Fund including management fees and other expenses. Please
read it carefully before investing.
JPMorgan Value Opportunities Fund
President's Letter
August 18, 2005
Dear Fellow Shareholders,
The JPMorgan Value Opportunities Fund's results for the first six months of 2005
were flat, with the Fund's Class A shares down slightly for the period ended
June 30, 2005, -0.29% on a total return basis - roughly in line with the general
market. As the chart below indicates, the Fund's performance has been strong
over longer periods of time relative to its benchmark, the Russell 1000 Value
Index, as well as the Standard & Poor's 500 Composite Index and the Dow Jones
Industrial Average (all unmanaged indexes).
Cumulative total returns (for the periods ended June 30, 2005):/1/
Since
Six Inception
Months 1 Year 3 Years 12/31/01/2/
JPMorgan Value Opportunities
Fund, Class A -.29% 12.45% 41.45% 35.48%
Russell 1000 Value Index/3/ 1.76% 14.05% 36.74% 30.21%
S&P 500 Composite Index /4/ -.81% 6.32% 26.94% 10.24%
Dow Jones Industrial Average -3.77% .75% 18.98% 10.77%
/1/ Results shown are at net asset value with dividends and capital gain
distributions reinvested.
/2/ Date Fund began operations as JPMorgan Value Opportunities Fund.
/3/ The Russell 1000 Value Index measures the performance of large cap value
stocks. An individual cannot invest directly in an index.
/4/ The S&P 500 Composite Index is an unmanaged broad-based index that is used
as representation of the U.S. stock market. It includes 500 widely held common
stocks. An individual cannot invest directly in an index.
The lackluster performance by the general stock market reflected, we believe,
investor concern about the future course of the economy and world-wide political
events.
During the first six months of 2005, the market moved within a relatively narrow
range as investors seemed to take a breather following the 2004 year-end rally.
The market lost ground in the first quarter but recovered in the second quarter.
News reports during the period tended to accentuate concerns about the ongoing
strength of the economic recovery, problems in Iraq, oil prices, interest rate
increases, and a possible bubble in residential real estate prices. These
factors combined to produce a difficult environment for the U.S. stock market.
The best performing market sector during the period was, not surprisingly,
energy in which the Fund benefited strongly from its holdings in ConocoPhillips
and Unocal. Unocal had been "in play" with several major energy companies,
including the Chinese government oil company, vying for its valuable oil and gas
properties. Other strong performing holdings included Lockheed Martin,
rebounding from its lows in December 2004 on the strength of new government
contracts, and Corning, the leading domestic producer of glass for flat panel TV
screens, which saw its shares increase more than 40% in value during the period.
However, most industry sectors had negative returns during the first half of the
year, with the Materials, Consumer Discretionary, Insurance, and Media sectors
performing relatively poorly. Fortunately, the Fund has not had significant
assets invested in these sectors although the Fund's holdings in U.S. Steel and
Liberty Media did hurt returns. Other holdings which hurt the Fund's performance
included the Willis Group, Boston Scientific and Tyco. The Fund's adviser
expected Willis Group to benefit at the expense of its insurance company rivals,
hurt by scandals in the industry. Although that expectation has not yet
materialized, the adviser believes the company is well managed and has good
prospects. Boston Scientific has been hurt by both lower-than-expected sales of
its Taxus stent product and patent litigation. Tyco has been hurt by
disappointing earnings reports.
U.S. stock valuations do not, in general, seem particularly high. Moreover, the
economy has continued to expand during the first half of the year. First quarter
Gross Domestic Product (GDP) was up 3.8% on an annualized basis. GDP is
estimated to have grown at an annual rate of 3.4% during the second quarter.
While earnings growth rates for companies continue to slow, they remain
generally healthy. Spending on new plant construction and factory orders
increased during the second quarter of the year, and June consumer confidence,
as measured by the Conference Board, reached a three-year high. The Federal
Reserve continues to hold inflation in check with its policy of measured
increases in the short-term federal funds interest rate, now at 3.50%, up from
1.25% one year ago. In addition, the Congressional Budget Office has revised
downward its estimate of the current year's Federal budget deficit as a result
of higher-than-expected tax receipts from both corporations and individuals.
To the surprise of many observers, long term interest rates have remained low,
as have mortgage rates. Low mortgage rates have helped fuel the rising median
home prices across the country. Rising real estate prices have led to some
concerns about the possibility of excessive speculation in real estate and
potential difficulties for the economy if home prices were to significantly
collapse. On balance, however, we believe the economy to be on a reasonably
sound foundation.
Our investment adviser, J.P. Morgan Investment Management, uses a value oriented
approach to stock selection, and, in current market conditions, we believe this
approach should serve the Fund well. It has certainly served us well over the
past several years.
We welcome our newest shareholders. If you have any questions or comments about
the Fund, please do not hesitate to contact us. As always, we look forward to
reporting to you again in six months.
Sincerely yours,
(signature)
Jeffrey L. Steele
President
Please note that current performance may be higher or lower than the performance
data shown. The Fund is currently waiving certain fees. Removal of the waiver
would reduce returns. Investors should carefully read the Fund prospectus, which
includes information on the Fund's investment objective and risks as well as
charges and expenses along with other information. Investors should review the
information in the prospectus carefully before investing. For up to date
month-end performance information, or to receive a Fund prospectus, please call
1-800-480-4111. Please read carefully before investing or sending money.
JPMorgan Value Opportunities Fund
As of June 30, 2005
Portfolio Diversification by Sector (percent of total net assets)
(Bar chart showing the following percentages)
Energy 13.42%
Industrial Products & Services 7.77%
Health Care 7.66%
Commercial Banks 7.44%
Diversified Financial Services 6.77%
Media 6.03%
Utilities 5.51%
Consumer Finance 5.35%
Telecommunications Services 5.33%
Materials 4.99%
Information Technology 4.76%
Insurance 4.41%
Consumer Staples 4.35%
Capital Markets 4.06%
Mortgage Finance & Thrifts 3.14%
Other 2.54%
Real Estate 2.35%
Retail 2.06%
Short-term Investments 1.96%
(end of bar chart)
Top Ten Equity Holdings of the Portfolio
1. Citigroup Inc. 5.93%
2. Exxon Mobil Corp. 5.84%
3. Verizon Communications Inc. 2.63%
4. Freddie Mac 2.50%
5. Bank of America Corp. 2.43%
6. Liberty Media Corp. Class A 2.17%
7. MBNA Corp. 2.13%
8. Tyco International LTD (Bermuda) 2.04%
9. Pfizer Inc 2.01%
10. Sprint Corp. 1.98%
Top 10 equity holdings comprised 29.66% ($176,734,425) of the Fund's total net
assets. As of June 30, 2005 the Fund held 96 equity holdings. Portfolio holdings
are subject to change at any time.
JPMorgan Value Opportunities Fund
Portfolio of Investments
As of June 30, 2005 (unaudited)
Shares Issuer Value
Long-Term Investments -- 97.94%
Common Stocks -- 97.94%
Automobiles & Components -- 0.20%
32,200 Lear Corp. $ 1,171,436
Capital Goods -- 5.54%
96,500 Eaton Corp. 5,780,350
331,300 General Electric Corp. 11,479,545
49,700 3M Company 3,593,310
416,100 Tyco International LTD (Bermuda) 12,150,120
33,003,325
Capital Markets -- 4.06%
40,500 Goldman Sachs Group Inc. 4,131,810
186,200 Lazard Ltd.* 4,329,150
203,100 Morgan Stanley 10,656,657
104,500 State Street Corp. 5,042,125
24,159,742
Commercial Banks -- 7.44%
317,000 Bank of America Corp. 14,458,370
50,100 BB&T Corp. 2,002,497
68,200 Comerica Inc. 3,941,960
157,100 Northfork Bancorp Inc. 4,412,939
62,000 SunTrust Banks, Inc. 4,478,880
328,200 U.S. Bancorp 9,583,440
42,800 Washington Mutual, Inc. 1,741,532
59,600 Wells Fargo & Co. 3,670,168
44,289,786
Commercial Services & Supplies -- 1.48%
203,900 Cendant Corp. 4,561,243
149,300 Waste Management, Inc. 4,231,162
8,792,405
Consumer Durables and Apparel -- 1.27%
242,900 Jones Apparel Group, Inc. 7,539,616
Consumer Finance -- 5.35%
91,578 Ambac Financial Inc. 6,388,481
243,600 CIT Group 10,467,492
76,600 Genworth Financial Inc. 2,315,618
484,800 MBNA Corp. 12,682,368
31,853,959
Consumer Services -- 1.07%
58,400 Carnival Corp. 3,185,720
116,400 McDonald's Corp. 3,230,100
6,415,820
Consumer Staples -- 4.35%
173,700 Altria Group, Inc. $ 11,231,442
85,800 Coca-Cola Co. 3,582,150
108,040 Coca-Cola Enterprises Inc. 2,377,960
42,600 Kimberly-Clark Corp. 2,666,334
79,700 Kraft Foods Inc. 2,535,257
65,500 Procter & Gamble Co. 3,455,125
25,848,268
Diversified Financial Services -- 6.77%
765,900 Citigroup Inc. 35,407,557
90,700 Merrill Lynch & Co. 4,989,407
40,396,964
Energy -- 13.42%
62,000 Anadarko Petroleum Corp. 5,093,300
53,700 Apache Corporation 3,469,020
169,700 ChevronTexaco Corp. 9,489,624
178,600 ConocoPhillips 10,267,714
605,000 Exxon Mobil Corp. 34,769,351
85,400 Global SantaFe Corp. 3,484,320
53,600 Occidental Petroleum 4,123,448
103,300 Rowan Companies* 3,069,043
96,500 Unocal Corp. 6,277,325
80,043,145
Health Care Equipment & Services -- 3.98%
55,800 AmerisourceBergen Corp. 3,858,570
311,200 Boston Scientific Corp.* 8,402,400
22,800 Coventry Healthcare Inc.* 1,613,100
40,900 Guidant Corp. 2,752,570
101,800 Wellpoint Inc.* 7,089,352
23,715,992
Insurance -- 4.41%
85,800 Assurant, Inc. 3,097,380
69,400 Hartford Financial Services Group, Inc. 5,189,732
153,700 Renaissance Re Holdings 7,568,188
318,589 Willis Group Holdings 10,424,232
26,279,532
Materials -- 4.99%
39,900 Air Products and Chemicals, Inc. 2,405,970
206,600 Alcoa Inc. 5,398,458
135,600 MeadWestvaco Corp. 3,802,224
144,900 Nalco Holding Co.* 2,844,387
208,600 Pactiv Corp.* 4,501,588
132,600 Praxair, Inc. $ 6,179,160
132,400 United States Steel Corporation 4,550,588
29,682,375
Media -- 6.03%
245,100 Dex Media Corp. 5,982,891
8,954 Liberty Global, Inc. Class A* 417,883
56,100 Liberty Global, Inc. Service A* 2,618,187
1,179,100 Liberty Media Corp. Class A* 12,931,110
160,300 News Corp Class A 2,593,654
355,500 Viacom Inc. 11,383,110
35,926,835
Mortgage Finance & Thrifts -- 3.14%
64,800 Fannie Mae 3,784,320
228,400 Freddie Mac 14,898,532
18,682,852
Pharmaceuticals & Biotechnology -- 3.68%
37,400 Eli Lilly & Co. 2,083,554
80,400 Forest Laboratories Inc.* 3,123,540
433,600 Pfizer Inc 11,958,688
107,000 Wyeth 4,761,500
21,927,282
Real Estate -- 2.35%
89,700 Mack Cali Realty Corp. 4,063,410
123,300 Prologis 4,961,592
208,500 United Dominion Realty 5,014,425
14,039,427
Retailing -- 2.06%
230,700 Dollar General Corp. 4,697,052
79,800 Kohls Corporation* 4,461,618
144,900 Staples Inc. 3,089,268
12,247,938
Software and Services -- 2.85%
81,000 Affiliated Computer Services, Inc.* 4,139,100
172,700 Computer Associates International 4,745,796
169,300 Microsoft Corporation 4,205,412
192,800 Sabre Holdings Corp. 3,846,360
16,936,668
Technology Hardware & Equipment -- 1.91%
89,900 Cisco Systems* 1,717,989
156,300 Corning Inc.* 2,597,706
68,000 Lexmark International* 4,408,440
191,800 Xerox Corp.* 2,644,922
11,369,057
Telecommunications Services -- 5.33%
180,700 SBC Communications Inc. $ 4,291,625
469,600 Sprint Corp. 11,782,264
454,300 Verizon Communications Inc. 15,696,065
31,769,954
Transportation -- 0.75%
68,900 Union Pacific Corp. 4,464,720
Utilities -- 5.51%
55,600 Consolidated Edison, Inc. 2,604,304
105,300 Dominion Resources, Inc. 7,727,967
100,000 Edison International 4,055,000
131,000 Pinnacle West Capital Corp. 5,822,950
115,800 PPL Corp. 6,876,204
133,300 SCANA Corp. 5,693,243
32,779,668
Total Long-Term Investments
(Cost $576,823,575) 583,336,766
Short-Term Investments -- 1.96%
Investment Companies -- 1.96%
11,699,052 JPMorgan Prime Money Market Fund (a) 11,699,052
(Cost $11,699,052)
Total Investments -- 99.90% 595,035,818
(Cost $588,522,627)
Other assets in excess of liabilities -- 0.10% 582,498
Net assets -- 100.00% $ 595,618,316
* -- Security did not produce income during the last 12 months.
(a) -- Affiliated. Money Market Fund registered under the Investment Company Act
of 1940, as amended and advised by J.P. Morgan Investment Management, Inc.
See notes to financial statements.
JPMorgan Value Opportunities Fund
Statement of Assets & Liabilities
As of June 30, 2005 (unaudited)
Assets:
Investment securities at value:
Unaffiliated issuers $583,336,766
Affiliated issuers 11,699,052
Cash 65,963
Interest and dividends receivable 1,013,311
Receivable for securities sold 3,658,776
Receivable for Fund shares sold 448,156
Total assets $600,222,024
Liabilities:
Payable for adviser and management services 277,746
Payable for distribution plans 75,485
Payable for shareholder servicing fees 14,849
Payable for other accrued expenses 31,962
Payable for securities purchased 4,163,175
Payable for Fund shares redeemed 40,491
Total liabilities 4,603,708
Net Assets:
Capital paid in on shares of capital stock 577,681,591
Accumulated undistributed net
investment income 4,377,227
Accumulated net realized gain
on investments 7,046,307
Unrealized gains 6,513,191
Total net assets $595,618,316
Total authorized capital stock --
500,000,000 shares, $.01 par value:
Class A net assets, 3,737,760 shares outstanding $ 63,370,545
Class A net asset value per share $ 16.95
Class A maximum offering price per share $ 17.89
Class B net assets, 356,245 shares outstanding $ 5,938,000
Class B net asset value per share* $ 16.67
Class C net assets, 270,764 shares outstanding $ 4,513,887
Class C net asset value per share* $ 16.67
Institutional Class net assets,
30,720,761 shares outstanding $521,795,884
Institutional Class net asset value $ 16.99
Cost of investments $588,522,627
*Redemption price may be reduced by contingent deferred sales charge.
See notes to financial statements.
JPMorgan Value Opportunities Fund
Statement of Operations
For the six months ended June 30, 2005 (unaudited)
Investment Income:
Dividends $5,977,860
Dividend income from affiliated investments 14,318
Interest income 253,324
Total investment Income $ 6,245,502
Expenses:
Investment advisory fee 1,363,737
Business management fee 477,307
Distribution expenses 82,858
Shareholder servicing fees 274,864
Transfer agent fee 57,153
Auditing and legal fees 29,550
Custodian fee 14,737
Directors' fees 10,000
Postage, stationery and supplies 2,200
Reports to shareholders 12,265
Registration and prospectus 54,908
Other 30,291
Total expenses 2,409,870
Less amounts waived 539,662
Net expenses 1,870,208
Net investment income 4,375,294
Realized and Unrealized Gain (Loss)
on investments:
Net realized gain on equities,
identified cost basis 7,020,061
Net change in unrealized gain (8,390,683)
Net realized and change in
unrealized gain (loss) on investments (1,370,622)
Net increase in net assets resulting
from operations $3,004,672
See notes to financial statements.
JPMorgan Value Opportunities Fund
Statement of Changes in Net Assets
For the Periods Indicated
Six Months Year
Ended Ended
6/30/05 /1/ 12/31/04
Increase in Net Assets
from operations:
Net investment income $ 4,375,294 $ 348,822
Net realized gain on equity investments 7,020,061 5,290,926
Net change in unrealized gain
on investments (8,390,683) 839,212
Net increase in net assets
from operations 3,004,672 6,478,960
Distributions to Shareholders from:
Net investment income -- (338,245)
Net realized gains -- (5,273,324)
Total distribution to shareholders -- (5,611,569)
Capital Stock Transactions:
Net increase in net assets resulting
from capital stock transactions 528,333,855 24,300,561
Total increase in net assets 531,338,527 25,167,952
Net Assets:
Beginning of period 64,279,789 39,111,837
End of period (including undistributed
net investment income: $4,377,227
and $3,079, respectively) $595,618,316 $ 64,279,789
/1/ Unaudited
See notes to financial statements.
JPMorgan Value Opportunities Fund
Notes to Financial Statements (unaudited)
1. Organization
The JPMorgan Value Opportunities Fund, Inc. (the "Fund") was incorporated in
Maryland on May 24, 1985 as The Growth Fund of Washington, Inc. and operated as
such through December 30, 2001. On December 31, 2001 the Fund began operating as
the JPMorgan Value Opportunities Fund. The Fund is registered under the
Investment Company Act of 1940 (the "Act"), as amended, as an open end,
diversified investment company. The Fund's objective is to provide for long-term
capital appreciation.
The Fund offers Class A, Class B, Class C and Institutional Class shares. Class
C shares began operations on February 19, 2005. Class A shares generally have a
front-end sales charge while Class B and C shares provide for a contingent
deferred sales charge. Institutional Class shares have no sales charge. All
classes have equal rights as to earnings, assets and voting privileges except
that each class may bear different distribution and shareholder service fees,
and each class has exclusive voting rights with respect to its distribution
plans and shareholder servicing agreement.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Fund in its preparation of its financial statements: The policies are in
accordance with accounting principles generally accepted in the United States of
America which require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. Valuation of Investments
Listed securities are valued at the last sale price on the exchange on which
they are primarily traded. The value of National Market System equity securities
quoted by the NASDAQ Stock Market will generally be the NASDAQ Official Closing
Price. Unlisted securities or listed securities for which the latest sales
prices are not available are valued at the mean of the latest bid and ask price
as of the closing of the primary exchange where such securities are normally
traded. Fixed income securities with a maturity of 61 days or more held by the
Fund will be valued each day based on readily available market quotations
received from third party broker-dealers of comparable securities or independent
or affiliated pricing services approved by the Board of Directors. Such pricing
services and broker-dealers will generally provide bid-side quotations.
Short-term investments maturing in less than 61 days are valued at amortized
cost, which approximates market value. Futures, options and other derivatives
are valued on the basis of available market quotations. Investments in other
open-end investment companies are valued at such investment company's current
day closing net asset value per share.
Securities or other assets for which market quotations are not readily available
or for which market quotations do not represent the value at the time of pricing
(including certain illiquid securities) are fair valued in accordance with
procedures established by and under the supervision and responsibility of the
Directors. Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and may
also take place on days when the domestic market is closed. In accordance with
procedures adopted by the Directors, the Fund applies fair value pricing on a
daily basis for all non-U.S. and non-Canadian equity securities held in its
portfolio by utilizing the quotations of an independent pricing service, unless
the Fund's adviser determines that use of another valuation methodology is
appropriate. The pricing services use statistical analyses and quantitative
models to adjust local market prices using factors such as subsequent movement
and changes in the prices of indices, securities and exchange rate in other
markets, in determining fair value as of the time the Fund calculates its net
asset value.
B. Securities 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 interest method adjusted for amortization
of premiums and accretion of discounts. Dividend income less foreign taxes
withheld (if any) is recorded on the ex-dividend date or when the Fund first
learns of the dividend.
C. Federal Income Taxes
It is the Fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
D. Dividends and Distributions to Shareholders
Dividends from net investment income are declared and paid annually. Dividends
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.
Distributions from net investment income and from net capital gains are
determined in accordance with U.S. income tax regulations, which may differ from
U.S. generally accepted accounting principles. These differences are primarily
due to differing treatments for mortgage-backed securities, expiring capital
loss carryforwards, and deferrals of certain losses. Permanent book and tax
basis differences have been reclassified among the components of net assets. The
Fund may utilize earnings and profits distributed to shareholders on redemption
of shares as part of the dividends paid deduction for income tax purposes.
3. Fees and Other Transactions with Affiliates
A. Investment Advisory Fee
Pursuant to the Investment Advisory Agreement, J.P. Morgan Investment
Management, Inc. (the "Adviser") acts as the investment adviser to the Fund. The
Adviser is a wholly-owned subsidiary of J.P. Morgan Asset Management Holdings,
Inc., which is a wholly-owned subsidiary of JPMorgan Chase & Co. ("JPMorgan").
The Adviser supervises the investments of the Fund and for such service is paid
a fee. The fee is accrued daily and paid monthly based on the Fund's average
daily net assets. The annual fee rate for the Fund is 0.50%.
The Fund may invest in one or more money market funds advised by the Adviser or
its affiliates. Advisory and shareholder servicing fees are waived and/or
reimbursed from the Funds in an amount sufficient to offset any doubling up of
these fees related to the Fund's investment in an affiliated money market fund
to the extent required by law.
B. Business Management Fee
Pursuant to the Business Management Agreement, Washington Management Corporation
("WMC"), a wholly owned subsidiary of The Johnston-Lemon Group Incorporated,
performs various corporate and administrative services and receives a fee
accrued daily and paid monthly based on the Fund's average daily net assets. The
annual fee rate for the Fund is 0.175%.
C. Distribution Fees
Effective February 19, 2005, pursuant to a Distribution Agreement, JPMorgan
Distribution Services, Inc. ("Distributor"), a wholly-owned subsidiary of
JPMorgan, began serving as the Fund's exclusive underwriter and promotes and
arranges for the sale of the Fund's shares. Prior to February 19, 2005, J.P.
Morgan Fund Distributors, Inc. ("JPMFD"), a wholly-owned subsidiary of The BISYS
Group, Inc., served as the Fund's exclusive underwriter.
The Directors have adopted Distribution Plans (the "Distribution Plans") for
Class A, B, and C shares of the Fund in accordance with Rule 12b-1 under the
1940 Act. The Distribution Plans provides that the Fund shall pay distribution
fees, including payments to the Distributor, at annual rates of the average
daily net assets of up to 0.25% for Class A and 0.75% for Class B and Class C.
In addition, the Distributor is entitled to receive the front-end sales charges
from purchases of Class A shares and the contingent deferred sales charges
("CDSC") from redemptions of Class B and Class C shares and certain Class A
shares for which front-end sales charges have been waived. For the period
February 19, 2005 to June 30, 2005, the Distributor received the following
amounts: Class A - $28,163, Class B - $1,908 and Class C - none.
Sales charges are not an expense of the Fund and, hence, are not reflected in
the accompanying Statement of Operations.
Johnston, Lemon & Co. Incorporated, a wholly-owned subsidiary of The
Johnston-Lemon Group, Incorporated and parent company of WMC, earned $32,033 on
its retail sales of shares of the Fund and Distribution Plan fees.
D. Shareholder Service Fees
Effective February 19, 2005, the Fund entered into a Shareholder Servicing
Agreement with the Distributor under which the Distributor provides account
administration and personal account maintenance services to the shareholders.
For performing these services, the Distributor receives a fee that is computed
daily and paid monthly equal to a percentage of the average daily net assets at
an annual rate of 0.25% for Class A, Class B and Class C and .10% for the
Institutional Share Class.
The Distributor 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 Funds
under which the Distributor will pay all or a portion of such financial
intermediaries for performing such services.
Prior to February 19, 2005, JPMorgan Chase Bank, N.A. (JPMCB) served as the
Fund's Shareholder Servicing Agent.
JPMCB and the Distributor waived shareholder servicing fees as outlined in Note
3.F.
E. Custodian and Fund Accounting Fees
JPMCB provides portfolio custody and fund accounting services for the Fund.
Compensation for such services is presented in the Statement of Operations as
custodian fees. The custodian fees may be reduced by credits earned by the Fund,
based on uninvested cash balances held by the custodian. The custodian fee
includes $25 that was paid by these credits.
F. Waivers and Reimbursements
The Adviser, Business Manager and Distributor have contractually agreed to waive
fees or reimburse the Fund to the extent that total operating expenses for the
Institutional Share Class (excluding interest, taxes and extraordinary expenses)
exceeds 0.65% the Fund's average daily net assets. The contractual expense
limitation agreements were in effect for the period February 19, 2005 through
June 30, 2005. The expense limitation percentage is due to expire May 1, 2006,
but may be extended.
For the six months ended June 30, 2005, the Fund's service providers
contractually waived fees for the Fund as follows: Investment Adviser -
$105,640, Business Manager - $251,591, Shareholder Servicing Agent - $182,431.
None of these parties expect the Fund to repay any such waived fees in future
years.
G. Other
All officers of the Fund and three of its directors are affiliated with the
Business Manager and receive no compensation from the Fund for serving in their
respective roles.
During the period, the Fund may have purchased securities from an underwriting
syndicate in which the principal underwriter or members of the syndicate are
affiliated with the Adviser.
The Fund may use related party broker-dealers. For the period ended June 30,
2005, the Fund incurred no brokerage commissions with broker-dealers affiliated
with the Adviser.
4. Class Specific Expenses
The Fund's class specific expenses for the six months ended June 30, 2005 are as
follows:
Share Class Shareholder Service Distribution
Class A $ 25,350 $67,192
Class B 3,345 10,034
Class C 1,877 5,632
Institutional 244,292 --
5. Class Specific Distributions
The Fund made no distributions to shareholders during the six months ended June
30, 2005. The tax character of distributions paid to shareholders for the year
ended December 31, 2004 was as follows:
Distribution from Distribution from Total distributions
Share Class ordinary income long-term capital gains paid
Class A $720,833 $4,843,219 $5,564,052
Class B 3,819 43,698 47,517
Total $724,652 $4,886,917 $5,611,569
6. Investment Transactions
The Fund made purchases of investment securities, other than short-term
securities, of $741,042,204 and sales of $199,923,808 during the six months
ended June 30, 2005.
7. Federal Income Tax Matters
For Federal income tax purposes, the cost and unrealized appreciation
(depreciation) in value of the investment securities at June 30, 2005 are as
follows:
Aggregate Gross unrealized Gross unrealized Net unrealized
Cost appreciation depreciation appreciation
$588,522,627 $27,772,726 ($21,259,535) $6,513,191
8. Concentration and Indemnifications
From time to time, the Fund may have a concentration of one or more shareholders
which may be a related party, holding a significant percentage of shares
outstanding. Investment activities of these shareholders could have a material
impact on the Fund.
In the normal course of business the Fund enters into contracts that contain a
variety of representations which provide certain indemnifications. The Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Fund that have not yet occurred. The
Fund has not had any such claims in its past.
9. Capital Share Transactions
Capital stock transactions were as follows for the periods presented:
Six Months ended June 30, 2005
Class A Class B
Amount Shares Amount Shares
Shares sold $22,654,405 1,351,835 $5,635,703 341,623
Shares issued in reinvest-
ment of distributions -- -- -- --
Shares redeemed (2,673,375) (158,856) (136,718) (8,268)
Net increase in Fund
shares outstanding $19,981,030 1,192,979 $5,498,985 333,355
Class C Institutional
Amount Shares Amount Shares
Shares sold $4,527,077 273,576 $517,232,566 30,628,574
Shares issued in reinvest-
ment of distributions -- -- -- --
Shares redeemed (46,392) (2,812) (18,859,411) (1,121,992)
Net increase in Fund
shares outstanding $4,480,685 270,764 $498,373,155 29,506,582
Year ended December 31, 2004
Class A Class B
Amount Shares Amount Shares
Shares sold $1,092,842 60,882 $354,488 20,519
Shares issued in reinvest-
ment of distributions 4,986,222 293,135 43,045 2,565
Shares redeemed (2,711,137) (156,421) (105,934) (6,137)
Net increase in Fund
shares outstanding $3,367,927 197,596 $291,599 16,947
In addition, the Fund sold $20,641,035 equalling 1,214,179 shares of
Institutional Class shares on December 31, 2004, the first day the shares were
made available for purchase.
JPMorgan Value Opportunities Fund
Financial Highlights
Class A
Six Months
ended Year Ended December 31,
Per Share Operating Performance: June 30, 2005<F1> 2004 2003 2002 2001 2000
Net asset value, beginning of period $17.00 $16.62 $15.48 $20.86 $28.05 $28.83
Income from investment operations:
Net investment income .09 .15 .10 .06 .02 .04
Net gains and losses on securities
(both realized and unrealized) (.14) 2.70 4.86 (2.63) (4.28) .10
Total from investment operations (.05) 2.85 4.96 (2.57) (4.26) .14
Less distributions:
Dividends from net investment income -- (.15) (.10) (.06) (.02) (.05)
Distributions from capital gains -- (2.32) (3.72) (2.75) (2.91) (.87)
Total distributions -- (2.47) (3.82) (2.81) (2.93) (.92)
Net asset value, end of period $16.95 $17.00 $16.62 $15.48 $20.86 $28.05
Total Return<F2> (.29%) 17.14% 32.63% (12.54%) (15.31%) .65%
Ratios/Supplemental Data:
Net assets, end of period (thousands) $63,371 $43,255 $39,014 $31,796 $51,253 $62,075
Ratio to Average Net Assets:
Net expenses .96%<F3> 1.44% 1.41% 1.46% 1.39% 1.25%
Net investment income 1.28%<F3> .88% .64% .42% .09% .21%
Expenses without waivers 1.10%<F3> 1.62% 1.65% N/A N/A N/A
Net investment income without waivers 1.54%<F3> .70% .40% N/A N/A N/A
Portfolio Turnover Rate (all classes) 42.15% 40.64% 60.83% 51.20% 14.42% 11.73%
<FN>
<F1> Unaudited
<F2> Total return figures do not include the effect of any front-end or deferred
sales charge.
<F3> Annualized
N/A = not applicable
</FN>
See notes to financial statements.
JPMorgan Value Opportunities Fund
Financial Highlights (continued)
Class B<F1> Class C<F2> Institutional<F3>
Six Months February 23 Six Months
ended Year Ended December 31, to ended
Per Share Operating Performance: June 30, 2005<F4> 2004 2003 2002 June 30, 2005<F4> June 30, 2005<F4>
Net asset value, beginning of period $16.77 $16.45 $15.40 $20.86 $16.59 $17.00
Income from investment operations:
Net investment income (loss) .05<F5> .02<F5> (.01)<F5> (.08)<F5> .04<F5> .165<F5>
Net gains and losses on securities
(both realized and unrealized) (.15) 2.64 4.78 (2.63) .04 (.17)
Total from investment operations (.10) 2.66 4.77 (2.71) .08 (.01)
Less distributions:
Dividends from net investment income -- (.02) -- -- -- --
Distributions from capital gains -- (2.32) (3.72) (2.75) -- --
Total distributions -- (2.34) (3.72) (2.75) -- --
Net asset value, end of period $16.67 $16.77 $16.45 $15.40 $16.67 $16.99
Total Return<F6> (.60%) 16.14% 31.56% (13.21%) .48% (.10%)
Ratios/Supplemental Data:
Net assets, end of period (thousands) $5,938 $384 $98 $14 $4,514 $521,796
Ratio to Average Net Assets:
Net expenses 1.60%<F7> 2.26% 2.14% 2.45% 1.65%<F7> .64%<F7>
Net investment income (loss) .64%<F7> .15% (.08%) (.40%) .64%<F7> 1.64%<F7>
Expenses without waivers 1.70%<F7> 2.41% 2.38% N/A 1.75%<F7> .84%<F7>
Net investment income without waivers .52%<F7> .00% (.32%) N/A .54%<F7> 1.42%<F7>
<FN>
<F1> Class B shares began operations on December 31, 2001.
<F2> Class C shares began operations on February 23, 2005.
<F3> Institutional shares began operations on January 3, 2005.
<F4> Unaudited
<F5> Calculated based on average shares outstanding.
<F6> Total return figures do not include the effect of any front-end or deferred
sales charge.
<F7> Annualized
</FN>
N/A = not applicable
JPMorgan Value Opportunities Fund
Schedule of Shareholder Expenses (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees:
and (2) ongoing costs, including investment advisory, 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 costs with the ongoing costs of investing in other mutual
funds. The examples assume that you had a $1,000 investment in the Class at the
beginning of the period, January 1, 2005, and continued to hold your shares at
the end of the period, June 30, 2005.
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 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.
Expenses
paid
during
Beginning Ending period
account account January 1,
value value 2005 to Annualized
January 1, June 30, June 30, expense
2005 2005 2005 ratio
Class A
Actual period return $1,000.00 $997.10 $4.75 /1/ .96%
Hypothetical $1,000.00 $1,020.20 $4.81 /1/ .96%
Class B
Actual period return $1,000.00 $994.00 $7.91 /1/ 1.60%
Hypothetical $1,000.00 $1,017.00 $8.00 /1/ 1.60%
Institutional
Actual period return $1,000.00 $999.00 $3.17 /1/ .64%
Hypothetical $1,000.00 $1,018.60 $3.20 /1/ .64%
Expenses
paid
during
Beginning Ending period
account account February 23,
value value 2005 to Annualized
February 23, June 30, June 30, expense
2005 2005 2005 ratio
Class C
Actual period return $1,000.00 $1,004.80 $5.80 /2/ 1.65%
Hypothetical $1,000.00 $1,011.90 $5.82 /2/ 1.65%
/1/ Expenses are equal to the Class' annualized expense ratio in the table
above, multiplied by the average account value over the period, multiplied by
181/365 (to reflect the one-half year period).
/2/ Expenses are equal to the Class C annualized expense ratio in the table
above, multiplied by the average account value over the period, multiplied by
128/365 (to reflect the operating period).
JPMorgan Value Opportunities Fund
Investment Advisory Agreement Renewal
At meetings held on February 17, 2005, the Fund's Governance Committee,
consisting of the Fund's Independent Directors, and the full Board of Directors
each met to review the Fund's investment advisory agreement with J.P.Morgan
Investment Management Inc. ("JPMIM"). During the course of each year, the
Independent Directors receive various materials related to the services and
performance of JPMIM. These materials include reports related to the Fund's
investment results; portfolio composition; reports from the portfolio managers;
investment results and portfolio composition relative to the Fund's performance
benchmark - the Russell 1000 Value Index; and other information relating to
policies and procedures of the investment adviser. In addition, in advance of
the meetings on February 17, the Independent Directors had requested and
evaluated materials from JPMIM and Washington Management Corporation, the Fund's
business manager, as well as a memorandum from independent legal counsel
discussing the legal standards applicable to the proposed renewal of the
investment advisory agreement. During the course of the Governance Committee
meeting, the Independent Directors met with representatives of JPMIM and the
business manager and then privately with independent legal counsel without
representatives of JPMIM or the business manager present.
The Directors reviewed factors they believed relevant, including, but not
limited to: the professional experience and qualifications of JPMIM's portfolio
management team, the Fund's investment performance - both absolute and relative
to the Russell 1000 Value Index, other broad market indexes, and the Lipper
Large-Cap Value Average; the performance of other similar funds; fees charged to
the Fund by JPMIM; and fees charged to other JPMIM clients; advisory fees
incurred by other similar funds; the nature, extent and quality of services
provided by JPMIM and its affiliates, including shareholder services; JPMIM's
brokerage and "soft dollar" policies and the Fund's portfolio turnover rate;
various compliance related matters; the profitability of the relationship with
the Fund to JPMIM and its affiliates, as well as the terms of the investment
advisory agreement.
No one factor was considered determinative in the Directors' decision to approve
renewal of the investment advisory agreement. The Directors unanimously
concluded that the terms of the agreement, as well as the fees to be paid under
it, were fair and reasonable and that the agreement should be renewed through
May 1, 2006. Among the reasons why the Directors reached that conclusion are:
the depth and quality of JPMIM's investment organization and the Fund's strong
cumulative investment performance over the past three calendar years relative to
the Fund's performance benchmark and other funds with similar investment styles,
as well as the Directors' belief that the advisory fees to be paid are lower
compared to the average fee charged to other similar funds. In reaching that
conclusion, the Directors reviewed comparative fee information for other large
cap value funds with Rule 12b-1 distribution plans and of similar asset size.
The Directors also reviewed information related to services provided by
affiliates of JPMIM. These services include fund accounting and custodian
services as well as certain shareholder services. The Board concluded these fees
were reasonable in light of the services to be performed.
Because the Fund has been small in size, fees paid to JPMIM and its affiliates
have not been sufficient to generate meaningful profits for the investment
adviser. The Board recognizes that this may change as the Fund grows in size.
Accordingly, at an appropriate time, the Board expects to consider whether
economies of scale are being realized and whether investment advisory fee rates
can be modified or additional breakpoints at higher asset levels should be
added.
JPMorgan Value Opportunities Fund
JPMorgan Funds are distributed by JPMorgan Distribution Services, Inc., which is
a subsidiary of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive
fees for providing various services to the Fund.
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by a prospectus.
Contact JPMorgan Funds Service Center at 1-800-480-4111 for a Fund prospectus or
to receive up to date month-end performance information. 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 Fund before
investing. The prospectus contains this and other information about the Fund.
Read the prospectus carefully before investing.
No sooner than 30 days after the end of each month, the Fund will make available
upon request a complete uncertified schedule of its portfolio holdings as of the
last day of that month. Not later than 60 days after the end of each fiscal
quarter, the Fund will make available a complete schedule of its portfolio
holdings as of the last day of that quarter, as filed in a certified filing with
the SEC. In addition to providing hard copies upon request, the Fund will post
these quarterly schedules on the Fund's website at www.jpmorganfunds.com and
make available on the SEC's website at www.sec.gov. You may also review or, for
a fee, copy the forms at the SEC's Public Reference Room in Washington, DC
(1-800-SEC-0330).
Shareholders may request portfolio holdings schedules at no charge by calling
1-800-480-4111.
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio holdings is available in the Statement of
Additional Information.
A description of the Fund's proxy voting policies and procedures is available
without charge upon request by calling 1-800-480-4111 and on the SEC's website
at www.sec.gov. The Directors have delegated the authority to vote proxies for
securities owned by the Fund to a designated Fund officer. A copy of the Fund's
voting record is available on the SEC's website at www.sec.gov or at the Fund's
website at www.jpmorganfunds.com. The Fund's proxy voting record will include,
among other things, a brief description of the matter voted on for each
portfolio security, and will state how each vote was cast, for example, for or
against the proposal.
JPMorgan Value Opportunities Fund
1101 Vermont Avenue, NW
Washington, DC 20005-3585
PRST STD
U.S. POSTAGE
PAID
FREDERICK, MD
PERMIT #999
(C)JPMorgan Chase & Co., 2005 All Rights Reserved, August 2005.
SAN-VO-605
Item 2 - Code of Ethics
Not applicable to this filing.
Item 3 - Audit Committee Financial Expert
Not applicable to this filing.
Item 4 - Principal Accountant Fees and Services
Not applicable to this filing.
Item 5 - Audit Committee Disclosure for Listed Companies
Not applicable to this Registrant
Item 6 - Schedule of Investments
The schedule is included in the report to shareholders filed under Item 1 of
this Form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant
Item 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant.
Item 9 - Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable to this Registrant
Item 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board of Directors since the registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The registrant has a Governance Committee comprised solely of persons
who are not considered "interested persons" of the registrant within the meaning
of the Investment Company Act of 1940. The committee periodically reviews such
issues as the Board's composition, responsibilities, committees, compensation
and other relevant issues, and recommends any appropriate changes to the full
Board of Directors. While the committee normally is able to identify from its
own resources an ample number of qualified candidates, it will consider
shareholder suggestions of persons to be considered as nominees to fill future
vacancies on the Board. Such suggestions must be sent in writing to the
Governance Committee of the registrant, c/o the registrant's Secretary, and
should be accompanied by complete biographical and occupational data on the
prospective nominee, along with a written consent of the prospective nominee for
consideration of his or her name by the Governance Committee.
Item 11 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's last fiscal half-year (the
Registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
Item 12 - Exhibits
(a) Not applicable to this filing.
(b) The certifications required by Rule 30a-2 of the Investment Company
Act of 1940, as amended, and Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 are attached as exhibits 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.
JPMorgan Value Opportunities Fund, Inc.
By /s/ Jeffrey L. Steele, President and PEO
Date: September 7, 2005
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.
By /s/ Jeffrey L. Steele, President and PEO
Date: September 7, 2005
By /s/ Michael W. Stockton, Vice President and Treasurer
Date: September 7, 2005