Annual Report JPMorgan Elect plc · Managed Cash– Preservation of capital with a yield based on...

JPMorgan Elect plc. Annual Report & Accounts 2009 | a

Annual Report09JPMorgan Elect plc

Annual Report & Accounts for the year ended 31st August 2009

Features

JPMorgan Elect plc (the ‘Company’) adopted its present structure as a result of thecombination of JPMorgan Fleming Managed Growth plc and JPMorgan FlemingManaged Income plc and the subsequent capital reorganisation. The Company’sname reflects the capital structure and the investment flexibility it offers toshareholders. There are three share classes, each with distinct investment policies,objectives and underlying investment portfolios. Each share class is listedseparately and traded on the London Stock Exchange. This capital structuremeans that shareholders may benefit from greater investment flexibility in atax-efficient manner.

Objectives

Managed Growth – Long term capital growth from investing in a range ofinvestment trusts and open-ended funds managed principally by JPMorgan AssetManagement.

Managed Income – Growth of income with potential for long term capital growthby investing in equities, investment trusts and fixed income securities.

Managed Cash – Preservation of capital with a yield based on short term interestrates by investing in a range of liquidity funds and short dated AAA-rated UKgovernment securities/G7 government securities hedged into sterling.

More information on investment policies and risk management is given in theDirectors’ Report on pages 35 and 36.

Benchmarks

Managed Growth – A composite comprising 50% FTSE All-Share Index and50% FTSE World Index (ex-UK).

Managed Income – The benchmark changed during the year. Prior to 28thFebruary 2009, the benchmark was a composite comprising 85% FTSE 350 HighYield Index and 15% Merrill Lynch 5-10 year Sterling Corporate Bond Index.With effect from 1st March 2009, the benchmark is a composite comprising85% FTSE All-Share Index and 15% Barclays Capital Global Corporate Bond Indexin sterling terms.

Managed Cash – There is no benchmark for this portfolio.

Capital Structure

Managed Growth share class has an authorised share capital of 160,000,000ordinary shares, of which 44,650,134 (2008: 45,484,800) were in issue at the yearend.

Managed Income share class has an authorised share capital of 200,000,000ordinary shares, of which 51,979,421 (2008: 54,126,517) were in issue at the yearend.

Managed Cash share class has an authorised share capital of 125,000,000ordinary shares, of which 21,425,261 (2008: 23,801,941) were in issue at the yearend.

Management Company

The Company employs JPMorgan Asset Management (UK) Limited (‘JPMAM’ or the‘Manager’) to manage its assets.

Contents

1 Chairman’s Statement

Managed Growth Share Class

4 Financial Results5 Investment Managers’ Report8 Financial Record9 Ten Largest Investments10 Geographical Analysis11 List of Investments12 Shareholder Analysis13 Income Statement14 Balance Sheet

Managed Income Share Class

15 Financial Results16 Investment Managers’ Report20 Financial Record21 Ten Largest Investments22 Sector Analysis23 List of Investments24 Shareholder Analysis25 Income Statement26 Balance Sheet

Managed Cash Share Class

27 Financial Results28 Investment Managers’ Report29 Financial Record30 List of Investments31 Portfolio Analysis31 Shareholder Analysis32 Income Statement33 Balance Sheet

The Company

34 Board of Directors35 Directors’ Report44 Corporate Governance48 Directors’ Remuneration Report49 Directors’ Responsibilities in

Respect of the Accounts50 Independent Auditors’ Report52 Income Statement53 Reconciliation of Movements in

Shareholders’ Funds54 Balance Sheet55 Cash Flow Statement56 Notes to the Accounts77 Notice of Meeting80 Appendix84 Glossary of Terms85 Information about the Company

TH

E

CO

MP

AN

Y

JPMorgan Elect plc. Annual Report & Accounts 2009 | 1

The 12 month period under review was very much a year of contrast: the first sixmonths being marked by a ferocious market sell-off, the second six monthswitnessing sharp recoveries in equities and bonds around the world.

The Managed Growth portfolio has continued to perform much in line with itsbenchmark with a slight improvement in the relative position over the second half:for the year to 31st August 2009 the total return to shareholders declined by 5.0%and the benchmark by 6.7%. Disappointing thought it is to report an absolutedecline for the year the Board regards this outcome as satisfactory in what havebeen exceptional circumstances.

In my half-yearly statement I set out in detail a number of substantial changesbeing made by the Manager in response to the Board’s representations about thedecline in performance of the Managed Income portfolio. Shareholders willremember that these included changes in personnel, a revision of portfoliostructure, and a new composite benchmark, together with a reduction inmanagement fees. The annual figures still make grim reading: total return toshareholders for the twelve months to 31st August 2009 of -13.8% compared with-6.3% for the benchmark. However these figures disguise a relative improvementfollowing the full implementation of the changes described above. Although it istoo early to make a final judgement, your Board is encouraged by the results nowbeing delivered.

The effects of the substantial contraction in the supply of credit on short-datedmoney instruments and the sharp reduction in base rates to 0.5% have both had adirect effect on the Managed Cash portfolio, which has provided a total return toshareholders of +1.2% over the year. The Board regards this as a satisfactoryperformance in difficult market conditions.

The investment manager’s reports on the following pages provide a detailedreview of market performance and the actions taken over the last financial yeartogether with a market outlook for each share class. I strongly encourageshareholders to take the time to read each of these reports.

Dividends

Managed Growth

During the year, three interim dividends totalling 5.60 pence were paid.The Directors have declared a fourth interim dividend of 1.55 pence per sharein respect of the three months to 31st August 2009, which will be paid on22nd December 2009 to shareholders on the register at the close of business on27th November 2009. Total dividends for 2009 are therefore 7.15 pence per shareand compare with 5.65 pence in 2008; an increase of 26.5%. Shareholders shouldnote however that there is no specific dividend objective for Managed Growth andaccordingly the rate of dividend will fluctuate from year to year, depending on thepayments made by the underlying investments. Dividends on Managed Growthshares are paid in June and December each year.

Chairman’s Statement

2 | JPMorgan Elect plc. Annual Report & Accounts 2009

TH

E

CO

MP

AN

Y

Managed Income

Against the rapidly deteriorating environment for corporate profits and accordinglythe payment of dividends on the shares of many of the companies held in theportfolio, three interim dividends totalling 2.85 pence were paid. In order tomaintain the 2009 dividend total at 4.30 pence per share (2008: 4.30 pence),your Board declared a fourth quarterly dividend of 1.45 pence per sharenecessitating a transfer from revenue reserves of £388,000. Your Board isvery mindful of the implications of using the finite revenue reserve to maintainthe dividend and is keeping this matter under close review.

Dividends on the Managed Income shares are paid quarterly in March, June,September and December each year. As the level and timing of dividend receiptsfrom the underlying investments varies throughout the year, the quarterlydividends will not be of equal amounts.

Managed Cash

Against the backdrop of rapidly falling interest rates, three dividends totalling1.70 pence per share were paid. As the impact of these declines fed through to theyields obtainable from sterling liquidity funds, your Board did not declare a fourthquarterly dividend. Dividends on the Managed Cash shares are normally paidquarterly in March, June, September and December each year. Dividends on theManaged Cash portfolio will always be highly dependent on the level of interestrates and with no likelihood of an early increase in interest rates, shareholdersshould not expect any more than minimal distributions from this portfolio.

Fourth Portfolio

During the year under review the Board considered the establishment of a newshare class to compliment the Company’s existing structure. The new share classwas due to be launched in late Autumn 2008. However, due to the exceptionalvolatility in financial markets at this time, the launch was postponed. The Board arekeeping the launch of a new share class under review and shareholders will benotified when there are developments in this area.

The Board

Roger Yates was appointed to the Board on 1st August 2009. Mr Yates was chiefexecutive of Henderson Group plc until 2008 and is an independent director ofIG Holdings plc and F&C Asset Management plc. Mr Yates has 28 years’ fundmanagement industry experience. Shareholders will have a chance to meet him atthis year’s Annual General Meeting.

Managed Growth and Managed Cash Investment Manager

Shareholders will recall that Jonathan Lowe took over the management of theManaged Growth and Managed Cash portfolios whilst Katy Thorneycroft was onmaternity leave. Mrs Thorneycroft has recently returned to work and will, over thenext few months, resume her responsibilities as lead investment manager for bothshare classes. Both Mrs Thorneycroft and Mr Lowe will attend this year’s AnnualGeneral Meeting.

Chairman’s Statement continued


TH

E

CO

MP

AN

Y

VAT Case

On 19th December 2008, the Company received a full and final settlement inrelation to the recovery of past VAT following a ruling by the European Court ofJustice that investment trusts should be exempt from VAT on their investmentmanagement fees. The total recovery, including interest, was £838,000 and wasrepaid to the Managed Growth and Managed Income share class poolsproportionate to the amounts originally suffered.

Annual General Meeting

The Company’s Annual General Meeting will be held at Dexter House, No.2 RoyalMint Court, Tower Hill, London, EC3N 4QN on Wednesday 9th December 2009at 12.00 noon. In addition to the formal part of the meeting, there will bepresentations from the investment managers of each share class and a questionand answer session. Please submit in writing, any detailed questions that you wishto raise at the AGM to the Company Secretary, JPMorgan Elect plc, Finsbury Dials,20 Finsbury Street, London, EC2Y 9AQ. Shareholders who are unable to attend theAGM in person are encouraged to use their proxy votes.

Articles of Association

At the Annual General Meeting, it is proposed that the Company adopts newArticles of Association. These latest amendments to the current articles ofassociation reflect the changes in company law brought about by the 2006 Actwhich came into effect on 1 October 2009 and, changes made to the 2006 Act inAugust 2009, to implement the EU Shareholder Rights Directive in the UK, as wellas some minor technical or clarifying changes. More details on the proposedchanges to the Articles are given in the Directors’ Report and Appendix to theNotice of Meeting on pages 80 to 83.

Conversion Opportunities Between Share Classes

A tremendous advantage of the Company’s structure is in the ability to convert allor part of any class of holding into any other class on 31st May and 30th Novembereach year without such conversions, under current law, being treated as disposalsfor UK capital gains tax purposes. As detailed in the Half-Year Report, subject tothe relevant tax clearances from HMRC, the Company intends to increase thefrequency of conversion opportunities to quarterly. Shareholders will be informedif, and when, such clearance is granted.

SSiimmoonn MMiilllleerrChairman 4th November 2009


MA

NA

GE

D

GR

OW

TH

A glossary of terms and definitions is provided on page 84.

1Source: Morningstar

2Source: FTSE. The benchmark is a composite comprising 50% FTSE All-Share Index and 50% FTSE World Index (ex-UK).

3Management fees and all other operating expenses excluding interest and VAT recoverable, expressed as a percentage of theaverage of the opening and closing net assets.

31st August 31st August %2009 2008 change

Shareholders’ funds (£’000) 148,252 161,940 -8.5

Number of shares in issue 44,650,134 45,484,800 -1.8

Net asset value per share 332.0p 356.0p -6.7

Share price 321.0p 346.5p -7.4

Share price discount to net asset value 3.3% 2.7%

Total expense ratio3 0.53% 0.43%

Financial Data

Financial ResultsTotal Returns (capital plus income)

Managed Growth Share Class

-5.0%Return to shareholders1

(2008: -9.5%)

7.15pDividends(2008: 5.65p)

-4.6%Return on net assets1

(2008: -10.6%)

-6.7%Benchmark return2

(2008: -5.2%)

Review

Six months ago our half-year report reflected upon the exceptional volatility infinancial markets that had taken place since the bankruptcy of Lehman Brothersand the resultant sharp falls in both economic activity and share prices.Government bonds and cash, we noted, were the only places to hide. The pastsix months by contrast have seen some of the sharpest rises in equity marketson record, as the world moved away from the brink of depression and riskaversion reduced.

Although the rebound in markets over the past six months has been substantial,it is not unusual after a period of sharp and protracted declines. A study of 19 bearmarket cycles over the past eighty years shows the market concerned fell onaverage 57% and the peak to trough decline took on average 30 months. Between31 October 2007 and 9 March 2009 the MSCI All Country World Index (in USdollars) fell 60% and took just over 16 months to reach its nadir. So whilesomewhat faster than average the contraction phase of this cycle is well within thehistorical experience. The study goes on to note that the subsequent reboundsfollowing these declines averaged 71% from the lows and took on average17 months to play out. If we turn to the current cycle, what is unusual about thisparticular rebound is less its magnitude and more its speed. As of the time ofwriting the MSCI All Country World Index has rallied (trough to recent peak) 72%from its lows of 9 March, but it has only taken six months to achieve. The averagepost bear market rally tends to last 17 months with only two prior instances of itlasting less than a year.

What is at least as interesting is to look to history for what happens next. In almostall instances after a sharp rebound, a period of reaction sets in. From the peak ofthe rebound rally, markets subsequently underwent a correction of up to 25%, asrecovery expectations moderated. And thereafter multi-year trading ranges set in,in at least half of the markets surveyed, as structural problems (fiscal deficits,balance sheet repair, high inflation, deflation etc) acted as a headwind againstfurther gains. Although no one cycle is ever exactly the same, this idea of a periodof convalescence being required to heal past credit related excesses - at least inthe worst affected economies – does have some resonance. The one positive offsetto this view is that the low level of valuation should provide some downsidesupport. The really protracted bear markets – the US in 1929 or Japan in 1989 –started with excessive levels of valuation which were only reduced over longperiods of time. Fortunately our starting point in this context is very much morefavourable.


MA

NA

GE

D

GR

OW

TH

Investment Managers’ Report

Katy Thorneycroft

Jonathan Lowe

Performance

The table below summarises the fund’s performance over the past 12 months.

The rally of the past six months has done much to reverse the poor absolutereturns suffered in the post Lehman’s bankruptcy period but there is still much todo if we are to erase the full extent of declines since mid 2007. That said we are ata point in the market cycle where the momentum for both economies andearnings is accelerating and where monetary policy remains highlyaccommodative. Six months ago there were legitimate concerns that policy wouldnot gain traction as credit markets remained in deep freeze. But this concern hasreduced as systemic risk has been relieved. Consequently we feel there is somefurther upside to markets before the monetary spigot tightens, so the prospect ofseeing these declines recede still further is relatively high.

Against the benchmark it has been a much better period for the portfolio. Our regionalallocations for the most part worked well, particularly once sterling’s relative weaknessover the full 12 month period is taken into account. For much of the period we held anunderweight position in both the UK and the US and an overweight position inContinental Europe, Asia and the Emerging Markets. Although Asia and the EmergingMarkets suffered badly during last Autumn’s melt-down, the less developed marketshave rebounded strongly in the subsequent recovery. Given their superior economicprofiles (stronger growth, better fiscal positions, unimpaired credit systems etc) weexpect these markets to continue to perform strongly in a relative context.

Fund performance was mixed over the period. Of our key holdings we benefitedfrom the relative defensiveness of JPMorgan American Investment Trust as well asthe sharp recovery of JPMorgan Asian Investment Trust, JPMorgan EmergingMarkets Investment Trust and Mercantile Investment Trust. Indeed the strongabsolute and relative performance of our smaller company funds (Mercantile,JPMorgan European Fledgeling, Gartmore Growth Opportunities) was a particularsource of satisfaction. Unfortunately the effects of this were offset by poor relativeperformance in the UK (JPMorgan UK Dynamic) and Europe (JPMorgan EuropeanGrowth). The underperformance of some of our largest holdings created asignificant headwind over the period.


MA

NA

GE

D

GR

OW

TH

Investment Managers’ Reportcontinued

Source: Morningstar/Bloomberg.1Prior to 31st August 2007, the benchmark was a composite comprising 65% FTSE All-ShareIndex-UK and 35% FTSE World Index (ex-UK).

Months 6 12 24 361

Net Asset Value (%) 33.8 -4.6 -14.6 -2.9

Benchmark (%) 32.2 -6.7 -11.5 -1.0

FTSE All-Share Index (%) 33.8 -8.2 -16.2 -6.3

FTSE World Index (ex-UK) (%) 30.5 -5.3 -7.0 4.3

Total returns to 31st August 2009

Portfolio Activity

The exceptional volatility of the past 12 months should have created someinteresting trading opportunities. Unfortunately the potential to exploit this hasbeen reduced by the poor underlying liquidity of the investment trust sector.With market makers not inclined to commit capital at a time of financial stress,working positions even for a modestly sized portfolio such as ours has not beeneasy. The problem has usually been disposing of positions rather than acquiringthem given the underlying direction of markets.

Nevertheless there were some notable transactions over the year. Only three newnames entered the portfolio (Artemis Alpha, BlackRock World Mining and JupiterEuropean Opportunities) but sizeable additions were made to existing holdings inMercantile Investment Trust, JPMorgan Smaller Companies Investment Trust,Edinburgh Worldwide, JPMorgan Asian Investment Trust and SVM UK Active. On thesale side we disposed of previously held positions in Edinburgh Investment Trust,Gartmore Fledgeling Investment Trust, Electric and General Investment Trust,Schroder Japan Investment Trust, JPMorgan Mid Cap Investment Trust and ScottishMortgage Investment Trust as well as the holding in the JPMorgan US Technologyopen ended fund. Being able to access the immediate liquidity of our open endedfund holdings gave us a much needed source of flexibility.

Outlook

As noted above, we are at a point in the equity cycle when returns should remainpositive. History tells us that the “normal” recovery period after a deep andprotracted decline is around 18 months even if the average upside is “only” 70%from the trough. Interestingly after abnormally sharp periods of decline (eg the USin the 1930s, the UK in the 1970s or Hong Kong post the Asian financial crisis) theupside has been considerably higher. We have the unusual combination of a sharpinventory led recovery, lowish valuations and the maintenance of extreme policyaccommodation.

The problem is what comes next. It is much easier to hold a relatively sanguineview for the next six months than it is for the next 24. We know that policy makerswill keep their feet on the policy pedal because they are too scared to withdrawthis support prematurely. No policy maker wishes to be the cause of a double diprecession. At the same time we know that policy accommodation will be withdrawnwhen the recovery becomes self sustaining. How quickly will markets begin todiscount this? Hence the resonance of a broad based multi-year trading rangereferred to above. The higher the returns in the next 12 months the more we willbe borrowing from the future. Maintaining exposure to true areas of seculargrowth will be crucial to sustaining longer term returns from this portfolio.

KKaattyy TThhoorrnneeyyccrrooffttJJoonnaatthhaann LLoowweeInvestment Managers 4th November 2009


MA

NA

GE

D

GR

OW

TH


MA

NA

GE

D

GR

OW

TH

Financial Record

At 31st August 20001 2001 2002 2003 2004 20052 2006 2007 2008 2009

Net asset value per share (p) 349.5 278.9 211.5 221.6 230.2 301.5 362.0 404.2 356.0 332.0

Share price (p) 357.0 287.0 210.5 215.0 226.0 293.8 353.5 389.5 346.5 321.0

Year ended 31st August

Revenue return per share (p) 2.05 4.95 3.78 3.85 3.63 3.82 5.23 5.06 5.65 7.25

Dividends (p) 1.30 3.50 3.50 3.50 3.50 3.72 5.20 5.25 5.65 7.15

Premium/(discount) (%) 2.1 2.9 (0.5) (3.0) (1.8) (1.8) (2.3) (3.6) (2.7) (3.3)

Gearing factor (%) 95.2 97.1 95.2 95.2 95.2 97.2 95.0 97.4 94.9 97.4

Total expense ratio (TER) (%)3 n/a 0.45 0.60 0.51 0.52 0.50 0.41 0.44 0.43 0.53

A glossary of terms and definitions is provided on page 84.1Represents the period from commencement of operations on 24th November 1999 to 31st August 2000.2Restated for the change in accounting policy regarding dividends payable, which are now included in the accounts in the year in which they are approved by shareholders.Years prior to 2005 have not been restated.

3Management fees and all other operating expenses excluding interest and VAT recoverable, expressed as a percentage of the average of the opening and closingnet assets.


MA

NA

GE

D

GR

OW

TH

Ten Largest Investments

31st August 2009 31st August 2008Valuation Valuation

£’000 %1 £’000 %2

JPMorgan UK Dynamic Fund (A shares)3 17,975 12.1 18,145 11.2

JPMorgan Claverhouse Investment Trust plc 13,740 9.3 16,456 10.2

JPMorgan American Investment Trust plc 11,634 7.9 15,029 9.3

JPMorgan US Select Equity Fund (A shares)3 9,557 6.5 8,720 5.4

JPMorgan Asian Investment Trust plc4 8,796 5.9 7,213 4.5

JPMorgan European Investment Trust plc (Growth shares) 7,891 5.3 10,743 6.6

JPMorgan US Fund (A shares)3 5,366 3.6 6,933 4.3

The Mercantile Investment Trust plc5 5,255 3.5 2,886 1.8

JPMorgan Japanese Investment Trust plc 5,025 3.4 4,037 2.5

JPMorgan Smaller Companies Investment Trust plc5 4,583 3.1 2,890 1.8

Total* 89,822 60.6

1 Based on total assets less current liabilities of £148.3m.2 Based on total assets less current liabilities of £161.9m.3 Represent holdings in Open Ended Investment Companies and Société d’investissements à Capital Variable (‘SICAVs’).4 Both ordinary shares and subscription shares held.5 Not included in the ten largest investments at 31st August 2008.

*At 31st August 2008, the value of the ten largest investments amounted to £96.0m, representing 59.4% of total assets less current liabilities.


Geographical Analysis

31st August 2009 31st August 2008Portfolio Benchmark Portfolio Benchmark

Region % % % %

UK 42.4 50.0 38.5 50.0North America 24.7 25.7 27.0 26.7Continental Europe 12.6 11.5 12.2 11.8Asia (excluding Japan) 7.6 5.3 4.3 2.6Japan 5.8 5.2 4.9 4.8Emerging Markets and Other 4.5 2.3 6.4 4.1Net Current Assets 2.4 — 6.7 –

Total 100.0 100.0 100.0 100.0

Based on total assets less current liabilities of £148.3m (2008: £161.9m).

(on a look through basis)

MA

NA

GE

D

GR

OW

TH


MA

NA

GE

D

GR

OW

TH

List of Investmentsat 31st August 2009

JPMorgan Managed Investment Trusts

JPMorgan Claverhouse 13,740

JPMorgan American 11,634

JPMorgan Asian1 8,796

JPMorgan European (Growth shares) 7,891

The Mercantile Investment Trust 5,255

JPMorgan Japanese 5,025

JPMorgan Smaller Companies 4,583

JPMorgan Emerging Markets1 4,551

JPMorgan European Fledgeling 4,491

JPMorgan Income & Capital (Ordinary shares) 2,732

JPMorgan US Discovery 2,102

JPMorgan Indian1 1,582

JPMorgan Fleming Japanese Smaller Companies1 1,542

JPMorgan Chinese1 1,000

JPMorgan Income & Growth (Capital shares) 496

JPMorgan Income & Growth (Units) 292

75,712

JPMorgan Managed Open Ended Funds

JPMorgan UK Dynamic (‘A’ Shares)2 17,975

JPMorgan US Select Equity (‘A’ shares)2,3 9,557

JPMorgan US Fund (‘A’ shares)2 5,366

32,8981Both ordinary and subscription shares held.2Unlisted.3Société d’Investissement à Capital Variable (‘SICAV’).

Externally Managed Investment Trusts

Fidelity Special Values 4,062

Hansa Trust (‘A’ non-voting shares) 3,280

BlackRock World Mining 3,053

RCM Technology1 2,899

Alliance Trust 2,876

Biotech Growth 2,605

SVM UK Active 2,426

Gartmore Growth Opportunities 2,187

Edinburgh Worldwide 1,915

Finsbury Growth & Income 1,713

Impax Environmental Markets 1,713

Jupiter European Opportunities 1,548

Perpetual Income & Growth 1,494

Gartmore Irish Growth 1,435

Melchior Japan 849

Artemis Alpha 833

Utilico1 644

Dolphin Capital Investors 328

35,860

Total Portfolio 144,470

Valuation£’000

Valuation£’000


MA

NA

GE

D

GR

OW

TH

Shareholder AnalysisAt 31st August 2009

Number of shares % Holding

Unit Trusts 381,172 0.9Pension Funds 380,401 0.8Other Institutions 231,669 0.5

Total Institutions 993,242 2.2

Individuals in the Investment Trust Share Plan1 13,830,195 31.0Individuals in the Investment Trust Pension Account1 12,471,756 27.9Private Client Brokers 11,436,951 25.6Retail Investors holding shares directly or through nominee accounts2 3,996,548 9.0Individuals in the Investment Trust Individual Savings Account1 1,921,441 4.3

Total Retail Holdings 43,656,891 97.8

Total Shares in Issue 44,650,133 100.0

Nominee accounts have been allocated to their appropriate category.1 Savings product managed by JPMorgan.2 Includes shares below 10,000 threshold.

Source: Thomson Financial.


MA

NA

GE

D

GR

OW

TH

Income Statement (unaudited)for the year ended 31st August 2009

2009 2008Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Losses on investments held atfair value through profit or loss – (11,828) (11,828) – (22,419) (22,419)

Net foreign currency gains/(losses) – 3 3 – (27) (27)Income from investments 3,520 – 3,520 2,680 – 2,680Other interest receivable and similar income 204 – 204 467 – 467

Gross return/(loss) 3,724 (11,825) (8,101) 3,147 (22,446) (19,299)Management fee (63) (190) (253) (102) (307) (409)VAT recovered 156 469 625 – – –Other administrative expenses (573) – (573) (367) – (367)

Net return/(loss) on ordinary activities before taxation 3,244 (11,546) (8,302) 2,678 (22,753) (20,075)

Taxation credit/(charge) 23 (78) (55) (28) 45 17

Net return/(loss) on ordinary activities after taxation 3,267 (11,624) (8,357) 2,650 (22,708) (20,058)

Return/(loss) per Managed Growth share 7.25p (25.79)p (18.54)p 5.65p (48.45)p (42.80)p


MA

NA

GE

D

GR

OW

TH

Balance Sheet (unaudited)At 31st August 2009

2009 2008£’000 £’000

Fixed assetsInvestments held at fair value through profit or loss 144,470 153,659

Current assetsDebtors 478 1,365Cash and short term deposits 3,681 7,259

4,159 8,624Creditors: amounts falling due within one year (360) (343)

Net current assets 3,799 8,281

Total assets less current liabilities 148,269 161,940

Provision for liabilities and chargesDeferred tax (17) –

Total net assets 148,252 161,940

Net asset value per Managed Growth share 332.0p 356.0p


MA

NA

GE

D

IN

CO

ME

Managed Income Share Class


1Source: Morningstar2Source: WM (World Markets)/Bloomberg. The benchmark changed during the year. Prior to 28thFebruary 2009, the benchmark was a composite comprising 85% FTSE 350 High Yield Index and15% Merrill Lynch 5-10 year Sterling Corporate Bond Index. With effect from 1st March 2009, thebenchmark is a composite comprising 85% FTSE All-Share Index and 15% Barclays Capital GlobalCorporate Bond Index in sterling terms.

3Management fees and all other operating expenses excluding interest and VAT recoverable,expressed as a percentage of the average of the opening and closing net assets.








Financial Data


-13.8%Return to shareholders1

(2008: -17.6%)

4.30pDividends(2008: 4.30p & specialdividend of 1.15p)

-14.1%Return on net assets1

(2008: -19.7%)

-6.3%Benchmark return2

(2008: -10.5%)


MA

NA

GE

D

IN

CO

ME

Review

The last 12 months have seen unprecedented volatility on global stock markets,with investor confidence buffeted by the near-collapse of the global financialsystem, a deep downturn (and subsequent modest recovery) in the globaleconomy, and extraordinary levels of intervention from central banks andgovernments around the world. Against this backdrop, the FTSE All-Share Indexended August 2009 8.2% lower than a year earlier, while the Barclays CapitalGlobal Corporate Bond Index gained 19.4%.


Sarah Emly

John Baker

The review period began badly, with the UK stock market falling precipitously andcorporate bond yields rising sharply as the collapse of Lehman Brothers senttremors through the global financial system and sparked a wave of bank rescuesaround the world. In the UK, HBOS agreed to be acquired by Lloyds TSB afterfinding it increasingly difficult to secure funding, with the resulting Lloyds BankingGroup one of a number of institutions, including Royal Bank of Scotland andBradford & Bingley, which have since undergone part or total nationalisation.

The fallout from the ensuing financial crisis and severe tightening of creditconditions was quickly felt in the global economy. Unemployment surged in all themajor economies and manufacturing activity slowed rapidly as consumer demandplummeted. The UK economy quickly went into reverse, contracting by 1.8%quarter on quarter over the final three months of 2008, by 2.4% in the firstquarter of 2009 and by another 0.7% in the three months to the end of June 2009(source: National Statistics Office and Bloomberg).

Worries that the very sharp global recession may even turn into another GreatDepression saw investors flee all risk assets for the safety of government bondsand cash. As a result, by early March 2009 the stock market had fallen to such anextent that the FTSE All-Share was 49% below its 2007 peak and at its lowest levelsince the eve of the invasion of Iraq six years’ earlier. Corporate bonds faredequally badly, with spreads widening significantly as investors anticipated risingcredit downgrades and defaults.

However, in mid March sentiment suddenly reversed and for the remainder of thefinancial year, equities surged higher and corporate bond spreads narrowedsignificantly as the gradual emergence of some more encouraging economic newsallowed markets to move away from pricing in another Great Depression. Theinitial catalyst was an improvement in the financial sector, alongside the realisationthat global central banks and governments were prepared to do whatever it tookto support the global financial system, along with the emergence of someeconomic ‘green shoots’, that convinced investors to come out of their bunkers.

Markets responded particularly positively to a US plan to draw a line under thefinancial crisis by removing toxic assets from banks’ balance sheets, as well as toan announcement of concerted action from the G20 countries to resuscitate theglobal economy. In early March 2009 UK interest rates were reduced to a recordlow of just 0.5% and the Bank of England took the unprecedented step ofannouncing plans to buy £75 billion of government bonds, which has since beenincreased to up to £175 billion. This programme is called quantitative easing and itsaim is to bring down borrowing costs for businesses and individuals by forcinglong-term government bond yields lower.

Through the spring and summer, signs began to emerge that the unprecedentedmonetary policy action, combined with the various government stimulus packages


MA

NA

GE

D

IN

CO

ME

announced over the last year, may be working. Economic data releases began tosuggest that the pace of economic contraction was slowing, with manufacturingand services purchasing managers’ indices showing industrial activity returning togrowth and retail sales rising again. Even housing market reports suggested houseprices may at last be stabilising after falling sharply since late 2007. In earlySeptember the National Institute of Economic and Social Research said that theybelieved the UK economy had returned to growth in the three months to July.

The result of this better economic news was a very sharp rebound in equities andcorporate bonds as investors, no longer concerned that the world was heading foreconomic meltdown, began to regain their appetite for risk. Worries that themarket may have got ahead of itself sparked some profit taking through June andthe first half of July. But with second-quarter corporate earnings suggesting theworst of the profits correction may be over, the market again surged higherthrough the end of August. The FTSE All-Share is now only about 8% belowpre-Lehman levels (as at 31 August 2009), and is 41% above its March bottom.

Performance

The table below summarises the fund’s performance over the past 12 months.

In the twelve months to the 31st August 2009 the Managed Income portfoliodelivered a return on net assets of -14.1% against the total return of the compositebenchmark of -6.3%, which in absolute terms is a distinct improvement on thesituation at the half year stage. As was stated in the half-year report, beingunderweight in corporate bonds during the first six months of this period wasdetrimental to performance, given the severe weakness of the equity market andrelative resilience of corporate bonds at that time. For the first six months, andindeed for the year as a whole, the Company’s exposure to investment trusts andother investment instruments was significantly detrimental to performance, asthese instruments suffered from their gearing to the falling equity market, theirilliquidity and the widening of their discounts relative to their net asset values.However, significant progress has been made over the most recent six months toreduce the Company’s exposure to these instruments, as detailed below.

In terms of the underlying direct equity holdings over the twelve month period, theoverall performance was broadly in line with the benchmark. The Companybenefited from its significantly underweight position in the banking sector,particularly being underweight in Royal Bank of Scotland, and in the previouslyquoted HBOS, prior to its rescue takeover by Lloyds TSB. The Company alsobenefited from its positions in the defensive tobacco stocks, British American

Source: Morningstar/Bloomberg.

Months 6 12 24 36

Net Asset Value (%) 26.2 -14.1 -31.2 -25.0

Benchmark (%) 29.4 -6.3 -16.1 -9.4

FTSE All-Share Index (%) 33.8 -8.2 -16.2 -6.3

Barclays Capital Global Corporate Bond Index in

sterling terms (%) 6.1 19.4 35.8 34.9

Total returns to 31st August 2009


MA

NA

GE

D

IN

CO

ME

Tobacco and Imperial Tobacco which continued to deliver resilient earningsperformance through the turbulent market conditions. Some of our recent value-oriented purchases have also contributed positively for the period as a whole,including the investment bank, Investec, and Tullett Prebon, the inter-dealerbroker, which have both performed particularly strongly since mid-March 2009 astheir valuation attractions became more widely recognised. By contrast, theunderweight position in the Oil & Gas Producers sector, notably BP and RoyalDutch Shell, was detrimental to performance over the first six months of the yearas they outperformed the falling market. We have increased our positions in bothof these major oil stocks as their valuations, and dividends in particular, lookattractive. Being underweight in the mining sector was also costly over the periodas a whole, with this sector rallying since the recovery in investors’ risk appetite inspring of 2009 and the hoped-for positive impact of economic recovery.

Portfolio Review

The Company’s financial year spanned an extremely turbulent time in equitymarkets. The first six months of the year were characterised by economic sclerosisand collapsing equity prices, particularly in the financial sector. The period fromMarch 2009 to the year end on 31 August 2009 saw equity markets rebound fromtheir lows as economic conditions ceased to deteriorate any further.

We focus on identifying stocks whose earnings forecasts are being revisedupwards, whose valuation is attractive and whose balance sheet strength allowsfor dividend stability. As such, portfolio construction is determined by stockselection rather than explicit market direction calls.

In the first half of the year the Company sought to minimise its exposure to stocksadversely impacted by the global financial crisis. The portfolio’s exposure to UKdomestic banks and life assurance stocks was reduced as the earnings prospects inthese sectors deteriorated and consequently the dividend paying potential of thebanks collapsed. On the other hand, we purchased companies like AstraZenecaand GlaxoSmithKline. These companies reported better than expected results,leading to earnings upgrades whilst their strong cash flow generation supportedabove average dividend yields.

Since the half-year report both economic and market conditions have improvedconsiderably and investor confidence has begun to rise. We have sought tocapitalise on this by adding new positions in stocks where there is evidence thatearnings prospects have improved, such as Tullett Prebon, Next, British Telecomand Daily Mail & General Trust. In addition to improving earnings trends, thesecompanies are also characterised by strong cashflows and relatively securedividend payments as we work to ensure that the portfolio has a balancedexposure to economic recovery and income resilience.

Since early 2009 we have also sought to reduce the Company’s exposure to someof the investment vehicles and have managed to lower the number of suchholdings from twenty-nine at the previous year end to seven, now representingless than 20% of the total fund value. In April, as the general market outlookbecame more stable, we used such proceeds to purchase a holding in twoJPMorgan Bond funds as a diversified approach to enhancing income yield whilstalso benefiting from corporate recovery. The two bond funds, JPMorgan GlobalCorporate Bond Fund and JPMorgan Global High Yield Bond, currently represent11.1% of the portfolio with approximately 8.8% in the Global Corporate Bond Fundand 2.3% in the Global High Yield Bond Fund.

Investment Managers’ Reportcontinued

Outlook

Given the extent and length of the recent stock market rally, some caution frominvestors is understandable. The economy has stabilised after a period of freefall,but there is no sign yet of a strong return to growth. With unemployment stillrising, the consumer remains a key area of risk and we will need to see a real pickup in consumer spending before there can be a sustainable recovery.

Meanwhile, the positive surprises we saw in second-quarter corporate earningswere largely driven by aggressive cost cutting, which supported profit margins.However, this process will run out of steam sooner or later, and markets will belooking for signs of top line revenue growth in order to move forward.

Nevertheless, there are several factors that we think may continue to supportequities for the time being. In particular, we expect economic data to continue toimprove and surprise positively, and do not yet feel that share prices are fullyreflecting the more benign growth and inflation environment that now exists.High unemployment will keep wages growth low, helping to support corporateearnings until companies can find a way to increase revenues. Meanwhile, centralbanks have indicated that they currently have no intention of increasing interestrates from the current very low levels.

As a result, markets are currently benefiting from a modest economic growthoutlook, low inflation and supportive monetary policy – a combination that hashistorically been positive for equity investors.

SSaarraahh EEmmllyyJJoohhnn BBaakkeerrInvestment Managers 4th November 2009


MA

NA

GE

D

IN

CO

ME


Financial Record

At 31st August 2001 2002 2003 20041 20052 2006 2007 2008 2009

Net asset value per share (p) 92.3 73.7 77.4 79.1 97.2 108.7 113.8 86.4 69.6

Share price (p) 96.0 74.5 79.0 77.0 95.0 106.5 109.0 84.5 69.5

Year ended 31st August

Revenue return per share (p) 3.21 4.47 4.00 3.31 4.35 4.23 5.12 5.52 3.55

Dividends (p) 3.19 4.36 4.36 2.85 3.50 3.75 4.12 4.30 4.30

Special dividends (p) - - - - - - 1.00 1.15 –

(Discount)/premium (%) (2.7) (2.3) (2.0) 4.2 (2.2) (0.1)

Gearing factor (%) 100.2 100.4 100.7 99.8 97.8 98.8 97.4 98.9 98.2

Total expense ratio (TER) (%)3 0.85 1.17 1.16 0.50 0.71 0.79 0.79 0.74 0.77

A glossary of terms and definitions is provided on page 84.1Represents the period from commencement of operations on 14th January 2004, which is the date when the investments of JPMorgan Fleming Managed Income weretransferred to the Company, to 31st August 2004.

2Restated for the change in accounting policy regarding dividends payable, which are now included in the accounts in the year in which they are approved by shareholders.The period ended 31st August 2004 and prior years have not been restated.

3Management fees and all other operating expenses excluding interest and VAT recoverable, expressed as a percentage of the average of the opening and closingnet assets.

MA

NA

GE

D

IN

CO

ME


Ten Largest Investments

31st August 2009 31st August 2008Valuation Valuation

£’000 %1 £’000 %2

JPMorgan Income & Growth Investment Trust plc(Income shares and capital shares) 4,459 12.3 5,987 12.8

JPMorgan Global Corporate Bond Fund (‘A’ Distribution shares)3 3,182 8.8 – –

HSBC 2,583 7.1 2,023 4.3

Royal Dutch Shell 2,203 6.1 2,647 5.7

BP 2,126 5.9 2,674 5.7

Vodafone 1,357 3.8 3,075 6.6

GlaxoSmithKline3 1,301 3.6 – –

JPMorgan European Investment Trust plc (Income shares) 1,230 3.4 1,373 2.9

British American Tobacco 1,014 2.8 949 2.0

AstraZeneca3 942 2.6 404 0.9

Total* 20,397 56.4

1 Based on total assets less current liabilities of £36.2m.2 Based on total assets less current liabilities of £46.8m.3 Not included in the ten largest investments at 31st August 2008.

*At 31st August 2008, the value of the ten largest investments amounted to £21.6m, representing 46.3% of total assets less current liabilities.M

AN

AG

ED

I

NC

OM

E


Sector Analysis

31st August 2009 31st August 2008Portfolio Benchmark Portfolio Benchmark

% % % %

Financials 18.6 18.6 15.8 28.2Investment Trusts 16.8 2.3 41.3 –Oil & Gas 13.5 15.6 12.3 22.1Basic Materials 7.6 8.5 2.5 –Consumer Goods 6.5 9.7 4.5 1.0Healthcare 6.2 6.9 0.9 10.7Consumer Services 5.7 8.3 3.2 5.4Telecommunications 4.7 5.1 8.7 9.2Industrials 4.6 5.8 3.5 1.9Utilities 2.4 3.0 6.3 5.9Technology 0.5 1.2 – 0.6Fixed Interest 11.1 15.0 – 15.0Net Current Assets 1.8 – 1.0 –

Total 100.0 100.0 100.0 100.0

Based on total assets less current liabilities of £36.2m (2008: £46.8m).

MA

NA

GE

D

IN

CO

ME



UK EquitiesHSBC 2,583Royal Dutch Shell 2,203BP 2,126Vodafone 1,357GlaxoSmithKline 1,301British American Tobacco 1,014AstraZeneca 942Rio Tinto 887BHP Billiton 821Barclays 792Xstrata 700Standard Chartered 561National Grid Transco 496Aviva 433BAE Systems 402Tullett Prebon 401Imperial Tobacco 377BT 357Prudential 349Kazakhmys 344BG 317Centrica 312Investec 289Tesco 280IMI 278Next 268Unilever 255AMEC 238Compass 226Restaurant 219Legal & General 204Northern Foods 200Marks & Spencer 199Hiscox 186Daily Mail & General Trust (‘A’ Non-Voting) 186McBride 185Logica 184Pearson 183Britvic 175Amlin 170Carillion 166HMV 162Rolls-Royce 148Halfords 144Weir 142Jardine Lloyd Thompson 140Standard Life 135PZ Cussons 132Provident Financial 130

Close Brothers 129Balfour Beatty 129Royal & Sun Alliance Insurance 122Morrison (Wm.) Supermarkets 118Babcock International 117G4S 111Beazley 82Brown (N.) 75International Power 74Interserve 63WSP 61Severfield-Rowen 52

25,432

JPMorgan Managed Investment TrustsJPMorgan Income & Growth (Income shares) 3,388

JPMorgan European (Income shares) 1,230

JPMorgan Income & Growth (Units) 1,071

5,689

Externally Managed Investment Trusts

ACP Mezzanine 153

Speymill Deutsche Immobilien 134

Global Special Opportunities (Income) 68

Jupiter Second Enhanced Income (Income) 43

398

Fixed Interest – JPMorgan Managed Open Ended Funds

JPMorgan Global Corporate Bond

(‘A’ Distribution shares) 3,182

JPMorgan Global High Yield Bond (‘A’ Income shares) 847

4,029

Total Fixed Asset Investments 35,548

Derivative Instruments

Options

Compass 360 Call Options Sep 2009 -

Rolls-Royce 380 Call Options Sep 2009 (9)

Barclays 320 Call Options Sep 2009 (18)

Total Derivative Instruments (27)

Total Fixed Asset Investments and Derivatives 35,521

Valuation£’000

Valuation£’000

MA

NA

GE

D

IN

CO

ME


At 31st August 2009

Shareholder Analysis


Units Trusts 437,993 0.8Other Institutions 93592 0.2


Individuals in the Investment Trust Share Plan 1 24,336,014 46.8Private Client Brokers 17,556,786 33.8Retail Investors holding shares directly or through nominee accounts 2 4,788,817 9.2Individuals in the Investment Trust Individual Savings Account 1 3,789,149 7.3Individuals in the Investment Trust Pension Accounts 1 977,070 1.9

Total Retail Holdings 51,447,836 99.0


Nominee accounts have been allocated to their appropriate category.1 Savings product managed by JPMorgan.2 Includes shares below 10,000 threshold.


MA

NA

GE

D

IN

CO

ME




£’000 £’000 £’000 £’000 £’000 £’000

Losses on investments held at fair value through profit or loss – (8,778) (8,778) – (15,220) (15,220)

Net foreign currency (losses)/gains – (4) (4) – 3 3Income from investments 2,035 – 2,035 3,264 – 3,264Other interest receivable and similar income 61 – 61 121 – 121

Gross return/(loss) 2,096 (8,782) (6,686) 3,385 (15,217) (11,832)Management fee (77) (87) (164) (156) (156) (312)VAT recovered 59 59 118 – – –Other administrative expenses (156) – (156) (98) – (98)


Taxation (charge)/credit (19) 8 (11) (75) 46 (29)


Return/(loss) per Managed Income share 3.55p (16.41)p (12.86)p 5.52p (27.71)p (22.19)p

MA

NA

GE

D

IN

CO

ME



2009 2008£’000 £’000


Current assetsDebtors 258 407Cash and short term deposits 1,094 145

1,352 552

Creditors: amounts falling due within one year (716) (52)

Net current assets 636 500



Net asset value per Managed Income share 69.6p 86.4p

MA

NA

GE

D

IN

CO

ME


Managed Cash Share Class


1Source: Morningstar2Operating expenses excluding interest, expressed as a percentage of the average of the openingand closing net assets.








Financial Data


+1.2%Return to shareholders1

(2008: +4.6%)

+1.5%Return on net assets1

(2008: +4.2%)

1.70pDividend(2008: 4.07p)

MA

NA

GE

D

CA

SH


Review

The net asset value of the Managed Cash portfolio returned 1.5% during the yearto the end August 2009. The total return to shareholders was slightly less over theperiod as the mid market price retreated back to £1 per share.

The past 12 months have been the most challenging for short term money marketmanagers since this industry was founded at the end of the 1960s. One of theunforeseen consequences of the bankruptcy of Lehman Brothers was therealisation that these funds could be subject to old fashioned bank runs ascounterparty risk considerations took hold. The US Federal Reserve quicklyprevented full scale panic selling from setting in by offering governmentguarantees to qualifying funds, but it was a close run thing. Fortunately due to thehigh quality nature of their holdings and their short dated maturities none of thesterling denominated stable value funds fell below their £1 “par values” (the USdollar funds’ sector was not so fortunate). But this was largely down to the abilityof money authorities to prevent a cascading series of bank failures through the useof tax-payers funds.

For this portfolio we only invest in AAA-rated stable value funds which aremembers of the Institutional Money Market Funds Association. However inrecognition of the counterparty risk issue we did modify the portfolio guidelines topermit direct investment into short dated government securities. Although thisdiscretion has not yet been used, it is worth emphasising that capital preservationremains our absolute priority for this portfolio, with the yield achieved being asecondary objective.

Outlook

Given the cut in the base rate by the Bank of England to 0.5% and the adoption of“quantitative easing” measures, we do not anticipate more than a modest returnfrom our liquidity fund holdings for the foreseeable future. The embedded yieldsfrom our portfolio holdings are still somewhat higher than is implied by thecurrent base rate but these yields will decline as old paper runs off andreinvestment takes place at the lower level. Until base rates turn up meaningfully –and any increases are probably still 12 months away – shareholders should notexpect any more than a minimal distribution from these holdings.

KKaattyy TThhoorrnneeyyccrrooffttJJoonnaatthhaann LLoowweeInvestment Managers 4th November 2009


Katy Thorneycroft

Jonathan Lowe

MA

NA

GE

D

CA

SH


Financial Record

At 31st August 20041 20052,3 20063 20073 20083 2009

Net asset value per share (p) 100.1 101.2 101.1 101.4 101.5 100.3

Share price (p) 100.0 99.5 99.0 100.0 100.5 100.0

Year to 31st August

Revenue return per share (p) 2.08 3.97 3.65 3.98 4.17 1.56

Dividends (p) 2.00 3.96 3.73 3.93 4.07 1.70

Discount (%) 0.1 1.7 2.1 1.4 1.0 0.3

Gearing factor (%) nil nil nil nil nil nil

Total expense ratio (TER) (%)4 0.10 0.08 0.15 0.12 0.16 0.20

A glossary of terms and definitions is provided on page 84.1Represents the period from commencement of operations on 14th January 2004.2Restated for change in accounting policy regarding dividends payable, which are now included in the accounts in the year in which they are approved by shareholders.The period ended 31st August 2004 has not been restated.

3The net asset values at the year-ends include the 4th quarterly dividend which was declared but not paid.4Operating expenses excluding interest, expressed as a percentage of the average of the opening and closing net assets.

MA

NA

GE

D

CA

SH



31st August 2009 31st August 2008Yield Rating2 Valuation Valuation

%1 £’000 %3 £’000 %4

JPMorgan Sterling Liquidity Fund 2.55 AAA 4,155 19.3 2 - Scottish Widows Investment Partnership Liquidity Fund 2.20 AAA 4,146 19.3 - - Standard Life Sterling Liquidity Fund 2.61 AAA 3,572 16.6 3,455 14.3Western Asset Sterling Liquidity Fund 2.59 AAA 3,463 16.1 3,900 16.2Fidelity Institutional Sterling Cash Fund 2.36 AAA 3,405 15.9 4,693 19.4Barclays Global Investors Sterling Liquidity Fund 2.12 AAA 2,812 13.1 2,918 12.1

Total 21,553 100.3

1 Annual yield to 31st August 2009. Source: IMMFA Money Fund Report, iMoneyNet.2 Ratings given by recognised credit agencies.3 Based on total assets less current liabilities of £21.5m.4 Based on total assets less current liabilities of £24.2m.

MA

NA

GE

D

CA

SH


Portfolio Analysis

31st August 31st August2009 2008

%1 %

Sterling Liquidity Funds 100.3 100.8Net Current Liabilities (0.3) (0.8)

Total 100.0 100.0

1Based on total assets less current liabilities of £21.5m (2008: £24.2m).

Shareholder AnalysisAt 31st August 2009


Other Institutions 39,105 0.2


Retail investors holding shares directly or through nominee accounts 1 11,286,149 52.7Individuals in the Investment Share Plan 2 5,788,663 27.0Private Client Brokers 4,309,959 20.1Individuals in the Investment Trust Individual Savings Account 2 1,385 0.0

Total Retail 21,386,156 99.8


Nominee accounts have been allocated to their appropriate category1 Includes shares below 10,000 threshold.2 Savings product managed by JPMorgan.


MA

NA

GE

D

CA

SH




£’000 £’000 £’000 £’000 £’000 £’000

Losses on investments held at fair value through profit or loss – (3) (3) – (4) (4)

Income from investments 530 – 530 1,452 – 1,452Other interest receivable and similar income – – – 3 – 3

Gross return/(loss) 530 (3) 527 1,455 (4) 1,451Other administrative expenses (46) – (46) (40) – (40)

Net return/(loss) on ordinary activities before taxation 484 (3) 481 1,415 (4) 1,411

Taxation (136) – (136) (376) – (376)

Net return/(loss) on ordinary activities after taxation 348 (3) 345 1,039 (4) 1,035

Return/(loss) per Managed Cash share 1.56p (0.01)p 1.55p 4.17p (0.02)p 4.15p

MA

NA

GE

D

CA

SH



2009 2008£’000 £’000


Current assetsDebtors 13 132Cash and short term deposits – –

13 132Creditors: amounts falling due within one year (70) (329)

Net current liabilities (57) (197)



Net asset value per Managed Cash share1 100.3p 101.5p

1 The net asset value at 31st August 2008 includes the 1.00p 4th quarterly dividend which was declared but not paid at that date.

MA

NA

GE

D

CA

SH


Board of Directors

All Directors are members of the Audit and Nomination Committees and areconsidered independent of the Manager.

Angus Macpherson

A Director since 2008

Group Chief Executive of Noble Group Limited, the specialist small and mid-capinvestment banking firm. Mr Macpherson graduated in history from CambridgeUniversity and subsequently worked for Lazard Brothers Inc., Smith New CourtLimited and Merrill Lynch. During his career he has worked in London, New York,Singapore and Hong Kong, latterly as Head of Capital Markets and Financing forMerrill Lynch in Asia. He joined Noble Group Limited in 2006.

Simon Miller (Chairman)


Chairman of Dunedin Capital Partners Limited. Mr Miller is also Chairman of Artemis Alpha Trust plc and Noble AIM VCT plc and a Non-Executive Director ofDunedin Enterprise Investment Trust plc, Adam & Company plc and BrewinDolphin Holdings PLC. Previously Chairman of JPMorgan Fleming ManagedIncome plc.

Nigel Sidebottom (Chairman of the Audit Committee)


Investment Director of Premier Fund Managers Limited. Formerly a Director of BFS Investments plc, stockbrokers Gerrard Vivian Gray Limitedand Greig Middleton and Co. Limited. Mr Sidebottom was also formerly aNon-Executive Director of INVESCO Continental Smaller Companies Trust PLC andThe Monthly High Income Trust PLC.

Robert Ottley


After a career as a private client stockbroker specialising in the selection ofinvestment trusts and other collective investment schemes, first with W Greenwell,then James Capel, and HSBC Investment Management, Mr Ottley has latterly been anon-executive director of a variety of investment companies, most recently AtlantisAsian Recovery Trust plc and, as chairman, The Zero Preference Growth Trust plc.His former directorships also include JPMorgan Fleming Managed Income plc.

Roger Yates


Former chief executive of Henderson Group plc, a position that he held from 1999to 2008. He is currently an independent non-executive director of IG GroupHoldings plc and F&C Asset Management plc. He has 28 years’ experience in thefund management industry having begun his career with GT Management Limitedin 1981. He was previously chief investment officer of Invesco Global and MorganGrenfell Investment Management Limited.

TH

E

CO

MP

AN

Y


Directors’ Report

The Directors present their report for the year ended31st August 2009.

Business Review

Business of the Company

The Company carries on business as an investment trust andwas approved by HM Revenue & Customs as an investmenttrust in accordance with Section 842 of the Income andCorporation Taxes Act 1988 for the year ended 31st August2008. In the opinion of the Directors, the Company hassubsequently conducted its affairs so that it should continueto qualify. The Company will continue to seek approval underSection 842 of the Income and Corporation Taxes Act 1988each year.

Approval for the year ended 31st August 2008 is subject toreview should there be any subsequent enquiry underCorporation Tax Self Assessment.

The Company is an investment company within the meaningof Section 833 of the Companies Act 2006. The Company isnot a close company for taxation purposes.

A review of the Company’s activities and prospects is given inthe Chairman’s Statement on pages 1 to 3, and in theInvestment Managers’ Reports on pages 5 to 7, 16 to 19and 28.

Managed Growth

Objective

The objective of the Managed Growth portfolio is to achievelong term capital growth from investments in closed andopen-ended funds managed principally by JPMAM.

Investment Policies and Risk Management

In order to achieve its stated investment policy and manageinvestment risks, the Managed Growth portfolio is invested ina diversified range of investment trusts and open-endedfunds, which they themselves invest in the UK and overseas.The number of investments in the portfolio will normallyrange between 30 and 50.

Investment Limits and Restrictions

• The investment manager must obtain Board approval forany new investment in excess of 10% of the portfolio’sgross assets.

• The portfolio does not invest more than 10% of its grossassets in companies that themselves may invest more

than 15% of their gross assets in UK listed investmentcompanies.

• An investment in any open-ended fund will not exceed25% of the market capital of the investee fund.

• An investment in third party managed funds will notnormally exceed 25% of the portfolio’s gross assets.

• The portfolio will not normally invest in derivativeinstruments – prior approval is required from the Board if such an investment is desired.

• The Board does not intend to utilise borrowings toincrease the funds available for investment, the portfolioto remain invested between 70-105%. The Boardmonitors closely the level of indirect gearing through theunderlying investments. The underlying portfolio shouldbe invested 95-120%.

These limits and restrictions may be varied by the Board atany time at its discretion.

Managed Income

Objective

The objective of the Managed Income portfolio is to achievea growing income return with potential for long-term capitalgrowth by investing in equities, investment companies andfixed income securities.


In order to achieve its stated investment policy and manageinvestment risks, the Managed Income portfolio is investedin a diversified portfolio of UK equities (including investmentcompanies) and fixed interest securities. Please see theInvestment Managers’ report for more details on portfolioactivity. The number of investments in the portfolio willnormally range between 50 and 80.


• The portfolio does not invest more than 10% of its grossassets in companies that themselves may invest morethan 15% of their gross assets in UK listed investmentcompanies.

• The portfolio will not normally invest in unlistedsecurities.

• The portfolio will be between 90-100% invested inequities (including investment companies) and fixedinterest securities.

TH

E

CO

MP

AN

Y


Directors’ Report continued

• The investment manager may write options withinparameters set by the Board. Prior approval is requiredfrom the Board for investment in all other derivativeinstruments.

• The Board does not intend to utilise borrowings toincrease the funds available for investment.


Managed Cash

Objective

The objective of the Managed Cash portfolio is to providepreservation of capital with a yield based on short terminterest rates by investing in a range of sterling liquidityfunds, selected for their yield and credit rating and shortdated AAA-rated UK government securities/G7 governmentsecurities hedged into sterling.


In order to achieve its stated investment policy and managerisks, the Managed Cash portfolio invests no more than 20%of the value of the portfolio in any one liquidity fund or shortdated (i.e. with a maturity of less than 2 years) UKgovernment securities/G7 government securities hedged intosterling. All liquidity funds or government securities shallhave a AAA credit rating (as measured by Standard & Poors)or equivalent rating from a recognised credit rating agency.


• No more than 20% of the value of the portfolio to beinvested in any one sterling liquidity fund.

• To invest no more than 15% of gross assets in other UKlisted companies (including investment companies).

• The Board does not intend to utilise borrowings toincrease the funds available for investment.


Performance

Managed Growth:

In the year to 31st August 2009, the Managed Growthportfolio produced a total return to shareholders of -5.0%and a total return on net assets of -4.6%. This compares withthe return on the composite benchmark of -6.7%.

As at 31st August 2009, the value of the Managed Growthinvestment portfolio was £144.5m. The Investment Managers’Report on pages 5 to 7 includes a review of developmentsduring the year as well as information on investment activitywithin the portfolio.

Managed Income:

In the year to 31st August 2009, the Managed Incomeportfolio produced a total return to shareholders of -13.8%and a total return on net assets of -14.1%. This compares withthe return on the composite benchmark of -6.3%. As at 31st August 2009, the value of the Managed Incomeinvestment portfolio was £35.5m. The Investment Managers’Report on pages 16 to 19 includes a review of developmentsduring the year as well as information on investment activitywithin the portfolio.

Managed Cash:

In the year to 31st August 2009, the Managed Cash portfolioproduced a total return to shareholders of 1.2% and a totalreturn on net assets of 1.5%. There is no benchmark indexfor this share class. As at 31st August 2009, the value of theinvestment portfolio was £21.6m. The Investment Managers’Report on page 28 includes a review of developments duringthe year.

Total Return, Revenue and Dividends

The Company’s gross loss for the year totalled £14.3m(2008: loss of £29.7m) and a net loss after deducting themanagement fee, other administrative expenses, finance costsand taxation amounted to £14.9m (2008: loss of £31.3m).

Managed Growth:

Net revenue return for the year available for distribution byway of dividend amounted to £3,267,000 (2008: £2,650,000).Total dividends paid and proposed in respect of the year are7.15p per share (2008: 5.65p per share), costing £3,208,000(2008: £2,622,000). The Directors have declared a fourthinterim dividend of 1.55p (2008: 1.17p) payable on 22ndDecember 2009 to shareholders on the register at the closeof business on 27th November 2009, costing £692,000(2008: £532,000). The balance on the revenue reserve at theyear end is £1,497,000 (2008: £1,275,000) and after thetransfer of the fourth interim (2008: fourth interim) will be£805,000 (2008: £743,000).

TH

E

CO

MP

AN

Y


Managed Income:

Net revenue return for the year available for distribution byway of dividend amounted to £1,903,000 (2008: £3,056,000).Total dividends paid and proposed in respect of the yearwere 4.30p per share (2008: 5.45p per share), costing£2,291,000 (2008: £2,999,000). The balance on the revenuereserve at the year end is £1,258,000 (2008: £1,677,000) andafter payment of the fourth quarter dividend is £504,000(2008: £893,000).

Managed Cash:

Net revenue return for the year available for distribution byway of dividend amounted to £348,000 (2008: £1,039,000).Total dividends paid and proposed in respect of the yearwere 1.70p per share (2008: 4.07p per share), costing£387,000 (2008: £1,013,000). The balance on the revenuereserve at the year end is £21,000 (2008: £60,000 afterpayment of the fourth quarterly dividend).

Full details of the dividends paid and proposed on all threeshare classes during the year are given in note 7 on pages 62and 63.

Key Performance Indicators (‘KPIs’)

The Board uses a number of financial KPIs to monitor andassess the performance of the Company. The principal KPIsare:

• Performance against the benchmark index:

This is the most important KPI by which performance isjudged.

Managed Growth:

Performance Relative to Benchmark Index Figures have been rebased to 100 as at 30th November 1999

Performance Since Launch Figures have been rebased to 100 as at 30th November 1999

Managed Income:

Performance Relative to Benchmark Index Figures have been rebased to 100 as at 31st December 2000

Performance Since Launch Figures have been rebased to 100 as at 31st December 2000

Source: Morningstar/FTSE

708090

100110120130140150160170180

2009200820072006200520042003200220012000

JPMorgan Elect Managed Income – Share priceJPMorgan Elect Managed Income – Net asset valueBenchmark

JPMorgan Elect Managed Income – Share price JPMorgan Elect Managed Income – Net asset valueBenchmark


7580859095

100105110115120

2009200820072006200520042003200220012000

JPMorgan Elect Managed Growth – Share priceJPMorgan Elect Managed Growth – Net asset valueBenchmark


40

60

80

100

120

140

160

180

2009200820072006200520042003200220012000

JPMorgan Elect Managed Growth – Share price JPMorgan Elect Managed Growth – Net asset valueBenchmark (Represented by the horizontal line)


80

90

100

110

120

130

140

2009200820072006200520042003200220012000

TH

E

CO

MP

AN

Y



Managed Cash:

There is no benchmark for the Managed Cash share class.

• Performance against the Company’s peers

The principal objective of the Managed Growth share class isto achieve capital growth. The principal objective of theManaged Income share class is to achieve growing incomewith the potential for long term capital. However, the Boardalso monitors the performance of the Managed Growth andManaged Income share classes relative to their respectivebenchmarks and a broad range of competitor funds.

• Performance attribution

The purpose of performance attribution analysis is to assesshow each share class achieved its performance relative to itsbenchmark index, i.e. to understand the impact on theManaged Growth and Managed Income portfolios’ relativeperformance of the various components, such as assetallocation and stock selection. However, given that theManaged Growth (and a proportion of the Managed Incomeportfolio) is invested in other funds, rather than entirely inconventional equities, it is difficult to produce precise,verifiable performance attribution data. Therefore theInvestment Managers comment on the factors that havesignificantly impacted on performance in their reports.

• Discount to net asset value (‘NAV’)

The Board has for several years operated share issue andrepurchase programmes which seek to address imbalancesin supply and demand of the Company’s shares within themarket and thereby minimise the volatility and absolute levelof the discount/premium to NAV at which the Company’sshares trade.

Managed Growth – Discount Performance

In the year to 31st August 2009, Managed Growth sharestraded between a discount of 0.04% and 3.41%.

Managed Income – Discount Performance

In the year to 31st August 2009, the Managed Income sharestraded between a premium of 3.44% and a discount of 3.80%.

Managed Cash – Discount Performance

In the year to 31st August 2009, the Managed Cash sharestraded between a premium of 0.13% and a discount of0.99%.

• Total expense ratio (‘TER’)

The TER represents the Company’s management fees and allother operating expenses, excluding interest payments andVAT recoverable, expressed as a percentage of the average ofthe opening and closing net assets. The Managed Growth TERfor the year ended 31st August 2009 was 0.53%(2008: 0.43%), the Managed Income TER was 0.77%(2008: 0.74%) and the Managed Cash TER was 0.20%(2008: 0.16%). The Board reviews each year an analysiswhich shows a comparison of the Managed Growth andManaged Income TERs and its main expenses with those ofits peers.

Source: Morningstar

JPMorgan Managed Cash – Premium/(Discount)

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

Aug 2009

Aug 2008

Aug 2007

Aug 2006

Aug 2005

Aug 2004

Jan 2004

-4

-2

0

2

4

6

8

10

Aug2009

Aug2008

Aug2007

Aug2006

Aug2005

Aug2004

Aug2003

Aug2002

Aug2001

Dec2000

Source: Morningstar

JPMorgan Managed Income – Premium/(Discount)

-4-3-2-10123456

Aug 2009

Aug 2008

Aug 2007

Aug 2006

Aug 2005

Aug 2004

Aug 2003

Aug 2002

Aug 2001

Aug 2000

Nov 1999

Source: Morningstar

JPMorgan Managed Growth – Premium/(Discount)

TH

E

CO

MP

AN

Y


Share Capital

The Company has authority to issue new shares and torepurchase shares for cancellation.

• Share issues

During the year 460,000 Managed Growth and 375,000Managed Income shares were issued at a premium to thenet asset value.

Since the year end and as at the date of this report, theCompany has not issued any further shares.

• Share repurchases

The Company repurchased a total of 1,481,039 ManagedGrowth shares in the market for cancellation during the year,representing 3.3% of the shares in issue at the beginning of theyear, at a total cost of £4,472,000. Since the Company’s yearend a further 534,738 Managed Growth shares have beenrepurchased for cancellation, at a total cost of £1,767,566.

The Company repurchased a total of 885,419 ManagedIncome shares in the market for cancellation during the year,representing 1.6% of the shares in issue at the beginning ofthe year, at a total cost of £585,000. Since the Company’syear end a further 173,250 Managed Income shares havebeen repurchased for cancellation, at a total cost of £114,211.

The Company repurchased a total of 945,200 Managed Cashshares in the market for cancellation during the year,representing 4.0% of the shares outstanding at the beginningof the year, at a total cost of £951,000. In addition 1,833,285Managed Cash shares were redeemed persuant to theconversion dates at a total cost of £1,835,000. Since theCompany’s year end a further 79,000 Managed Cash Shareshave been repurchased for cancellation, at a total cost of£78,003.

Resolutions to renew the authority to issue new shares andrepurchase Managed Growth, Managed Income and ManagedCash shares will be put to shareholders at the forthcomingAnnual General Meeting. The full text of these resolutions areset out in the Notice of Meeting on pages 77 and 78.

• Conversions

The Company’s capital structure allows shareholders theopportunity, twice each year, to convert part or all of theirshare holdings into shares of the Company’s other shareclasses without such conversions being treated, undercurrent law, as a disposal for UK capital gains tax purposes.More details are given on page 85.

During the year two conversions took place, on 30thNovember 2008 and 31st May 2009. The net result of thoseconversions was a reduction in the Managed Income issuedshare capital of 1,636,677 shares and an increase in theManaged Growth and Managed Cash issued share capital of186,373 and 401,805 shares respectively.

Principal Risks

With the assistance of the Manager, the Board has drawn upa risk matrix, which identifies the key risks to the Company.These key risks fall broadly under the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example asset allocation or the level ofgearing, may lead to under-performance against therelevant benchmark index and peer companies, resultingin the Company’s shares trading on a wider discount.The Board tries to limit these risks by diversification ofinvestments through its investment restrictions andguidelines which are monitored and reported on by theManager. JPMAM provides the Directors with timely andaccurate management information, includingperformance data and attribution analyses, revenueestimates, transaction reports and shareholder analyses.The Board monitors the implementation and results ofthe investment process with the Investment Managers,who attend all Board meetings, and review data whichshow statistical measures of the Company’s risk profile.The Board does not intend that any of the Company’sportfolios will use borrowings to increase the fundsavailable for investment and it monitors closely the levelof indirect gearing through the underlying investments.The Board holds a separate meeting devoted to strategyeach year.

• Market: Market risk arises from uncertainty about thefuture prices of the Company’s investments. It representsthe potential loss that the Company might suffer throughholding investments in the face of negative marketmovements. The Board considers asset allocation, stockselection and levels of indirect gearing on a regular basisand has set investment restrictions and guidelines whichare monitored and reported on by JPMAM. The Boardmonitors the implementation and results of theinvestment process with the Manager.

• Accounting, Legal and Regulatory: In order to qualify as aninvestment trust, the Company must comply with Section842 of the Income & Corporation Taxes Act 1988 (‘Section842’). Details of the Company’s approval status are givenunder ‘Business of the Company’ above. Were theCompany to breach Section 842, it might lose itsinvestment trust status and as a consequence gains within

TH

E

CO

MP

AN

Y



the Company’s portfolios could be subject to Capital GainsTax. The Section 842 qualification criteria are continuallymonitored by JPMAM and the results reported to theBoard each month. The Company must also comply withthe provisions of the Companies Act 2006 and, since itsshares are listed on the London Stock Exchange, the UKLAListing Rules. A breach of the Companies Act could resultin the Company and/or the Directors being fined or thesubject of criminal proceedings. Breach of the UKLAListing Rules could result in the Company’s shares beingsuspended from listing which in turn would breachSection 842. The Board relies on the services of itsCompany Secretary, JPMAM, and its professional advisersto ensure compliance with the Companies Act and theUKLA Listing Rules.

• Corporate Governance and Shareholder Relations: Detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out in the Corporate Governancereport on pages 44 to 47.

• Operational: Loss of key staff by JPMAM, such as theInvestment Managers, could affect the performance of theCompany. Disruption to, or failure of, JPMAM’s accounting,dealing or payments systems or the custodian’s recordscould prevent accurate reporting and monitoring of theCompany’s financial position. Details of how the Boardmonitors the services provided by JPMAM and its associatesand the key elements designed to provide effective internalcontrol are included with the Internal Control section of theCorporate Governance report on pages 46 and 47.

• Financial: The financial risks faced by the Companyinclude market price risk, interest rate risk, liability riskand credit risk. Further details are disclosed in note 19on pages 71 to 76.

Future Developments

Clearly the future development of the Company is much dependent upon the success of the Company’sinvestment strategies in the light of economic and equitymarket developments. The Board holds a separate meetingeach year devoted to the strategy of the Company and itsinvestment portfolios. The Investment Managers discuss theoutlook in their reports.

Management of the Company

The Manager and Secretary is JPMorgan Asset Management(UK) Limited (‘JPMAM’). JPMAM is employed under separatecontracts for each portfolio of assets, each contract beingterminable on one year’s notice, without penalty. If the

Company wishes to terminate any of the contracts on lessthan one year’s notice, the balance of the year’sremuneration is payable by way of compensation.

JPMAM is a wholly-owned subsidiary of JPMorgan ChaseBank which, through other subsidiaries, also providesbanking, dealing and custodian services to the Company.

The Board has evaluated the performance of the Managerand confirms that it is satisfied that the continuingappointment of the Manager is in the interests ofshareholders as a whole. In arriving at this view, the Boardhas considered the investment strategy and process of theManager, noting performance against the portfolios’respective benchmarks and peers over the long-term andthe quality of the support that the Company receives fromJPMAM.

Management Fee

The management fee is calculated and paid quarterly inarrears and is charged at the following rates:

• Managed Growth assets: The management fee is 0.3% perannum on assets invested in JPMorgan managed funds and0.6% per annum on assets invested in non JPMorganmanaged funds and direct investments. Investments inJPMorgan’s retail open-ended pooled funds qualify for apartial rebate of the underlying fee.

• Managed Income assets: There is no management fee onassets invested in JPMorgan managed funds and 0.6% perannum on assets invested in non JPMorgan managed fundsand direct investments. Investments in JPMorgan’s retailopen-ended pooled funds qualify for a partial rebate of theunderlying fee.

• Managed Cash assets: no management fee charged.

Going Concern

The Directors believe that having considered the Company’sinvestment objectives (see pages 35 and 36); risk managementpolicies (see pages 39 to 40); capital management policies andprocedures (see page 76); the nature of the portfolios andexpenditure projections, that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theyconsider that there is reasonable evidence to continue toadopt the going concern basis in preparing the accounts.

Payment Policy

It is the Company’s policy to obtain the best terms for allbusiness and therefore there are no standard payment terms.

TH

E

CO

MP

AN

Y


In general the Company agrees with its suppliers the termson which business will take place and it is the Company’spolicy to abide by those terms. As at 31st August 2009, theCompany had no outstanding trade creditors (2008: none).

Directors

The Directors of the Company who held office at the end ofthe year, together with their beneficial interests in theCompany’s share capital, are given below.

In accordance with the Company’s Articles of Association,Roger Yates who was appointed a Director on 1st August2009, offers himself for election. Having served as a Directorfor more than nine years, Nigel Sidebottom stands for annualre-election.

An insurance policy is maintained by the Company whichindemnifies the Directors of the Company against certainliabilities arising in the conduct of their duties. There is nocover against fraudulent or dishonest actions.

31st August 2009 1st September 2008 or date of appointment if laterManaged Managed Managed Managed Managed Managed

Growth Income Cash Growth Income CashDirectors Shares Shares Shares Shares Shares Shares

Simon Miller 5,524 23,603 – 3,905 22,185 –Angus Macpherson 5,568 – – – – –Robert Ottley 30,877 34,457 – 30,425 32,518 –Nigel Sidebottom 6,679 – – 6,679 – –Roger Yates – – – – – –

Disclosure of information to Auditors

In the case of each of the persons who are Directors of theCompany at the time when this report was approved:

(a) so far as each of the Directors is aware, there is norelevant audit information (as defined in the CompaniesAct) of which the Company’s auditors are unaware, and

(b) each of the Directors has taken all the steps that he oughtto have taken as a Director in order to make himselfaware of any relevant audit information and to establishthat the Company’s auditors are aware of thatinformation.

The above confirmation is given and should be interpretedin accordance with the provisions of Section 418 (2) of theCompanies Act 2006.

Section 992 Companies Act 2006

The following disclosures are made in accordance withSection 992 of the Companies Act 2006.

Capital Structure

The Company’s capital structure is summarised on thefeatures page at the front of this report.

Voting Rights in the Company’s shares

Details of the voting rights in the Company’s shares as atthe date of this report are given in note 15 to the Notice ofAGM on page 79 and below.

Notifiable Interests in the Company’s Voting Rights

At the date of this report, the following had declared anotifiable interest in the Company’s voting rights:

% Total votingShareholder Share class Shares held Voting rights rights

Chase Nominees1,2 Growth 17,049,732 56,605,110 27.7Income 30,600,220 21,420,154 10.5

Cash 8,578,720 8,578,720 42.456,228,672 86,603,984 80.6

1Held on behalf of JPMAM ISA and Share Plan participants.2Non-beneficial.

The percentage of total voting rights is calculated by reference to the share voting numbers which, as at 31st August 2009 were as follows:

Managed Growth Shares: 3.32Managed Income Shares: 0.70Managed Cash Shares: 1.00

TH

E

CO

MP

AN

Y



The rules concerning the appointment and replacement ofDirectors, amendment of the Articles of Association andpowers to issue or buy back the Company’s shares arecontained in the Articles of Association of the Company andthe Companies Act 2006.

There are no restrictions concerning the transfer of securitiesin the Company; no special rights with regard to controlattached to securities; no agreements between holders ofsecurities regarding their transfer known to the Company;no agreements which the Company is party to that affect itscontrol following take over bid; and no agreements betweenthe Company and its Directors concerning compensation forloss of office.

Independent Auditors

Ernst & Young LLP have expressed their willingness tocontinue in office as Auditors and a resolution to re-appointment them and authorise the Directors to determinetheir remuneration for the ensuing year, will be proposed atthe Annual General Meeting.

Annual General Meeting

NOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOURIMMEDIATE ATTENTION. If you are in any doubt as to the actionyou should take, you should seek your own personal financialadvice from your stockbroker, bank manager, solicitor or otherfinancial adviser authorised under the Financial Services andMarkets Act 2000.

Resolutions relating to the following items of special businesswill be proposed at the forthcoming Annual General Meeting:

(i) Authority to issue the Company’s shares for cash and disapplypre-emption rights (resolutions 6 and 7)

The Companies Act 2006 requires that the Directors of acompany be authorised by shareholders to allot shares. Italso requires that new shares issued by a company for cashbe offered first to existing shareholders in proportion to theirexisting shareholdings. However, shareholders can, by specialresolution, authorise Directors to allot shares otherwise thanby a pro rata issue to existing shareholders.

Resolutions 6 and 7 in the Notice of Meeting on page 77 willgive the Directors specific authority to allot new shares,otherwise than by a pro rata issue to existing shareholders,for cash up to an aggregate nominal amount ofapproximately £521 representing 4,411,539 Managed Growthshares, 5,180,617 Managed Income shares and 2,134,626Managed Cash shares, such amounts being approximately

equivalent to 10% of the present issued share capital of eachshare class.

The Board believes that, should the Company’s shares moveto a premium to net asset value, it would be in the interestsof existing shareholders for the Company to be able to issuenew shares to investors. As such issues would only be madeat prices greater than net asset value, they would increasethe assets underlying each share and spread theadministrative expenses, other than those fees charged as apercentage of assets, over a greater number of shares.The issue proceeds would be available for investment in linewith the Company’s investment objectives. No issue of shareswill be made which would effectively alter the control of theCompany without the prior approval of shareholders ingeneral meeting.

(ii) Authority to repurchase the Company’s shares (resolution 8)

At the Annual General Meeting of the Company held on16th December 2008 shareholders gave authority to theBoard to repurchase up to 14.99 per cent of the shares of anyclass of the Company’s then issued share capital. The Boardwill seek shareholder approval at the AGM to renew thisauthority, which will last until 8th June 2011 or until thewhole of the 14.99% has been acquired, whichever is theearlier. The full text of the resolution is set out in the Noticeof Meeting on pages 77 and 78. Repurchases will be made atthe discretion of the Board and will only be made in themarket at prices below the prevailing net asset value pershare as and when market conditions are appropriate.

(iii) Approval of the proposed Contingent Purchase Contract(resolution 9)

This resolution gives the Company authority to buy itsManaged Cash shares, Repurchase shares and Deferredshares arising on conversion of any of the Growth, Income orCash shares into other classes of share. This resolutionfollows the requirements of Section 694 of the UKCompanies Act 2006. The purchase contract is part of themechanism by which shareholders are entitled to require theCompany to repurchase Managed Cash shares. The Deferredshares are repurchased for nominal consideration (as theyhave no economic value) in order to keep the balance sheetmanageable. By law the Company can only purchase theseshares off-market if such purchase is pursuant to a contractin the form approved at a general meeting of the Company.

TH

E

CO

MP

AN

Y


(iv) Adoption of new Articles of Association (Resolution 10)

The Company proposes to adopt new articles of association.These incorporate amendments to the current articles ofassociation to reflect the changes in company law broughtabout by the Act which came into effect on 1st October 2009and changes made to the Act in August 2009 to implementthe EU Shareholder Rights Directive in the UK, as well assome minor technical or clarifying changes.

The principal changes in the new articles of associationproposed to be adopted at the AGM relate to shareholdermeetings and resolutions, the Company’s constitution andshare capital.

In August 2009, changes were made to the provisions in theAct on company meetings by The Companies (Shareholders’Rights) Regulations 2009 (‘Shareholders’ Rights Regulations’)to implement the EU Shareholder Rights Directive in the UK.The new articles incorporate amendments in relation tomeetings to ensure consistency with the Act (as amended bythe Shareholders’ Rights Regulations).

Under the Act all provisions of the Company’s memorandum,but most significantly the objects clause, are deemed to formpart of the Company’s articles from 1st October 2009. It ispossible for the objects clause to be removed or amended byamending the articles by special resolution. It is notnecessary under the Act for a company to set out its objects.The Act provides that, unless the articles state otherwise,a company’s objects will be unrestricted.

One of the other key provisions of the memorandum whichis deemed to form part of the Company’s articles from1st October 2009 is the restriction created by the existingauthorised share capital statement. The Act removes therequirement for a company to place limits on its authorisedshare capital.

By adopting the new Articles which do not contain theobjects clause or the authorised share capital statement,the Company will remove these provisions, which wouldotherwise be deemed to form part of the Company’s articlesunder section 28 of the 2006 Act, from its articles.

For a more detailed explanation of these and otheramendments please refer to the Appendix to this documenton pages 80 to 83.

A copy of the current articles of association and theproposed new articles of association that reflect theseamendments will be available for inspection during normalbusiness hours (Saturdays, Sundays and public holidaysexcepted) at the offices of JPMAM, Finsbury Dials,20 Finsbury Street, London EC2Y 9AQ up until the close ofthe AGM. Copies will also be available at Dexter House,No.2 Royal Mint Court, Tower Hill, London EC3N 4QNbeing the place of the AGM, for 15 minutes prior to, andduring, the AGM.

Recommendation

The Board considers that resolutions 6 to 10 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole. The Directors unanimously recommend that you vote infavour of the resolutions as they intend to do, where votingrights are exercisable, in respect of their own beneficialholdings which amount in aggregate to 75,831 sharesrepresenting approximately 0.04% of the voting rights of theCompany.

By order of the BoardAlison Vincent, for and on behalf ofJPMorgan Asset Management (UK) Limited,Secretary4th November 2009

TH

E

CO

MP

AN

Y


Compliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 49, indicates how theCompany has applied the principles of good governance ofthe 2008 Financial Reporting Council Combined Code(the ‘Combined Code’) and the AIC’s Code of CorporateGovernance, (the ‘AIC Code’), which complements theCombined Code and provides a framework of best practicefor investment trusts.

The Board is responsible for ensuring the appropriate levelof corporate governance and considers that the Companyhas complied with the best practice provisions of theCombined Code, other than in respect of the provisionrelating to the appointment of a senior independent directorand in so far as they are relevant to the Company’s businessand the AIC Code throughout the year.

Role of the Board

Management agreements between the Company and JPMAMset out the matters over which the Manager has authority.This includes management of the Company’s assets and theprovision of accounting, company secretarial, administration,and some marketing services. All other matters are reservedfor the approval of the Board. A formal schedule of mattersreserved to the Board for decision has been approved.This includes determination and monitoring of theCompany’s investment objectives and policies and its futurestrategic direction, gearing policy, management of the capitalstructure, appointment and removal of third party serviceproviders, review of key investment and financial data andthe Company’s corporate governance and risk controlarrangements.

The Board meets at least quarterly during the year andadditional meetings are arranged as necessary. Full andtimely information is provided to the Board to enable it tofunction effectively and to allow Directors to discharge theirresponsibilities.

On an annual basis each Director submits a list of potentialconflicts of interest for approval. These are consideredcarefully, taking into account the circumstances surroundingthem, and, if considered appropriate, are approved for aperiod of one year. During the year the potential conflicts ofinterest were reviewed and considered by the Board.However, in future years they will be reviewed by theNomination Committee which will then make arecommendation to the Board on whether or not thepotential conflicts should be authorised.

The Board considers there were no actual or indirectinterests of a Director which conflicted with the interests ofthe Company which arose during the year.

There is an agreed procedure for Directors to takeindependent professional advice if necessary and at theCompany’s expense. This is in addition to the access thatevery Director has to the advice and services of the CompanySecretary, JPMAM, which is responsible to the Board forensuring that Board procedures are followed and thatapplicable rules and regulations are complied with.

Board Composition

The Board, chaired by Simon Miller, consists of five non-executive Directors, all of whom are regarded by the Boardas independent of the Company’s Manager, including theChairman. The Directors have a breadth of investment,business and financial skills and experience relevant to theCompany’s business and brief biographical details of eachDirector are set out on page 34.

A review of Board composition and balance is included aspart of the annual performance evaluation of the Board,details of which may be found below. The Board hasconsidered whether a senior independent director should beappointed and has concluded that, as the Board comprisesentirely of non-executive directors, this is unnecessary.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be elected byshareholders. Thereafter, a Director’s appointment will runfor a term of three years. Subject to the performanceevaluation carried out each year, the Board will agreewhether it is appropriate for the Director to seek anadditional term. The Board does not believe that the lengthof service in itself necessarily disqualifies a Director fromseeking re-election but when making a recommendation,the Board will take into account the requirements of theCombined Code, including the need to refresh the Board andits committees. The Company’s Articles of Association requirethat Directors stand for re-election at least every three years.Any Director who has served for a period of more than nineyears will stand for annual re-election thereafter.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment, copies of which areavailable for inspection on request at the Company’sregistered office and at the Annual General Meeting.

Corporate Governance

TH

E

CO

MP

AN

Y


The Board recommends the re-election of Nigel Sidebottom,who requires annual re-election as he has served as aDirector for a period in excess of nine years. Furthermore,having appointed Roger Yates in August 2009, he retires andstands for election. The Board recommends his election.Before recommending Nigel Sidebottom for re-election, theNomination Committee conducted a thorough review of hisperformance and contribution and was satisfied that hefulfilled his role in an effective manner.

Meetings and Committees

The Board delegates certain responsibilities and functions tocommittees. All Directors are members of each committee.

The table below details the number of Board, AuditCommittee and Nomination Committee meetings attended byeach Director. During the year there were seven Boardmeetings, two Audit Committee meetings and oneNomination Committee meeting.

Audit NominationBoard Committee Committee

Meetings Meetings MeetingsDirector Attended Attended Attended

Simon Miller 7 2 1Angus Macpherson 7 2 1Robert Ottley 7 2 1Nigel Sidebottom 7 2 1Roger Yates1 – – –

1Appointed as a Director on 1st August 2009.

Training and Appraisal

On appointment the Manager provides all Directors withinduction training. Thereafter, regular briefings are providedon changes in regulatory requirements that affect theCompany and the Directors. Directors are encouraged toattend industry and other seminars covering issues anddevelopments relevant to investment trusts.

The Board conducts a formal evaluation of the Manager, itsown performance and that of its committees and individualDirectors. Questionnaires, devised by an independentindustry consultant, are completed by each Director.The responses are collated and then discussed at a privatemeeting.

The evaluation of individual Directors is led by the Chairmanwho meets with each Director; the other Directors evaluatethe Chairman’s performance; and the Board as a wholeevaluates the Manager, its own performance and that of itscommittees. The Chairman of the Audit Committee leads theevaluation of the Chairman.

Board Committees

Nomination Committee

The Nomination Committee, chaired by Simon Miller, consistsof all of the Directors and meets at least annually to ensurethat the Board has an appropriate balance of skills to carryout its fiduciary duties and to select and propose suitablecandidates for appointment when necessary.

The Nomination Committee undertakes an annualperformance evaluation, to ensure that all members of theBoard have devoted sufficient time and contributedadequately to the work of the Board. The Committee alsoreviews Directors’ fees and makes recommendations to theBoard as and when required.

Audit Committee

The Audit Committee, chaired by Nigel Sidebottom, consistsof all of the Directors and meets at least twice each year.The members of the Committee consider that they have therequisite skills and experience to fulfil the responsibilities ofthe Audit Committee. At least one member of the Committeehas recent and relevant financial experience.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the Combined Code. Itreviews the terms of the management agreement andexamines the effectiveness of the Company’s internal controlsystems, receives information from the Manager’scompliance department and reviews the scope and results ofthe external audit, its cost effectiveness and theindependence and objectivity of the external auditors.Representatives of the Company’s auditors attend thecommittee meeting at which the draft annual report andaccounts are considered. The Audit Committee has reviewedthe independence and objectivity of the auditors of theCompany and are satisfied that the auditors are independent.The Board reviews and approves any non-audit servicesprovided by the independent auditors and assesses theimpact of any non-audit work on the ability of the auditor toremain independent. Details of the auditors’ fees charged forboth audit and other services are disclosed in note 5 on page60. The Directors’ statement on the Company’s system ofinternal control is set out on pages 46 to 47.

Terms of Reference

Both the Nomination Committee and the Audit Committeehave written terms of reference which define clearly theirrespective responsibilities, copies of which are available onthe Company’s website, on request at the Company’sregistered office and at the Company’s Annual GeneralMeeting.

TH

E

CO

MP

AN

Y


Corporate Governance continued

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performance andreports formally to shareholders quarterly each year by way ofthe annual report and accounts, the half year financial reportand two interim management statements. This is supplementedby the daily publication, through the London Stock Exchange, ofthe net asset value of the Company’s shares.

All shareholders are encouraged, to attend the Company’sAnnual General Meeting at which the Directors andrepresentatives of the Manager are available in person tomeet shareholders and answer shareholders’ questions. Inaddition, presentations are given by the Investment Managerswho review the Company’s performance. During the year theCompany’s brokers, the Investment Managers and JPMAMhold regular discussions with larger shareholders. TheDirectors are made fully aware of their views. The Chairmanand Directors make themselves available as and whenrequired to address shareholder queries. The Directors maybe contacted through the Company Secretary whose detailsare shown on page 86.

The Company’s Annual Report and Accounts is published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders wishing to raisequestions in advance of the meeting are encouraged tosubmit questions via the Company’s website or write to theCompany Secretary at the address shown on page 86.

Details of the proxy voting position on each resolution will bepublished on the Company’s website shortly after the AnnualGeneral Meeting.

Internal Control

The Combined Code requires the Directors, at least annually,to review the effectiveness of the Company’s system ofinternal control and to report to shareholders that they havedone so. This encompasses a review of all controls, which theBoard has identified as including business, financial,operational, compliance and risk management.

The Directors are responsible for the Company’s system ofinternal control, which is designed to safeguard theCompany’s assets, maintain proper accounting records andensure that financial information used within the business, orpublished, is reliable. However, such a system can only bedesigned to manage rather than eliminate the risk of failureto achieve business objectives and therefore can onlyprovide reasonable, but not absolute, assurance againstfraud, material misstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMAM and its associates, the Company’s system of internalcontrol mainly comprises monitoring the services providedby JPMAM and its associates, including the operating controlsestablished by them, to ensure they meet the Company’sbusiness objectives. The Company does not have an internalaudit function of its own, but relies on the internal auditdepartment of JPMAM which reports any material failings orweaknesses.

The key elements designed to provide effective internalcontrol are as follows:

Financial Reporting – Regular and comprehensive review bythe Board of key investment and financial data, includingmanagement accounts, revenue projections, analysis oftransactions and performance comparisons.

Management Agreement – Appointment of a manager andcustodian regulated by the Financial Services Authority (FSA),whose responsibilities are clearly defined in a writtenagreement.

Management Systems – The Managers’ system of internalcontrol includes organisational agreements which clearlydefine the lines of responsibility, delegated authority, controlprocedures and systems. These are monitored by JPMAM’sCompliance Department which regularly monitorscompliance with FSA rules.

Investment Strategy – Authorisation and monitoring of theCompany’s investment strategy and exposure limits by theBoard.

The Board, either directly or through the Audit Committee,keeps under review the effectiveness of the Company’ssystem of internal control by monitoring the operation of thekey operating controls of the Manager and its associates asfollows:

• reviews the terms of the management agreement andreceives regular reports from JPMAM’s Compliancedepartment;

• reviews reports on the internal controls and theoperations of its custodian, JPMorgan Chase Bank, whichis itself independently reviewed; and

• reviews every six months an independent report on theinternal controls and the operations of JPMAM.

By means of the procedures set out above, the Boardconfirms that it has reviewed the effectiveness of theCompany’s system of internal control for the year ended 31st August 2009 and to the date of approval of this AnnualReport and Accounts.

TH

E

CO

MP

AN

Y


During the course of its review of the system of internalcontrol, the Board has not identified or been advised of anyfailings or weaknesses which it has determined to besignificant.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to JPMAM. The following is a summary of JPMAM’s policy statement on corporate governance and voting policy which has been noted by the Board. The full policy is available from JPMAM on request, or can bedownloaded from the internet as follows: go towww.jpmorganassetmanagement.co.uk/institutional andwithin the “Commentary & Analysis” tab you will find asection on Corporate Governance.

“JPMAM is committed to delivering superior investmentperformance to its clients worldwide. We believe that one ofthe drivers of investment performance is an assessment ofthe corporate governance principles and practices of thecompanies in which we invest our clients’ assets and weexpect those companies to demonstrate high standards ofgovernance in the management of their business.

Proxy voting is an important part of the corporategovernance process, and we view seriously our obligation to manage the voting rights of the shares entrusted to us aswe would manage any other asset. It is the policy of JPMAMto vote in a prudent and diligent manner, based exclusively on our reasonable judgement of what will best serve thefinancial interests of our clients. So far as is practicable we will vote at all of the meetings called by companies in whichwe are invested.

In order to do this we have formulated detailed guidelinesfor each region, which set out our stance on a variety of keycorporate governance issues, including disclosure andtransparency, board composition and independence, controlstructures, remuneration, as well as social and environmentalissues (see below). These guidelines form the basis of ourproxy voting decisions, although it should be noted thatJPMAM makes all of its voting decisions on a case by case basis, taking into account the individual circumstances of each vote.”

Corporate Social Responsibility

The following is a summary of JPMAM’s policy statement oncorporate social responsibility which has been noted by theBoard:

“We believe it is our primary duty to act in the best financialinterests of our clients and to achieve good financial returnsconsistent with an acceptable level of risk. We recognise thatnon-financial issues, such as social and environmental issues,can have an economic impact and that any company run inthe long-term interests of its shareholders will need tomanage effectively relationships with its employees,suppliers and customers, to behave ethically and to haveregard to the environment and society as a whole.Our investment managers take these factors into accountas part of any investment decision.”

TH

E

CO

MP

AN

Y


The Board has prepared this report in accordance with therequirements of Section 421 of the Companies Act 2006.An ordinary resolution to approve this report will be put tothe members at the forthcoming Annual General Meeting.

The law requires the Company’s auditors to audit certain ofthe disclosures provided. Where disclosures have beenaudited they are indicated as such. The auditors’ opinion isincluded in their report on pages 50 and 51.

The total Directors’ fees of £93,667 (2008: £87,945) comprises£51,667 (2008: £56,228) in respect of aggregate emolumentspaid to Directors and £42,000 paid to third parties formaking available the services of two Directors (2008: £31,717,two Directors).

The Board’s policy for this and subsequent years is thatDirectors’ fees should properly reflect the time spent by theDirectors on the Company’s business and should be at a levelto ensure that candidates of a high calibre are recruited tothe Board. The Chairman of the Board and the Chairman ofthe Audit Committee are paid higher fees than the otherDirectors, reflecting the greater time commitment involvedin fulfilling these roles.

As all of the Directors are non-executive, the Board has notestablished a Remuneration Committee. Instead, theNomination Committee reviews Directors’ fees on a regularbasis and makes recommendations to the Board as andwhen appropriate. Reviews are based on informationprovided by the Manager, JPMAM, and industry researchcarried out by third parties on the level of fees paid to thedirectors of the Company’s peers and within the investmenttrust industry generally. The Directors’ fees are notperformance-related. The Articles stipulate that aggregatefees must not exceed £200,000 per annum. Any increase inthe maximum aggregate amount requires both Board andshareholder approval. Directors have not increased fees since1st July 2006.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment. Details of the Board’spolicy on tenure are set out on pages 44 and 45.

The Company does not operate any type of incentive orpension scheme and therefore no Directors receive bonuspayments or pension contributions from the Company.The Directors do not have service contracts and are not paidcompensation for loss of office. No other payments are madeto Directors, other than the reimbursement of reasonableout-of-pocket expenses incurred in connection withattending the Company’s business.

Line graphs showing the share price total returns comparedto their benchmark indices for the Managed Growth andManaged Income share classes over the last five years areshown below. There is no benchmark index for the Managed Cash share class.

By order of the BoardAlison Vincent, for and on behalf ofJPMorgan Asset Management (UK) LimitedSecretary4th November 2009

Directors’ Remuneration1

2009 2008Director’s Name £ £

Ken Culley2 – 8,983Simon Miller 30,000 26,962Angus Macpherson3 20,000 10,000Nigel Sidebottom 22,000 22,000Robert Ottley 20,000 20,000Roger Yates4 1,667 –

Total 93,667 87,945

1Audited information.2Retired as a Director on 7th December 2007.3Appointed as a Director on 1st March 2008.4Appointed as a Director on 1st August 2009.

Directors’ Remuneration Report

100

120

140

160

180

200

220

200920082007200620052004

Source: Morningstar

Benchmark Total Return

Share Price Total Return

100110120130140150160170180

200920082007200620052004

Source: Morningstar

Benchmark Total Return

Share Price Total Return

Managed Growth – Five year share price andbenchmark total return to 31st August 2009

Managed Income – Five year share price andbenchmark total return to 31st August 2009

TH

E

CO

MP

AN

Y


The Directors are responsible for preparing the annual reportand the accounts in accordance with applicable law andregulations.

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, theDirectors have elected to prepare the financial statements inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standardsand applicable law). Under Company law the Directors mustnot approve the financial statements unless they are satisfiedthat they give a true and fair view of the state of affairs ofthe Company and of the profit or loss of the Company forthat period. In preparing these financial statements, theDirectors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and estimates that are reasonable andprudent;

• state whether applicable UK Accounting Standards havebeen followed, subject to any material departuresdisclosed and explained in the financial statements; and

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain theCompany’s transactions and disclose with reasonableaccuracy at any time the financial position of the Companyand to enable them to ensure that the financial statementscomply with the Companies Act 2006. They are alsoresponsible for safeguarding the assets of the Company andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report, Directors’Remuneration Report and Statement of CorporateGovernance that comply with that law and those regulations.

The Directors are responsible for the maintenance andintegrity of the corporate and financial information includedon the Company’s website. Legislation in the United Kingdomgoverning the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.

Statement under the Disclosure & Transparency Rules 4.1.12

(a) the accounts, prepared in accordance with applicableaccounting standards, give a true and fair view of theassets, liabilities, financial position and profit or loss ofthe Company; and

(b) this Annual Report includes a fair review of thedevelopment and performance of the business and theposition of the Company, together with a description ofthe principal risks and uncertainties that they face.

For and on behalf of the BoardSimon MillerChairman

4th November 2009

Directors’ Responsibilities inRespect of the Accounts

TH

E

CO

MP

AN

Y


Independent Auditors’ Report

Independent Auditors’ Report to the members of JPMorganElect plc.

We have audited the financial statements of JPMorgan Electplc for the year ended 31st August 2009 which comprise theIncome Statement, Reconciliation of Movements inShareholders Funds, Balance Sheet, Cash Flow Statement,and the related notes 1 to 20. The financial reportingframework that had been applied in their preparation isapplicable law and United Kingdom Accounting Standards(United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as abody, in accordance with Sections 495, 496 and 497 of theCompanies Act 2006. Our audit work has been undertakenso that we might state to the Company’s members thosematters we are required to state to them in an auditor’sreport and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibilityto anyone other than the Company and the Company’smembers as a body, for our audit work, for this report, or forthe opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’ ResponsibilitiesStatement set out on page 49, the Directors are responsiblefor the preparation of the financial statements and for beingsatisfied that they give a true and fair view. Our responsibilityis to audit the financial statements in accordance withapplicable law and International Standards on Auditing(UK and Ireland). Those standards require us to comply withthe Auditing Practices Board’s (APB’s) Ethical Standardsfor Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts anddisclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud orerror. This includes an assessment of: whether theaccounting policies are appropriate to the Company’scircumstances and have been consistently applied andadequately disclosed: the reasonableness of significantaccounting estimates made by the Directors; and the overallpresentation of the financial statements.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company’saffairs as at 31st August 2009 and of its net loss for theyear ended;

• have been properly prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirementsof the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors’ Remuneration Report to beaudited has been properly prepared in accordance withthe Companies Act 2006; and

• the information given in the Directors’ Report for thefinancial year for which the financial statements areprepared is consistent with the financial statements.

• the information given in the Corporate GovernanceStatement in compliance with rules 7.2.5 and 7.2.6 in theDisclosure Rules and Transparency Rules sourcebookissued by the Financial Services Authority (informationabout internal control and risk management systems inrelation to financial reporting processes and about sharecapital structures) is consistent with the FinancialStatements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report toyou if, in our opinion:

• adequate accounting records have not been kept, orreturns adequate for our audit have not been receivedfrom branches visited by us; or

• the financial statements and the part of the Directors’Remuneration Report to be audited are not in agreementwith the accounting records and returns; or

TH

E

CO

MP

AN

Y


• certain disclosures of Directors’ remuneration specifiedby law are not made; or

• we have not received all the information andexplanations we require for our audit.

Under the Listing Rules we are required to review:

• the Directors’ statement, set out in page 40, in relation togoing concern; and

• the part of the Corporate Governance Statement relatingto the Company’s compliance with the nine provisions ofthe June 2008 Combined Code specified for our review.

Caroline Gulliver (Senior statutory auditor)for and on behalf ofErnst & Young LLP, Statutory AuditorLondon 4th November 2009

TH

E

CO

MP

AN

Y


Income Statementfor the year ended 31st August 2009


Notes £’000 £’000 £’000 £’000 £’000 £’000

Losses on investments held at fair value through profit or loss 2 – (20,609) (20,609) – (37,643) (37,643)

Net foreign currency losses – (1) (1) – (24) (24)

Income from investments 3 6,085 – 6,085 7,396 – 7,396

Other interest receivable and similar income 3 265 – 265 591 – 591

Gross return/(loss) 6,350 (20,610) (14,260) 7,987 (37,667) (29,680)

Management fee 4 (140) (277) (417) (258) (463) (721)

VAT recovered 4 215 528 743 – – –

Other administrative expenses 5 (775) – (775) (505) – (505)


Taxation 6 (132) (70) (202) (479) 91 (388)


Return/(loss) per share:Managed Growth 8 7.25p (25.79)p (18.54)p 5.65p (48.45)p (42.80)pManaged Income 8 3.55p (16.41)p (12.86)p 5.52p (27.71)p (22.19)pManaged Cash 8 1.56p (0.01)p 1.55p 4.17p (0.02)p 4.15p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns represent supplementary information prepared underguidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total RecognisedGains and Losses (‘STRGL’). For this reason a STRGL has not been presented.

The notes on pages 56 to 76 form an integral part of these accounts.

TH

E

CO

MP

AN

Y


Reconciliation of Movements inShareholders’ Fundsfor the year ended 31st August 2009

Called upshare Share Other Capital Revenue

capital premium reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000

At 31st August 2007 24 57,861 159,262 64,397 3,367 284,911

Shares bought back and cancelled – – (14,134) – – (14,134)

Shares issued – 244 – – – 244

Share conversions during the year – 2,753 (2,753) – – –

Net (loss)/return on ordinary activities – – – (38,039) 6,745 (31,294)

Dividends appropriated in the year – – – – (6,861) (6,861)

At 31st August 2008 24 60,858 142,375 26,358 3,251 232,866

Shares bought back and cancelled – – (7,843) – – (7,843)

Shares issued – 1,813 – – – 1,813

Share conversions during the year – 2,232 (2,232) – – –

Net (loss)/return on ordinary activities – – – (20,429) 5,518 (14,911)

Dividends appropriated in the year – – – – (5,993) (5,993)

At 31st August 2009 24 64,903 132,300 5,929 2,776 205,932


TH

E

CO

MP

AN

Y


Balance SheetAt 31st August 2009

2009 2008Growth Income Cash Total Total

(unaudited) (unaudited) (unaudited)Notes £’000 £’000 £’000 £’000 £’000

Fixed assetsInvestments held at fair value through profit

or loss 9 144,470 35,548 21,553 201,571 224,282

Current assets 10Debtors 478 258 13 749 1,904Cash and short term deposits 3,681 1,094 – 4,775 7,404

4,159 1,352 13 5,524 9,308Creditors: amounts falling due within one year 11 (360) (716) (70) (1,146) (724)

Net current assets/(liabilities) 3,799 636 (57) 4,378 8,584

Total assets less current liabilities 148,269 36,184 21,496 205,949 232,866

Provision for liabilities and chargesDeferred taxation 6 (17) – – (17) –

Total net assets 148,252 36,184 21,496 205,932 232,866

Capital and reservesCalled up share capital 12 18 4 2 24 24Share premium 13 21,378 28,032 15,493 64,903 60,858Other reserve 13 111,588 14,724 5,988 132,300 142,375Capital reserves 13 13,771 (7,834) (8) 5,929 26,358Revenue reserve 13 1,497 1,258 21 2,776 3,251

Shareholders’ funds 148,252 36,184 21,496 205,932 232,866

31st August 2009 31st August 2008Net asset value Net assets Net asset value Net assets

per share attributable per share attributable(pence) £’000 (pence) £’000

Managed Growth 14 332.0 148,252 356.0 161,940Managed Income 14 69.6 36,184 86.4 46,769Managed Cash 14 100.3 21,496 101.5 24,157

The accounts on pages 52 to 76 were approved and authorised for issue by the Directors on 4th November 2009 and are signed on their behalf by:

Robert OttleyDirector


TH

E

CO

MP

AN

Y


Cash Flow Statementfor the year ended 31st August 2009

2009 2008Notes £’000 £’000

Net cash inflow from operating activities 15 6,032 6,898

Taxation paid (316) (470)

Capital expenditure and financial investmentPurchases of investments (56,981) (62,974)Sales of investments 60,283 79,279Option transactions (2) –Other capital items (13) (20)

Net cash inflow from capital expenditure and financial investment 3,287 16,285

Dividends paid (5,993) (6,861)

Net cash inflow before financing 3,010 15,852

FinancingIncrease in overdraft 28 –Issue of shares 1,813 244Repurchase of shares (7,479) (13,969)

Net cash outflow from financing (5,638) (13,725)

(Decrease)/increase in cash for the year 16 (2,628) 2,127


TH

E

CO

MP

AN

Y


Notes to the Accountsfor the year ended 31st August 2009

1. Accounting policies

(a) Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice (‘UKGAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies’ (the ‘SORP’) issued bythe AIC in January 2009.

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

The financial statements for the Company comprise the Income Statement, the Reconciliation of Movements in Shareholders’ Funds, the‘Total’ column of the Balance Sheet, the Cash Flow Statement and the ‘Total’ column within the Notes to the Accounts.

The Managed Growth, Managed Income and Managed Cash Income Statements and Balance Sheets, together with the notes to thoseIncome Statements and Balance Sheets are not required under UK Generally Accepted Accounting Practice or the SORP, but have beendisclosed to assist shareholders’ understanding of the net assets and liabilities, and income and expenses of the different share classes.

The accounts have been prepared on a going concern basis.

(b) Valuation of investments

The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capitalgrowth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis in accordance with adocumented investment strategy and information is provided internally on that basis to the Company’s Board of Directors. Accordingly,upon initial recognition, the investments are designated by the Company as ‘held at fair value through profit or loss’. They are includedinitially at fair value which is taken to be their cost, excluding expenses incidental to purchase which are written off in the capital columnof the income statement at the time of acquisition. Subsequently the investments are valued at fair value which is bid market price forlisted investments. Investments in Open Ended Investment Companies are valued at quoted bid prices.

Gains and losses on sales of investments, transaction costs, management fee and finance costs charged to capital, and other capitalreceipts and payments, are dealt with in capital reserves within ‘Gains and losses on sales of investments’. Increases and decreases in thevaluation of investments held at the year end are accounted for in capital reserves within ‘Holding gains and losses on investments’.

All purchases and sales of investments are accounted for on a trade date basis.

(c) Income

Dividends receivable are included in the revenue column of the income statement on an ex-dividend basis except where, in the opinion ofthe Board, the dividend is capital in nature, in which case it is included in the capital column.

UK dividends are accounted for net of any tax credits and unfranked income gross of any income tax. Overseas dividends are includedgross of any withholding tax.

Income from written options is included in the revenue column on a time apportionment basis.

Bank interest, deposit interest and underwriting commission are included in the revenue column on an accruals basis.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cashdividend foregone is recognised in the revenue coloumn. Any excess in the value of the shares received over the amount of the cashdividend is recognised in the capital column.

Underwriting commission is recognised in the revenue column where it relates to shares that the Company is not required to take up.Where the Company is required to take up a proportion of the shares underwritten, the same proportion of commission received isdeducted from the cost of the shares taken up, with the balance taken to the revenue column.

TH

E

CO

MP

AN

Y


(d) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to the revenue column of the income statementexcept for items in (i) to (iii) below.

(i) The management fee on the Managed Growth pool of assets is allocated 25% to revenue and 75% to capital in line with the Board’sexpected split of the revenue and capital return from the Managed Growth investment portfolio;

(ii) The management fee on the Managed Income pool of assets is allocated 50% to revenue and 50% to capital in line with the Board’sexpected split of the revenue and capital return from the Managed Income investment portfolio. Amounts rebated to the ManagedIncome pool of assets by the Manager in respect of assets invested in J.P. Morgan retail open-ended pooled funds are credited to therevenue column of the Income Statement.

(iii) Expenses incidental to the purchase of an investment are charged to capital and those incidental to the sale are deducted from thesales proceeds. These expenses are commonly referred to as transaction costs and include items such as stamp duty and brokercommissions.

Expenses charged to the Company, common to all pools (Managed Growth, Managed Income and Managed Cash) are apportioned to therevenue account of each pool in the same proportion as their net assets at the month end immediately preceding the date on which thecost is to be accounted for.

Expenses charged to the Company in relation to a specific pool are allocated directly to that pool, with the other two pools remainingunaffected.

(e) Financial instruments

Cash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount of cash and aresubject to insignificant risk of changes in value. Other receivables and payables do not carry any interest, are short term in nature andare accordingly stated at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

In accordance with FRS 26: ‘Financial instruments: Measurement’, written options are included in current assets or current liabilities atfair value, which is the cost of closing out the contracts.

(f) Taxation

Deferred tax is accounted for in accordance with FRS 19: ‘Deferred Tax’.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred tax liabilitiesare recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is probable that taxableprofits will be available against which those timing differences can be utilised.

Tax is computed for each pool of assets separately. Where unrelieved expenses in one pool are utilised in another pool, a credit is madein the donor pool and a charge in the recipient pool, based on half the value of those expenses to the Company as a whole.

(g) Functional currency

In accordance with FRS 23: ‘The effects of changes in Foreign Currency Exchange Rates’ the Company is required to nominate a functionalcurrency, being the currency in which the Company predominantly operates. The Board, having regard to the currency of the Company’sshare capital and the predominant currency in which its shareholders operate, has determined that sterling is the functional currency.Sterling is also the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of the transaction. Assets andliabilities denominated in foreign currencies at the year end are translated at the rates of exchange prevailing at the year end.

Any gain or loss arising on monetary assets from a change in exchange rates subsequent to the date of the transaction is included as anexchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capital nature. Gains and losses oninvestments arising from changes in exchange rates are included in gains or losses on Investments held at fair value through profit or loss.

TH

E

CO

MP

AN

Y


Notes to the Accounts continued

(h) Dividends

In accordance with FRS 21: ‘Events after the Balance Sheet Date’, dividends are included in the accounts in the year in which they are paid.

(i) VAT

Irrecoverable VAT is included in the expense on which it has been suffered. The basis on which it has been calculated is the partialexemption method using the proportion of taxable supplies to non taxable supplies. Further information regarding VAT on managementfees is given in note 4 on page 60.

VAT recovered on management fees paid by the Growth and Income pools of assets, is allocated between revenue and capital in theGrowth and Income pools in the same proportion as it was originally expensed to revenue and capital.

(j) Share capital transactions

Share capital transactions resulting from conversions are accounted for on the first working day following the biannual conversion dates.Deferred shares, which have no economic value, are allotted as part of the conversion process to ensure that the conversions do notresult in a reduction of the par value of the Company’s share capital.

The consideration paid for shares repurchased for cancellation, and the consideration paid for Managed Cash shares redeemed, ischarged to the ‘Other reserve’.

2009 2008£’000 £’000

2. Losses on investments held at fair value through profit or loss

Realised (losses)/gains on investments held at fair value through profitor loss based on historical cost (14,745) 9,299

Amounts recognised in investment holding losses/(gains) in theprevious year in respect of investments sold during the year 2,037 (16,156)

Losses on sales of investments based on the carrying value at theprevious balance sheet date (12,708) (6,857)

Net movement in investment holding gains and losses (7,865) (30,752)Unrealised losses on options (27) –Other capital items (9) (34)

Total capital losses on investments held at fair valuethrough profit or loss (20,609) (37,643)

TH

E

CO

MP

AN

Y


Managed Managed ManagedGrowth Income Cash

2009 2009 2009 Total Total(unaudited) (unaudited) (unaudited) 2009 2008

£’000 £’000 £’000 £’000 £’000

3. Income

Income from investments

UK dividend income 3,399 1,858 – 5,257 5,390UK unfranked investment income 121 19 – 140 554UK fixed interest income – 3 – 3 –Overseas dividends1 – 128 530 658 1,452Property income distribution from UK REITS – 3 – 3 –Scrip dividends – 24 – 24 –

3,520 2,035 530 6,085 7,396

Other interest receivable and similar income

Deposit interest 124 14 – 138 535Interest on VAT recovered 80 15 – 95 –Underwriting commission – 8 – 8 3Option income – 24 – 24 53

Total income 3,724 2,096 530 6,350 7,987

1 The overseas dividends represent distributions from liquidity funds, one of which is domiciled in Luxembourg and the others in Ireland.

TH

E

CO

MP

AN

Y





£’000 £’000 £’000 £’000 £’000

4. Management fee

Charged to revenue:

Management fee 63 77 – 140 238VAT thereon – – – – 20

63 77 – 140 258

VAT recoverable1 (156) (59) – (215) –

Total charged to revenue (93) 18 – (75) 258

Charged to capital:

Management fee 190 87 – 277 421VAT thereon – – – – 42

190 87 – 277 463VAT recoverable1 (469) (59) – (528) —

Total charged to capital (279) 28 – (251) 463

(372) 46 – (326) 721

Details of the management fee are given in the Directors’ Report on page 40.1 No VAT has been charged on management fees since November 2007 when HM Revenue & Customs announced acceptance that VAT was not chargeable on investmenttrust management fees. The Company has since recovered VAT amounting to £743,000 in respect of VAT paid in the past by the Growth and Income pools of assets.This amount has been allocated between revenue and capital in the Growth and Income pools in the same proportion as it was originally expensed to revenue andcapital. Interest amounting to £95,000 has also been received. This amount has been repaid to the Growth and Income pools and allocated wholly to revenue and isincluded within ‘Other interest receivable and similar income’ in note 3 above.



£’000 £’000 £’000 £’000 £’000

5. Other administrative expenses

Other management expenses1 353 107 30 490 224Directors’ fees2 66 17 11 94 88Savings products3 132 25 2 159 161Auditors’ remuneration for audit services4 20 6 3 29 29Auditors’ remuneration for other services 2 1 – 3 3

Total charged to revenue 573 156 46 775 505

1 Includes costs incurred to establish a new share class, the launch of which was postponed due to adverse market conditions.2 Full disclosure is given in the Directors’ Remuneration Report on page 48.3 These fees were paid to JPMAM for the marketing of ‘Wrapper’ products.4 Includes £4,000 (2008: £4,000) irrecoverable VAT.

Further details on how expenses are apportioned between each portfolio are given in note 1(d) on page 57.

TH

E

CO

MP

AN

Y


6. Taxation

(a) Analysis of tax charge in the year2009 2008

Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

UK corporation tax of 28% (2008: 29.17%) 169 – 169 400 – 400Prior year adjustment 12 – 12 (26) – (26)Income tax 4 – 4 14 – 14Tax attributable to expenses charged to capital (70) 70 – 91 (91) –

Current tax charge for the year 115 70 185 479 (91) 388Deferred taxation 17 – 17 – – –

132 70 202 479 (91) 388

(b) Factors affecting current tax charge for the year2009 2008

Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000


Net return/(loss) on ordinary activities beforetaxation multiplied by the applicable rateof corporation tax of 28% (2008: 29.17%) 1,582 (5,701) (4,119) 2,107 (11,122) (9,015)

Effects of:Non taxable capital returns – 5,771 5,771 – 10,987 10,987Tax relief on capitalised expenses (70) 70 – (135) 135 –Non taxable UK dividends (1,472) – (1,472) (1,572) – (1,572)Non taxable scrip dividends (7) – (7) – – –Income taxed in different periods (4) – (4) – – –Prior year adjustment 12 – 12 (26) — (26)Income tax 4 – 4 14 – 14Tax attributable to expenses charged to capital 70 (70) – 91 (91) –

Current tax charge for the year 115 70 185 479 (91) 388T

HE

C

OM

PA

NY



6. Taxation (continued)

(c) Deferred taxationThe provision for deferred taxation is in respect of timing differences which have originated but not reversed by thebalance sheet date. The movements on the deferred taxation account are as follows:

2009 2008£’000 £’000

Opening balance – –Charged to revenue return 17 –

Closing balance 17 –

The Company had no unrecognised deferred tax assets at 31st August 2009 (2008: £nil).

Given the Company’s status as an investment trust company and the intention to continue meeting the conditions requiredto obtain approval, the Company has not provided deferred tax on any capital gains or losses arising on the revaluation ordisposal of investments.

7. Dividends

2009 2008(a) Dividends paid £’000 £’000

Managed Growth shares 2008 4th interim of 1.17p (2007: 1.60p)1 529 763Managed Growth shares 1st interim of 1.87p (2008: 1.15p) 845 548Managed Growth shares 2nd interim of 2.00p (2008: 1.78p) 896 848Managed Growth shares 3rd interim of 1.73p (2008: 1.55p) 775 694Managed Income shares unclaimed dividends refunded - (3)Managed Income shares 2008 4th quarterly dividend of

1.20p (2007: 1.18p)1 650 661Managed Income shares 2008 special dividend of 0.25p (2007: 0.18p) 135 100Managed Income shares 1st quarterly dividend of 0.85p (2008: 1.10p) 459 611Managed Income shares 2nd quarterly dividend of 0.90p (2008: 1.00p) 485 559Managed Income shares 3rd quarterly dividend of 1.10p (2008: 1.00p) 593 550Managed Income shares special dividend of £nil (2008: 0.90p) - 495Managed Cash shares 2008 4th quarterly dividend of 1.00p (2007: 1.02p) 239 261Managed Cash shares 1st quarterly dividend of 0.90p (2008: 1.10p) 214 280Managed Cash shares 2nd quarterly dividend of 0.60p (2008: 1.12p) 131 281Managed Cash shares 3rd quarterly dividend of 0.20p (2008: 0.85p) 42 213

Total dividends paid in the year 5,993 6,861

1 The actual dividend paid differs from the amount shown in the accounts due to changes in the share register between the year end date and the record date.

2009 2008(b) Dividends proposed £’000 £’000

Managed Growth shares 4th interim dividend of 1.55p (2008: 1.17p) 692 532Managed Income shares 4th quarterly dividend of 1.45p (2008: 1.20p) 754 649Managed Income shares special dividend of £nil (2008: 0.25p) - 135Managed Cash shares 4th quarterly dividend of £nil (2008: 1.00p) - 239

Total dividends proposed 1,446 1,555

TH

E

CO

MP

AN

Y


7. Dividends (continued)

(c) Dividends for the purposes of Section 842 of the Income and Corporation Taxes Act 1988

The requirements of Section 842 of the Income and Corporation Taxes Act 1988 are considered on the basis ofdividends paid and proposed in respect of the financial year, as follows:

2009 2008£’000 £’000

Managed Growth shares 1st interim of 1.87p (2008: 1.15p) 845 548Managed Growth shares 2nd interim of 2.00p (2008: 1.78p) 896 848Managed Growth shares 3rd interim of 1.73p (2008: 1.55p) 775 694Managed Growth shares 4th interim dividend of 1.55p (2008: 1.17p) 692 532Managed Income shares 1st quarterly dividend of 0.85p (2008: 1.10p) 459 611Managed Income shares 2nd quarterly dividend of 0.90p (2008: 1.00p) 485 559Managed Income shares 3rd quarterly dividend of 1.10p (2008: 1.00p) 593 550Managed Income shares special dividend of £nil (2008: 0.90p) – 495Managed Income shares 4th quarterly dividend of 1.45p (2008: 1.20p) 754 649Managed Income shares special dividend of £nil (2008: 0.25p) – 135Managed Cash shares 1st quarterly dividend of 0.90p (2008: 1.10p) 214 280Managed Cash shares 2nd quarterly dividend of 0.60p (2008: 1.12p) 131 281Managed Cash shares 3rd quarterly dividend of 0.20p (2008: 0.85p) 42 213Managed Cash shares 4th quarterly dividend of £nil (2008: 1.00p) – 239

5,886 6,634

The revenue available for distribution by way of dividend for the year is £5,518,000 (2008: £6,745,000).

8. Return/(loss) per share

Managed Growth

2009 2008Return/(loss) per Managed Growth share is based on the following:- £’000 £’000

Revenue return 3,267 2,650Capital loss (11,624) (22,708)

Total loss (8,357) (20,058)

Weighted average number of shares in issue 45,068,399 46,868,163

Revenue return per share 7.25p 5.65p

Capital loss per share (25.79)p (48.45)p

Total loss per share (18.54)p (42.80)p

TH

E

CO

MP

AN

Y



8. Return/(loss) per share (continued)

Managed Income

2009 2008Return/(loss) per Managed Income share is based on the following:- £’000 £’000

Revenue return 1,903 3,056Capital loss (8,802) (15,327)

Total loss (6,899) (12,271)

Weighted average number of shares in issue 53,657,497 55,321,948Revenue return per share 3.55p 5.52pCapital loss per share (16.41)p (27.71)p

Total loss per share (12.86)p (22.19)p

Managed Cash

2009 2008Return/(loss) per Managed Cash share is based on the following:- £’000 £’000

Revenue return 348 1,039Capital loss (3) (4)

Total return 345 1,035

Weighted average number of shares in issue 22,262,472 24,911,971 Revenue return per share 1.56p 4.17pCapital loss per share (0.01)p (0.02)p

Total return per share 1.55p 4.15p

9. Investments

2009£’000

Investments listed on a recognised investment exchange 143,091Unlisted investments1 58,480

Total investments held at fair value 201,571

TH

E

CO

MP

AN

Y


Listed Unlisted1 2009Total

9. Investments (continued) £’000 £’000 £’000

Opening book cost 163,185 50,917 214,102Opening investment holding gains 303 9,877 10,180

Opening valuation 163,488 60,794 224,282Movements in the year:Purchases at cost 38,906 18,306 57,212Sales – proceeds (41,949) (17,401) (59,350)Losses on sales of investments based on the carrying value at the previous

balance sheet date (12,250) (458) (12,708)Net movement in investment holding gains and losses (5,104) (2,761) (7,865)

143,091 58,480 201,571

Closing book cost 145,985 51,234 197,219Closing investment holding (losses)/gains (2,894) 7,246 4,352

Total investments held at fair value 143,091 58,480 201,571

1 Unlisted investments comprise investments in Open Ended Investment Companies and liquidity funds.

During the year, prior year investment holding gains amounting to £2,037,000 have been transferred to gains on sales ofinvestments as disclosed in notes 2 and 13.

Transaction costs on purchases during the year amounted to £250,000 (2008: £234,000) and on sales during the yearamounted to £61,000 (2008: £60,000). These costs include stamp duty and brokerage commission.

2009 2008£’000 £’000

10. Current assets

Debtors

Securities sold awaiting settlement – 933Dividends and interest receivable 722 884UK income tax recoverable 9 31Share class tax allocation – 35Other debtors 18 21

Total 749 1,904

The Directors consider that the carrying amount of debtors approximates to their fair value.

TH

E

CO

MP

AN

Y



10. Current assets (continued)

Cash and short term deposits

Cash and short term deposits comprises bank balances and short term deposits. The carrying amount of these balancesrepresents their fair value. Cash balances in excess of a predetermined amount are placed on short term deposit atmarket rates of interest.

2009 2008£’000 £’000

11. Creditors: amounts falling due within one year

Securities purchased awaiting settlement 207 –Bank overdraft 32 4Share class tax allocation – 35Repurchase of the Company’s own shares for future settlement 740 376Other creditors and accruals 140 309Derivative instruments held at fair value through profit or loss –

written options 27 –

Total 1,146 724

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

2009 2008£’000 £’000

12. Share capital

AUTHORISED SHARE CAPITAL

160,000,000 (2008: 160,000,000) Managed Growth shares of 0.01p each 16 16125,000,000 (2008: 125,000,000) Managed Growth C shares of £1 each 125,000 125,000200,000,000 (2008: 200,000,000) Managed Income shares of 0.01p each 20 20125,000,000 (2008: 125,000,000) Managed Income C shares of £1 each 125,000 125,000125,000,000 (2008: 125,000,000) Managed Cash shares of 0.01p each 13 1350,000 (2008: 50,000) Founder shares £1 each 50 50300,000,000 (2008: 300,000,000) Redeemable shares of £1 each 300,000 300,000300,000,000 (2008: 300,000,000) Repurchase shares of 0.01p each 30 30

Total 550,129 550,129

TH

E

CO

MP

AN

Y


2009 2008£’000 £’000

12. Share capital (continued)

ISSUED SHARE CAPITAL

Managed Growth

45,484,800 (2008: 48,366,117) shares in issue at the beginning of the year 5 5Issue of 460,0001 (2008: nil) shares – –Net share conversion increase of 186,373 (2008: reduction of

27,817) shares — –Repurchase of 1,481,039 (2008: 2,853,500) shares for cancellation — –

Total 44,650,134 (2008: 45,484,800) shares in issue at the end of the year 5 5

Founder Shares

50,000 Founder Shares of £1 each 25p partly paid in issue at the beginning and end of the year 13 13

Managed Income

54,126,517 (2008: 55,760,419) shares in issue at the beginning of the year 4 4Issue of 375,0002 (2008: 247,000) shares — –Net share conversion reduction of 1,636,677 (2008: increase of

62,098) shares — –Repurchase of 885,419 (2008: 1,943,000) shares for cancellation — –


Managed Cash

23,801,941 (2008: 25,605,165) shares in issue at the beginning of the year 2 2Net share conversion increase of 401,805 (2008: increase of 23,866) — –Redemption of 1,833,285 (2008: 965,430) shares — –Repurchase of 945,200 (2008: 861,660) shares for cancellation — –


Total 24 24

1During the year, a total of 460,000 Managed Growth shares with a nominal value of £46 were issued to the market at prices in excess of the net asset value per share,for a total consideration of £1,586,000.

2During the year, a total of 375,000 Managed Income shares with a nominal value of £38 were issued to the market at prices in excess of the net asset value per share,for a total consideration of £227,000.

Further details of transactions in share capital during the year are given in the Directors’ Report on page 39.

Shareholders of Managed Growth, Managed Income and Managed Cash shares are entitled to convert some or all of theirholdings in any of these share classes into one or more of the other two share classes on 31st May and 30th Novembereach year (or, if such days are not business days, the next business day), which is exempt from UK capital gains tax.Managed Cash shareholders can also elect to have all or part of their holding of such shares redeemed by the Companyfor cash at the net asset value on each conversion date.The Founder Shares are non-voting and carry the right to receive a fixed dividend at the rate of 0.01 per cent on theirnominal value, but the holders have waived the right to receive such dividends.

Further details of the Company’s capital structure are given on page 85.

TH

E

CO

MP

AN

Y



12. Share capital (continued)

Deferred shares

The Company’s Articles allow for Deferred shares to be allotted as part of the biannual share conversion process to ensurethat the conversion does not result in a reduction of the par value of the Company’s issued share capital (in contraventionof the Companies Act). The Deferred shares do not confer any rights to the shareholder to receive capital or dividends andwill be repurchased by the Company from time to time for a nominal sum. The issue and repurchase of these Deferredshares has no effect on the net asset value attributable to the holders of Managed Growth, Managed Income or ManagedCash shares. The shares have no voting rights and no rights on a winding up or entitlement to dividends.

2009 2008£ £

Deferred Managed Growth shares:

At the beginning of the year 47,830 Deferred Managed Growth shares of 0.000117p (2007: 6,689 shares of 0.000176p) each – –

Cancellation of 47,830 Deferred Managed Growth shares of 0.000117p (2008: 6,689 shares of 0.000176p) each – –

Issue of 45,010,341 Deferred Managed Growth shares of 0.00266p(2008: 47,366,230 shares of 0.001482p) each 1,197 702

Cancellation of 45,010,341 Deferred Managed Growth shares of 0.00266p (2008: 47,366,230 shares of 0.001482p) each (1,197) (702)

Issue of 1,778,311 Deferred Managed Growth shares of 0.000716p(2008: 47,830 shares of 0.000117p) each 13 –

Closing balance 13 –

Deferred Managed Income shares:

At the beginning of the year 54,501,077 Deferred Managed Income shares of 0.001071p (2007: 56,155,758 shares of 0.000116p) each 584 65

Cancellation of 54,501,077 Deferred Managed Income shares of 0.001071p (2008: 56,155,758 shares of 0.000116p) each (584) (65)

Issue of 53,393,735 Deferred Managed Income shares of 0.000474p(2008: 55,295,807 shares of 0.000368p) each 253 203

Cancellation of 53,393,735 Deferred Managed Income shares of 0.000474p (2008: 55,295,807 shares of 0.000368p) each (253) (203)

Issue of 52,372,011 Deferred Managed Income shares of 0.000739p (2008: 54,501,077 shares of 0.001071p) each 387 584

Closing balance 387 584

Deferred Managed Cash shares:

At the beginning of the year 435,912 Deferred Managed Cash shares of 0.001165p (2007: 26,338,909 shares of 0.000476p) each 5 125

Cancellation of 435,912 Deferred Managed Cash shares of 0.001165p (2008: 26,338,909 shares of 0.000476p) each (5) (125)

Issue of nil Deferred Managed Cash shares (2008: 243,541 shares of 0.001380p) each – 3

Cancellation of nil Deferred Managed Cash shares (2008: 243,541 shares of 0.001380p) each – (3)

Issue of nil Deferred Managed Cash shares (2008: 435,912 shares of 0.001165p) each – 5

Closing balance – 5

TH

E

CO

MP

AN

Y


Capital reservesGains and Holdinglosses on gains and

Share Other sales of losses on Revenuepremium reserve investments investments reserve

£’000 £’000 £’000 £’000 £’000

13. Reserves

Opening balance 60,858 142,375 16,178 10,180 3,251Losses on sales of investments based on

the carrying value at the previous balancesheet date — — (12,708) — —

Transfer on disposal of investments — — (2,037) 2,037 —Net movement in investment holding gains

and losses — — — (7,865) —Unrealised losses on options — — — (27) —Currency losses on cash and short term

deposits held during the year — — (1) — —Shares issued 1,813 — — — —Share conversions during the year 2,232 (2,232) — — —Shares bought back and cancelled — (7,843) — — —Other capital items — — (9) — —Expenses charged to capital — — (277) — —Tax attributable to expenses

charged to capital — — (70) — —VAT recovered — — 528 — —Dividends appropriated in the year — — — — (5,993)Net revenue return for the year — — — — 5,518

Closing balance 64,903 132,300 1,604 4,325 2,776

Shares bought back and cancelled

During the year a total of 1,481,039 Managed Growth shares, 885,419 Managed Income shares and 945,200 Managed Cashshares were bought back by the Company and cancelled. In addition a total of 1,833,285 Managed Cash shares wereredeemed in the two redemption opportunities available to holders of those shares each year. The transfer from sharecapital to capital redemption reserve is not shown above as the total nominal value of the shares cancelled is less than£1,000. No capital redemption reserve is shown as the cumulative balance on the reserve at 31st August 2009 is lessthan £1,000.

TH

E

CO

MP

AN

Y



14. Net asset value per share

The net asset values per share are calculated as follows:

2009Managed Managed Managed

Growth Income CashNet assets attributable (£’000) 148,252 36,184 21,496

Shares in issue at the year end 44,650,134 51,979,421 21,425,261

Net asset value per share (pence) 332.0 69.6 100.3

2008Managed Managed Managed

Growth Income CashNet assets attributable (£’000) 161,940 46,769 24,157

Shares in issue at the year end 45,484,800 54,126,517 23,801,941

Net asset value per share (pence) 356.0 86.4 101.5

2009 2008£’000 £’000

15. Reconciliation of net loss on ordinary activities beforetaxation to net cash inflow from operating activities

Total net loss on ordinary activities before finance costs and taxation (14,708) (30,906)Add back capital loss before finance costs and taxation 20,359 38,130Decrease in accrued income 162 72(Increase)/decrease in other debtors (3) 56Increase in accrued expenses 19 13Scrip dividends received as income (24) –Expenses charged to capital 251 (463)Taxation on unfranked income (24) (4)

Net cash inflow from operating activities 6,032 6,898

31st Aug Exchange 31st Aug2008 Cash flow movement 2009

£’000 £’000 £’000 £’000

16. Analysis of changes in net funds

Cash and short term deposits 7,404 (2,628) (1) 4,775Bank overdraft (4) (28) — (32)

Net funds 7,400 (2,656) (1) 4,743

TH

E

CO

MP

AN

Y


17. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments at the balance sheet date (2008: none).

18. Transactions with the Manager

Details of the management contracts are set out in the Directors’ Report on page 40. The total amount payable to JPMAMfor the year in respect of these contracts was £417,000 (2008: £659,000 excluding VAT), of which £nil (2008: £nil) wasoutstanding at the year end. In addition £139,000 (2008: £137,000), excluding VAT, was payable to JPMAM for themarketing and administration of ‘wrapper’ products of which £nil (2008: £nil) was outstanding at the year end.

Custody fees amounting to £3,000 (2008: £5,000) were payable to third party custodians by JPMorgan Chase on behalf ofthe Company, of which £1,000 (2008: £1,000) was outstanding at the year end.

JPMAM carries out some of its investment transactions through group subsidiaries. These transactions are carried out atarm’s length. The commission payable to JPMorgan Securities for the year was £13,000 (2008: £45,000) of which £nil(2008: £nil) was outstanding at the year end. The Company has been informed that certain of its dealing transactions maybe subject to commission sharing arrangements.

The Company holds investments in funds managed by JPMAM. At 31st August 2009 these were valued at £122.5m (2008:£148.1m) and represented 60.8% (2008: 66.0%) of the Company’s investment portfolio. During the year the Companymade purchases of such investments with a total value of £21.4m (2008: £23.7m) and sales with a total value of £11.4m(2008: £40.1m). Income amounting to £2.7m (2008: £3.7m) was receivable from these investments during the year ofwhich £509,000 (2008: £425,000) was outstanding at the year end.

At the year end, a bank balance of £4,723,000 (2008: £7,389,000) was held with JPMorgan Chase. Interest amounting to£139,000 (2008: £105,000), was receivable by the Company during the year from JPMorgan Chase.

19. Financial instruments’ exposure to risk and risk management policies

As an investment trust, the Company invests in equities and other securities for the long term so to pursue the investmentobjectives stated on the Features page. In pursuing these objectives, the Company is exposed to a variety of risks thatcould result in a reduction in the Company’s net assets or a reduction in the profits available for distribution. These risksinclude market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. TheDirectors’ policy for managing these risks is set out below. The Company Secretary, in close cooperation with the Boardand the Manager, coordinates the Company’s risk management policy.

The objectives, policies and processes for managing the risks identified and the methods used to measure these risks thatare set out below, have not changed from those applying in the comparative year.

The Company’s financial instruments may comprise the following:

– investments in equity shares with UK exposure;

– investments in Investment Trusts with UK and international exposure, Open Ended Investment Companies withexposure to corporate bonds, and sterling liquidity funds;

– call and put options written by the Company to generate additional income; and

– short term debtors, creditors and cash arising directly from its operations.

The accounting policies in note 1 include criteria for the recognition and the basis of measurement applied to financialinstruments.

TH

E

CO

MP

AN

Y



(a) Market risk

The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes inmarket prices. This market risk comprises three elements – currency risk, interest rate risk and market price risk.Information to enable an evaluation of the nature and extent of these three elements of market price risk is given in parts(i) to (iii) of this note, together with sensitivity analyses where appropriate. The Board reviews and agrees policies formanaging these risks, and those policies have remained unchanged from those applying in the comparative year. TheManager assesses the exposure to market risk when making each investment decision and monitors the overall level ofmarket risk on the whole of the investment portfolio on an ongoing basis.

(i) Currency risk

The Company has no direct material exposure to foreign currencies. The Company’s investments and other financialassets are almost entirely denominated in sterling (the Company’s functional currency and the currency in which itreports). As a result, movements in exchange rates will have no direct material effect on the value of those items.The investments in the Managed Cash pool of assets comprise sterling liquidity funds and consequently there is noforeign currency exposure. The investments in the Managed Growth and Managed Cash pools of assets are almost entirelypriced in sterling. However, there is some indirect exposure to foreign currencies, particularly in the Managed Growthportfolio which includes holdings in investment trusts which invest in overseas markets.

(ii) Interest rate risk

Interest rate movements may affect the level of income receivable on cash deposits and the yield on the liquidity fundsheld in the Managed Cash pool of assets. The Company has no borrowings other than a bank overdraft at the year end of£32,000 (2008: £4,000).

Management of interest rate risk

The Company does not normally hold significant cash balances other than for short term working capital managementand would expect to be fully invested in normal market conditions.

Interest rate exposure

At the balance sheet date, the exposure of financial assets and financial liabilities to floating interest rates, giving cashflow interest rate risk when rates are re-set, was as follows:

2009 2009 2009 2008 2008 2008Managed Managed Managed Managed Managed Managed

Growth Income Cash 2009 Growth Income Cash 2008(unaudited) (unaudited) (unaudited) Total (unaudited) (unaudited) (unaudited) Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Exposure to floating interest rates:Cash and short term deposits 3,681 1,094 – 4,775 7,259 145 – 7,404Investments in liquidity funds – – 21,553 21,553 – – 24,354 24,354Bank overdraft – – (32) (32) – – (4) (4)

Total exposure 3,681 1,094 21,521 25,296 7,259 145 24,350 31,754

Interest receivable on cash balances is at a margin below the sterling London Interbank Offer Rate. The liquidity fundsgenerally aim to produce a yield comparable to the seven day sterling London Interbank Bid Rate.

TH

E

CO

MP

AN

Y


19. Financial instruments’ exposure to risk and risk management policies (continued)

The above year end exposures are not representative of the exposure to interest rates during the year as the cashbalances and investments in liquidity funds have fluctuated. The maximum and minimum exposures during the year wereas follows:



£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Maximum interest rate exposure to floating rates 7,744 2,078 24,155 33,977 15,902 1,059 26,553 43,514

Minimum interest rate exposure to floating rates 3,122 251 21,371 24,744 4,007 1 20,347 24,355

Interest rate sensitivity

The following tables illustrate the sensitivity of the revenue after taxation for the year and net assets to a 1.0% (2008:1.0%) increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities.This level of change is considered to be a reasonable illustration based on observation of current market conditions.The sensitivity analysis is based on the Company’s monetary financial instruments, with a direct interest rate exposure,held at the balance sheet date, with all other variables held constant.

A 1.0% increase in interest rates would have the following effect:



£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Income statement – return after taxation

Revenue return 37 11 215 263 73 1 244 318

Net assets 37 11 215 263 73 1 244 318

A 1.0% decrease in interest rates would have the following effect:



£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Income statement – return after taxation

Revenue return (37) (11) (215) (263) (73) (1) (244) (318)

Net assets (37) (11) (215) (263) (73) (1) (244) (318)

In the opinion of the Directors, the above sensitivity analysis is not representative of the whole year as the level of cashbalances and investments in liquidity funds have fluctuated as shown above.

TH

E

CO

MP

AN

Y



(iii) Other price risk

Other price risk includes changes in market prices, other than those arising from interest rate risk or currency risk, whichmay affect the value of investments.

Management of other price risk

The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the riskassociated with particular industry sectors. The investment management team has responsibility for monitoring theportfolio, which is selected in accordance with the Company’s investment objectives and seeks to ensure that individualstocks meet an acceptable risk reward profile.

Other price risk exposure

The Company’s exposure to changes in market prices at 31st August comprises its holdings in equity investments asfollows. Holdings in liquidity funds are not deemed to be exposed to price risk.



£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Equity investments held at fair valuethrough profit or loss 144,470 35,548 – 180,018 153,659 46,269 – 199,928

The above data is broadly representative of the exposure to other price risk during the year.

Concentration of exposure to other price risk

A list of investments in the Managed Growth and Managed Income portfolios is given on pages 11 and 23. This shows thatthe Managed Growth portfolio comprises investments with a broad geographical exposure through investment in UK listedand unlisted vehicles, with no concentration of exposure to any one country. A substantial proportion of the ManagedIncome portfolio is invested in UK equities and accordingly there is a concentration of exposure. However it should benoted that an investment may not necessarily be wholly exposed to the economic conditions in its country of domicile.

Other price risk sensitivity

The following table illustrates the sensitivity of revenue after taxation for the year and net assets to an increase ordecrease of 10% (2008: 10%) in the fair value of investments held in the Managed Growth and Managed Incomeportfolios. This level of change is considered to be a reasonable illustration based on observation of current marketconditions. The sensitivity analysis is based on the Company’s investments and adjusting for change in the managementfee, but with all other variables held constant.

A 10% increase in fair values would have the following effect:

2009 2009 2008 2008Managed Managed Managed Managed

Growth Income 2009 Growth Income 2008(unaudited) (unaudited) Total (unaudited) (unaudited) Total

£’000 £’000 £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (13) (9) (22) (14) (13) (27)Capital return 14,408 3,546 17,954 15,324 4,614 19,938

Total return after taxation and net assets 14,395 3,537 17,932 15,310 4,601 19,911

TH

E

CO

MP

AN

Y




A 10% decrease in fair values would have the following effect:

2009 2009 2008 2008Managed Managed Managed Managed

Growth Income 2009 Growth Income 2008(unaudited) (unaudited) Total (unaudited) (unaudited) Total

£’000 £’000 £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return 13 9 22 14 13 27Capital return (14,408) (3,546) (17,954) (15,324) (4,614) (19,938)

Total return after taxation and net assets (14,395) (3,537) (17,932) (15,310) (4,601) (19,911)

(b) Liquidity risk

This is the risk that the Company will encounter difficulty in settling financial liabilities as they fall due.

Management of the risk

Liquidity risk is not significant as the Company’s assets comprise readily realisable securities, which can be sold to meet fundingrequirements if necessary. The Board would expect to be fully invested in normal market conditions but to retain sufficient cashbalances to settle short term liabilities. The Company has no fixed term borrowings.

Liquidity risk exposure

Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required areas follows:

2009 2008Three Three

months months or less Total or less Total£’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement 207 207 – –Bank overdraft 32 32 4 4Repurchase of the Company’s own shares for future settlement 740 740 376 376Other creditors and accruals 140 140 309 309Derivative instruments held at fair value through profit or loss

– written options 27 27 – –

1,146 1,146 689 689

(c) Credit risk

Credit risk is the risk that the counterparty to a transaction fails to discharge its obligations under that transaction whichcould result in loss to the Company.

Management of credit risk

Portfolio dealingThe Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigatesthe risk of losing the principal of a trade during the settlement process. The Manager continuously monitors dealingactivity to ensure best execution, a process that involves measuring various indicators including the quality of tradesettlement and incidence of failed trades. Counterparty lists are maintained and adjusted accordingly.

TH

E

CO

MP

AN

Y



CashCounterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties thathave a minimum rating of A1/P1 from Standard & Poor’s and Moody’s respectively.

Exposure to JPMorgan Chase (the Custodian of the Company’s assets)The Company’s investment assets are clearly ring-fenced in client designated accounts. Therefore, in the event thatJPMorgan Chase were to cease trading these assets would be protected.

Credit risk exposure

The amounts shown in the balance sheet under debtors and cash and short term deposits represent the maximumexposure to credit risk at the current and comparative year ends.

Cash and short term deposits comprises balances held at banks that have a minimum rating of A1/P1 from Standard &Poor’s and Moody‘s respectively.

(d) Fair values of financial assets and financial liabilities

All financial assets and liabilities are either included in the balance sheet at fair value or the carrying amount in thebalance sheet is a reasonable approximation of fair value.

20. Capital management policies and procedures

The Company’s capital is divided into three share classes, each with distinct objectives and investment policies. The capitalof the three share classes is as disclosed in the balance sheet and is managed on a basis consistent with the investmentobjectives and policies disclosed in the Directors’ Report on pages 35 and 36.

TH

E

CO

MP

AN

Y



Notice of Meeting

Notice is hereby given that the ninth Annual General Meetingof JPMorgan Elect plc will be held at Dexter House,No.2 Royal Mint Court, Tower Hill, London EC3M 4QNon Wednesday 9th December 2009 at 12.00 noon for thefollowing purposes:

1 To receive the Directors’ Report, the Annual Accounts andthe Auditors’ Report for the year ended 31st August 2009.

2 To approve the Directors’ Remuneration Report for theyear ended 31st August 2009.

3 To re-elect Nigel Sidebottom as a Director of theCompany.

4 To elect Roger Yates as a Director of the Company.

5 To re-appoint Ernst & Young LLP as auditors of theCompany and to authorise the Directors to determinetheir remuneration.

Special Business:

To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution

6 THAT the Board be and is hereby generally andunconditionally authorised (in substitution of anyauthorities previously granted to Directors) to exercise allpowers of the Company to allot relevant securities (withinthe meaning of Section 551 of the Companies Act 2006(the ‘Act’)) up to an aggregate nominal amount ofapproximately £521 (being approximately 10% of theissued share capital of the Managed Growth, ManagedIncome and Managed Cash share classes of the Companyas at 3rd November 2009) provided that this authorityshall expire at the conclusion of the Annual GeneralMeeting of the Company to be held in 2010 unlessrenewed at a general meeting prior to such time, savethat the Company may before such expiry make offers,agreements or arrangements which would or mightrequire relevant securities to be allotted after such expiryand so that the Directors of the Company may allotrelevant securities in pursuance of such offers,agreements or arrangements as if the authority conferredhereby had not expired.

Authority to disapply pre-emptive rights on allotment of newshares – Special Resolution

7 THAT, subject to the passing of resolution 6 set outabove, the Directors of the Company be and are herebyempowered pursuant to Section 570 and 573 of the Actto allot equity securities (within the meaning of Section

560 of the Act) pursuant to the authority conferred byResolution 6 as if Section 561(1) of the Act did not applyto any such allotment, provided that this power shall belimited to:

(a) the allotment of equity securities in the Company by wayof rights issue, open offer or otherwise to holders ofManaged Growth shares, Managed Income shares andManaged Cash shares where the equity securitiesrespectively attributable to the interest of all ManagedGrowth shares, Managed Income shares and ManagedCash shares are proportionate to the respective numbersof Managed Growth shares, Managed Income shares andManaged Cash shares held by them subject to suchexclusions or other arrangements as the Board maydeem necessary or expedient in relation to fractionalentitlements or local or practical problems under thelaws of, or the requirements of, any regulatory body orany stock exchange or any territory or otherwisehowsoever; and/or

(b) the allotment (otherwise than pursuant to sub paragraph(a) above) of equity securities up to an aggregate nominalvalue of approximately £521 (being approximately 10% ofthe total issued share capital as at 2nd November 2009)at a price not less than the net asset value per share; andshall expire upon the expiry of the general authorityconferred by Resolution 6 above, save that the Companymay before such expiry make offers or agreements whichwould or might require equity securities to be allottedafter such expiry and the Board may allot equitysecurities in pursuance of such offers or agreements as ifthe power conferred hereby had not expired.

Authority to repurchase the Company’s shares – SpecialResolution

8 THAT the Company be generally and, subject ashereinafter appears, unconditionally authorised inaccordance with Section 701 of the Act to make marketpurchases (within the meaning of Section 693 of the Act)of its issued Managed Growth shares, Managed Incomeshares and Managed Cash shares (all being classes ofordinary shares in the capital of the Company)

PROVIDED ALWAYS THAT

(i) the maximum number of Managed Growth, ManagedIncome and Managed Cash shares hereby authorisedto be purchased shall be 6,612,898, 7,765,745 or3,199,805 respectively, or, if different, that number ofManaged Growth, Managed Income and ManagedCash shares which is equal to 14.99% of the issued

TH

E

CO

MP

AN

Y


Notice of Meeting continued

share capital of the relevant share class as at the dateof the passing of this Resolution;

(ii) the minimum price which may be paid for a ManagedGrowth, Managed Income and Managed Cash shareshall be 0.01p, 0.003p and 0.003p respectively;

(iii) the maximum price which may be paid for a shareshall be an amount equal to 105% of the average ofthe middle market quotations for the share takenfrom and calculated by reference to the London StockExchange Daily Official List for the five business daysimmediately preceding the day on which the share ispurchased or (b) the price of the last independenttrade; or (c) the highest current independent bid;

(iv) any purchase of shares will be made in the market forcash at prices below the prevailing net asset value pershare (as determined by the Directors) at the datefollowing not more than seven days before the dateof purchase;

(v) the authority hereby conferred shall expire on8th June 2011 unless the authority is renewed at theCompany’s Annual General Meeting in 2010 or at anyother general meeting prior to such time; and

(vi) the Company may make a contract to purchaseshares under the authority hereby conferred prior tothe expiry of such authority which contract will ormay be executed wholly or partly after the expiry ofsuch authority and may make a purchase of sharespursuant to any such contract notwithstanding suchexpiry.

Authority to make off-market purchases – Special Resolution

9 THAT the proposed Contingent Purchase contractbetween Winterflood Securities Limited and JPMorganElect plc to enable the Company to make off-marketpurchases of its own securities pursuant to Section 694of the Act in the form produced at the meeting andinitialled by the Chairman, be and is hereby approvedand the Company be and is hereby authorised to enterinto and perform such contract, but so that the approvaland authority conferred by this resolution shall expire onthe day immediately preceding the date which is18 months after the passing of this resolution or, if earlier,the next Annual General Meeting of the Company.

Adoption of new Articles of Association - Special Resolution

10 (i) THAT the Articles of Association of the Company beamended by deleting all the provisions formerly inthe Company’s Memorandum of Association which, by

virtue of Section 28 of the Act, are to be treated asprovisions of the Company’s Articles of Association;and

(ii) THAT the Articles of Association produced to themeeting and initialled by the chairman of the meetingand for the purpose of identification be adopted asthe new Articles of Association of the Company insubstitution for, and to the exclusion of, the existingArticles of Association.

By order of the BoardAlison Vincent, for and on behalf ofJPMorgan Asset Management (UK) Limited,Secretary4th November 2009

Notes

These notes should be read in conjunction with the notes on the reverse of the proxy

form.

1. A member entitled to attend and vote at the Meeting may appoint another

person(s) (who need not be a member of the Company) to exercise all or any of

his rights to attend, speak and vote at the Meeting. A member can appoint more

than one proxy in relation to the Meeting, provided that each proxy is appointed

to exercise the rights attaching to different shares held by him.

2. A proxy does not need to be a member of the Company but must attend the

Meeting to represent you. Your proxy could be the Chairman, another director of

the Company or another person who has agreed to attend to represent you.

Details of how to appoint the Chairman or another person(s) as your proxy or

proxies using the proxy form are set out in the notes to the proxy form. If a

voting box on the proxy form is left blank, the proxy or proxies will exercise

his/their discretion both as to how to vote and whether he/they abstain(s) from

voting. Your proxy must attend the Meeting for your vote to count. Appointing a

proxy or proxies does not preclude you from attending the Meeting and voting in

person. If you attend the Meeting in person, your proxy appointment will

automatically be terminated.

3. Any instrument appointing a proxy, to be valid, must be lodged in accordance

with the instructions given on the proxy form.

4. You may change your proxy instructions by returning a new proxy appointment.

The deadline for receipt of proxy appointments also applies in relation to

amended instructions. Any attempt to terminate or amend a proxy appointment

received after the relevant deadline will be disregarded. Where two or more

valid separate appointments of proxy are received in respect of the same share

in respect of the same Meeting, the one which is last received (regardless of its

date or the date of its signature) shall be treated as replacing and revoking the

other or others as regards that share; if the Company is unable to determine

which was last received (regardless of its date or the date of its signature) shall be

treated as replacing and revoking the other or others as regards that share; if

the Company is unable to determine which was last received, none of them

shall be treated as valid in respect of that share.

TH

E

CO

MP

AN

Y


5. To be entitled to attend and vote at the Meeting (and for the purpose of the

determination by the Company of the number of votes they may cast),

members must be entered on the Company’s register of members as at

6.00 p.m. two days prior to the Meeting (the ‘specified time’). If the Meeting is

adjourned to a time not more than 48 hours after the specified time applicable

to the original Meeting, that time will also apply for the purpose of determining

the entitlement of members to attend and vote (and for the purpose of

determining the number of votes they may cast) at the adjourned Meeting.

If however the Meeting is adjourned for a longer period then, to be so entitled,

members must be entered on the Company’s register of members as at

6.00 p.m. two days prior to the adjourned Meeting or, if the Company gives

notice of the adjourned Meeting, at the time specified in that notice. Changes to

entries on the register after this time shall be disregarded in determining the

rights of persons to attend or vote at the meeting or adjourned meeting.

6. Entry to the Meeting will be restricted to shareholders and their proxy or

proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s) to act as its

representative(s) and to vote in person at the Meeting (see instructions given

on the proxy form). In accordance with the provisions of the Companies Act

2006, each such representative(s) may exercise (on behalf of the corporation)

the same powers as the corporation could exercise if it were an individual

member of the Company, provided that they do not do so in relation to the

same shares. It is therefore no longer necessary to nominate a designated

corporate representative. Representatives should bring to the meeting

evidence of their appointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of the Companies Act 2006

can require the Company to publish a statement on its website setting out any

matter relating to (a) the audit of the Company’s accounts (including the

Auditor’s report and the conduct of the audit) that are to be laid before the

AGM; or (b) any circumstances connected with an Auditor of the Company

ceasing to hold office since the previous AGM; which the members propose to

raise at the meeting. The Company cannot require the members requesting the

publication to pay its expenses. Any statement placed on the website must also

be sent to the Company’s Auditors no later than the time it makes its statement

available on the website. The business which may be dealt with at the AGM

includes any statement that the Company has been required to publish on its

website pursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Company must cause

to be answered at the AGM any question relating to the business being dealt

with at the AGM which is put by a member attending the meeting except in

certain circumstances, including if it is undesirable in the interests of the

Company or the good order of the meeting or if it would involve the disclosure

of confidential information.

10. Under sections 338 and 338A of the 2006 Act, members meeting the threshold

requirements in those sections have the right to require the Company (i) to

give, to members of the Company entitled to receive notice of the Meeting,

notice of a resolution which those members intend to move (and which may

properly be moved) at the Meeting; and/or (ii) to include in the business to be

dealt with at the Meeting any matter (other than a proposed resolution) which

may properly be included in the business at the Meeting. A resolution may

properly be moved, or a matter properly included in the business unless

(a) (in the case of a resolution only) it would, if passed, be ineffective (whether

by reason of any inconsistency with any enactment or the Company’s

constitution or otherwise); (b) it is defamatory of any person; or (c) it is

frivolous or vexatious. A request made pursuant to this right may be in had

copy or electronic form, must identify the resolution of which notice is to be

given or the matter to be included in the business, must be accompanied by a

statement setting out the grounds for the request, must be authenticated by

the person(s) making it and must be received by the Company not later than

the date that is six clear weeks before the Meeting, and (in the case of a matter

to be included in the business only) must be accompanies by a statement

setting out the grounds for the request.

11. A copy of this notice has been sent for information only to persons who have

been nominated by a member to enjoy information rights under Section 146 of

the Companies Act 2006 (a ‘Nominated Person’). The rights to appoint a proxy

can not be exercised by a Nominated Person: they can only be exercised by the

member. However, a Nominated Person may have a right under an agreement

between him and the member by whom he was nominated to be appointed as

a proxy for the Meeting or to have someone else so appointed. If a Nominated

Person does not have such a right or does not wish to exercise it, he may have

a right under such an agreement to give instructions to the member as to the

exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, the contents of

this notice of meeting, details of the total number of shares in respect of which

members are entitled to exercise voting rights at the AGM, the total voting

rights members are entitled to exercise at the AGM and, if applicable, any

members’ statements, members’ resolutions or members’ matters of business

received by the Company after the date of this notice will be available on the

Company’s website www.jpmelect.co.uk.

13. The register of interests of the Directors and connected persons in the share

capital of the Company and the Directors’ letters of appointment are available

for inspection at the Company’s registered office during usual business hours

on any weekday (Saturdays, Sundays and public holidays excepted). It will also

be available for inspection at the Annual General Meeting. No Director has any

contract of service with the Company.

14. You may not use any electronic address provided in this Notice of meeting to

communicate with the Company for any purposes other than those expressly

stated.

15. As at 3rd November 2009 (being the latest business day prior to the

publication of this Notice), the Company’s issued share capital consists of

44,115,395 Managed Growth shares, 51,806,171 Managed Income shares and

21,346,261 Managed Cash shares. Voting rights are calculated by reference to

the Share Voting numbers which, as at 31st August 2009, were 3.32 (Managed

Growth), 0.70 (Managed Income) and 1.00 (Managed Cash). Therefore the total

voting rights in the Company are 204,073,692.

Electronic appointment – CREST members

CREST members who wish to appoint a proxy or proxies by utilising the CREST

electronic proxy appointment service may do so for the Meeting and any

adjournment(s) thereof by using the procedures described in the CREST Manual.

See further instructions on the proxy form.

TH

E

CO

MP

AN

Y


Explanatory Notes to Resolution 10

The Companies Act 2006 (the ‘2006 Act’), which is replacingthe Companies Act 1985 (the ‘1985 Act’) has beenimplemented in stages but is fully in force from 1st October2009. In addition, the Shareholders’ Rights Regulations whichamend certain provisions of the 2006 Act relating tomeetings of the Company came into force in August 2009.Under Resolution 10, the Company is adopting new Articlesof Association (the ‘Articles’) which will reflect the changes incompany law brought about by the Shareholders’ RightsRegulations and by the provisions of the 2006 Act whichcame into effect on or before 1st October 2009. The Articlesalso include some other modernising and clarifyingamendments, including, where appropriate, adopting thewording of the new model form articles for public companiescontained in Schedule 3 to the Companies (Model Articles)Regulations 2008 (the ‘model form articles’), which arereplacing the Table A articles under the 1985 Act on whichmany of the Company’s current articles are based. Set outbelow is a summary of the principal changes.

1. The Company’s objects

The 2006 Act significantly reduces the constitutionalsignificance of a company’s memorandum. The provisionsgoverning the operations of the Company are currently setout in both its memorandum of association and its articles ofassociation. Under the 2006 Act, the memorandum nolonger contains an objects clause and simply records thenames of the subscribers and the number of shares whicheach subscriber agreed to take in the Company. UnderSection 28 of the 2006 Act, the objects clause and all otherprovisions in the memorandum are treated as part of thearticles with effect from 1st October 2009 but the Companycan remove these provisions by special resolution. Unless thearticles provide otherwise, the Company’s objects will beunrestricted. The Company is proposing to remove its objectsclause together with all other provisions of its memorandumwhich, by virtue of the 2006 Act, are treated as forming partof the Company’s articles of association as of 1st October2009. Resolution 10 confirms the removal of these provisionsand adopts the new Articles.

2. Limited liability (Article 3)

Under the 2006 Act, the memorandum of association alsono longer contains a clause stating that the liability of themembers of a company is limited. For existing companies,this statement is automatically treated as having moved intothe articles on 1st October 2009. As noted in paragraph 1above, Resolution 10 confirms the removal, from theCompany’s articles of association, of the provisions of the

Company’s memorandum of association which are treated asforming part of the Company’s articles of association byvirtue of Section 28 of the 2006 Act, which includes thestatement of limited liability. An explicit statement of themembers’ limited liability is therefore included in the newArticles.

3. Authorised share capital and unissued shares

The 2006 Act abolishes the concept of authorised sharecapital and under the 2006 Act, the memorandum ofassociation no longer contains a statement of the Company’sauthorised share capital. For existing companies, thisstatement is deemed to be a provision of the Company’sarticles of association setting out the maximum amount ofshares that may be allotted by the Company. The adoption ofthe new Articles by the Company will have the effect ofremoving this provision relating to the maximum amount.Directors will still need to obtain the usual shareholders’authorisation in order to allot shares.

References to authorised share capital and to unissuedshares have therefore been removed from the new Articles.

4. Redeemable shares (Article 15)

Under the 2006 Act, the articles of association need notinclude the terms on which redeemable shares may beredeemed. The Directors may determine the terms,conditions and manner of redemption of redeemable sharesprovided they are authorised to do so by the articles.The new Articles contain such authorisation.

5. Share certificates (Article 22)

The new Articles contain new provisions for the issue ofconsolidated share certificates, in line with the model formarticles.

6. Transfer of shares (Articles 40 and 41)

The provision which gave the ability to suspend theregistration of transfers of shares for periods not exceeding30 days in any one year has been removed from the newArticles as there is no ability under the 2006 Act to close theregister.

7. Authority to purchase own shares, consolidate and sub-divideshares, and reduce share capital (Article 50)

Under the 1985 Act, a company required specificauthorisations in its articles of association to purchase itsown shares, to consolidate or sub-divide its shares and toreduce its share capital. Under the 2006 Act, publiccompanies do not require specific authorisations in their

Appendix

TH

E

CO

MP

AN

Y


articles of association to undertake these actions, butshareholder authority is still required. Amendments havebeen made to the new Articles to reflect these changes.

8. Participation in meetings at different places and by electronicmeans (Article 61)

Amendments made to the 2006 Act by the Shareholders’Rights Regulations specifically provide for the holding andconducting of electronic meetings. The new Articles includeamendments to provide greater scope for members toparticipate in meetings of the Company even if they are notpresent in person at the principal place where the meeting isbeing held. The amendments allow for members toparticipate not only by attendance at satellite meetinglocations, but also by any other electronic means ofparticipation.

9. Adjournments (Article 63)

The Shareholders’ Rights Regulations add a provision to the2006 Act which requires that, when a general meeting isadjourned due to lack of quorum, at least ten days’ noticemust be given to reconvene the meeting. The new Articlesinclude amendments to the provisions dealing with notice ofadjourned meetings to make them consistent with this newrequirement.

10. Removal of chairman’s casting vote

Pursuant to changes brought about by the Shareholders’Rights Regulations, a traded company is no longer permittedto allow the chairman to have a casting vote in the event ofan equality of votes. Accordingly, this provision has beenremoved in the new Articles.

11. Voting rights (Article 72)

The Shareholders’ Rights Regulations clarify the variouspowers of proxies and representatives of corporate membersin respect of resolutions taken on a show of hands. Where aproxy has been duly appointed by one member, he has onevote on a show of hands unless he has been appointed bymore than one member in which case the proxy has onevote for and one vote against if the proxy has beenappointed by more than one member to vote for theresolution and by more than one member to vote against theresolution. Where a corporate member appointsrepresentatives to attend meetings on its behalf, eachrepresentative duly appointed by a corporate member hasone vote on a show of hands. The new Articles containprovisions which clarify these rights and also clarify how theprovisions giving a proxy a second vote on a show of handsshould apply to discretionary powers.

12. Voting record date (Article 73)

The new Articles include a new provision which was notpreviously in the Company’s articles of association, dealingwith the method for determining which persons are allowedto attend or vote at a general meeting of the Company andhow many votes each person may cast. Under this newprovision, when convening a meeting the Company mayspecify a time, not more than 48 hours before the time of themeeting (excluding any part of a day that is not a workingday), by which a person must be entered on the register ofmembers in order to have the right to attend or vote at themeeting. This new provision is in line with a requirement forlisted companies introduced by the Shareholders’ RightsRegulations.

13. Validity of votes (Article 77)

Following the implementation of the Shareholders’ RightsRegulations, proxies are expressly required to vote inaccordance with instructions given to them by members.The new Articles contain a provision stating that theCompany is not required to enquire whether a proxy orcorporate representative has voted in accordance withinstructions given to him and that votes cast by a proxy orcorporate representative will be valid even if he has notvoted in accordance with his instructions.

14. Termination of proxy authority (Article 83)

Article 83 provides that the termination of a proxy’s authorityshould be in writing as this is required by the Shareholders’Rights Regulations.

15. Corporate representatives (Article 85)

The new Articles provide that the Company can require acorporate representative to produce a certified copy of theresolution appointing him before permitting him to exercisehis powers.

16. Retirement of directors by rotation (Articles 91 and 92)

The new Articles have been redrafted in order to make thisprovision clearer and to ensure (as far as possible) a regularnumber of retiring directors each year, with the number toretire being the number nearest to one-third of the board,excluding those directors who are retiring and seeking re-election for other reasons. Article 91 continues to complywith Combined Code provision A.7.1 which recommends thatall directors should be subject to re-election at intervals ofno more than three years. New Article 92 requires any non-executive director (other than the chairman) who has heldoffice for nine years or more to put himself up for re-election

TH

E

CO

MP

AN

Y


Appendix continued

at each annual general meeting. This is in line with CombinedCode provision A.7.2.

17. Alternate directors (Articles 98, 100 and 102)

Article 98 now clarifies that an alternative director is entitledto be paid expenses (but not directors’ fees). Article 100 is anew provision which effectively applies the provisions ofArticle 96, regarding removal of directors, to alternatedirectors. Article 102(c) makes it clear that an alternate issubject to the same restrictions as the director whoappointed him.

18. Borrowing powers (Article 104)

A number of presentational and descriptive amendmentshave been made to the borrowing powers provision:

(i) Article 104(1)(c) – a reference has been added to amounts“credited as paid up” on share capital to clarify that theseshould be included as well as amounts actually paid up.

(ii) Article 104(1)(d) – this has been amended to refer to totalof “any credit balance on the distributable andundistributable reserves of the Group”, to clarify that allreserves of the Group will be relevant for the calculationand to reflect the language used by those preparing theaccounts. The reference to “including share premiumaccount, capital redemption reserve and credit balanceon the profit and loss account reserve” has thereforebeen deleted.

(iii) Article 104(1) – the last paragraph has been amended toallow the Company also to adjust for variations in itscapital redemption reserve since the balance sheet dateas the directors may reasonably consider to beappropriate.

(iv) Articles 104(1)(c) and (104)(3)(e) – additional wording hasbeen included to clarify how any preference shares thatmight be issued should be treated for the purposes of theborrowing powers. Under IFRS and UK GAAP preferenceshares are now treated as a debt on a company’s balancesheet, rather than equity. The additional wordingincluded in Articles 104(3)(c) and 104(1)(e) reflects thisaccounting treatment. The effect of this wording is toexclude the amount of any preference share capital fromthe calculation of the Company’s share capital andreserves and to include such amount in the calculation ofthe Company’s borrowings.

19. Delegation to persons or committees (Article 105)

Article 105 follows the new, simplified approach todelegation adopted in the model form articles, allowing thedirectors to delegate as they decide appropriate.

20. Directors’ appointments, interests and conflicts of interest(Article 110)

Article 110, which is the provision for dealing with conflicts inour current articles, allowing directors to be interested intransactions and to be an officer of or employed by orinterested in a body corporate in which the Company isinterested provided that he has disclosed his interest inaccordance with the articles and the provisions of the Acts,has been amended so that it contains provisions relating toconfidential information, attendance at board meetings andavailability of board papers to protect a director from beingin breach of duty if a conflict of interest or potential conflictof interest arises. These provisions will only apply where theposition giving rise to the potential conflict falls within thesituations covered by Article 110.

21. Procedures regarding board meetings & resolution in writing(Articles 112 & 115)

The provisions of Article 112 have been amended to make itclear that notice of a board meeting may be given personally,by telephone, in hard copy or in electronic form. Therequirements for giving notice to directors who are not in theUnited Kingdom have also been clarified. In order to clarifythe procedure for written resolutions of directors, Article 115has been amended so that, rather than referring to aresolution in writing by all directors, a resolution in writingwill be valid and effectual as if it had been passed at ameeting if executed by all the directors entitled to receivenotice of the meeting and who would have been entitled tovote (and whose vote would have been counted) on aresolution at a meeting.

22. Quorum (Article 116)

The proposed amendment to Article 116, which deals withthe quorum requirement for board meetings, clarifies that adirector cannot count in the quorum for a matter orresolution on which he is not entitled to vote (or when hisvote cannot be counted) but he may count in the quorum forthe other matters or resolutions to be considered or votedon at the meeting.

23. Permitted interests and voting (article 117)

Article 117 has been amended to allow a director to vote on aresolution which relates to giving him an indemnity orfunding for expenditure incurred in defending proceedingsprovided all the other directors have been given or are tobe given arrangements on substantially the same terms.This exception has become a common exception for listedcompanies to include.

TH

E

CO

MP

AN

Y


24. Notice when post not available (Article 136)

Article 136 is the article covering service of notice in theevent of a postal strike. It has been amended to allow theCompany in such circumstances to serve notices only onthose members who receive notices via electronic means,provided that, as before, the Company also puts anadvertisement in two national newspapers and sends aconfirmatory hard copy notice if the postal service isavailable again within seven days of the meeting.

25. The seal (Articles 145 and 146)

Article 145 provides that instruments (other than sharecertificates) to which the seal is affixed shall be signed byone authorised person in the presence of a witness, whereaspreviously the requirement was for signature by either adirector and the secretary or two directors.

26. Change of name (Article 148)

Under the Companies Act 1985, a company could onlychange its name by special resolution. Under the CompaniesAct 2006 a company is able to change its name by othermeans provided for by its articles. To take advanatage of thisprovision, the new Articles enable the Directors to pass aresolution to change the Company’s name.

TH

E

CO

MP

AN

Y


Glossary of Terms

Return to Shareholders

Total return to the investor, on a mid-market price to mid-market price basis, assuming that all dividends received were reinvested in the relevant share class of the Companyat the time the shares were quoted ex-dividend. Transactioncosts of reinvestment are not taken into account.

Return on Net Assets

Total return on net asset value (‘NAV’) per share, on a bidvalue to bid value basis, assuming that all dividends paid outby the Company were reinvested in the relevant share classof the Company at the NAV per share at the time the shareswere quoted ex-dividend.

In accordance with industry practice, dividends payablewhich have been declared but which are unpaid at thebalance sheet date are deducted from the NAV whencalculating the total return on net assets.

Benchmark Return

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested in the shares of the underlying companies atthe time the shares were quoted ex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the investmentuniverse. The investment strategy does not track this indexand consequently, there may be some divergence between the performance of the relevant portfolio and that of thebenchmark.

Total Expense Ratio

Management fees and all other operating expenses,excluding interest and VAT recoverable, expressed as apercentage of the average of the opening and closing netassets.

Share Price Discount/Premium to Net Asset Value (‘NAV’)

If the share price of an investment company is lower thanthe NAV per share, the shares are said to be trading at adiscount. The discount is shown as a percentage of the NAV.The opposite of a discount is a premium. It is more commonfor an investment company’s shares to trade at a discountthan at a premium.

Gearing Factor

Investments excluding holdings in liquidity funds, expressedas a percentage of shareholders’ funds. This shows the effectof gearing on the NAV if the market value of the portfoliowere to increase by 100%.

TH

E

CO

MP

AN

Y


Information about the Company

JPMorgan Elect plc adopted its present structure as a resultof the combination of JPMorgan Fleming Managed Growthplc and JPMorgan Fleming Managed Income plc and thesubsequent capital reorganisation. The Company’s namereflects the capital structure and the investment flexibility itoffers to shareholders. There are three share classes, eachwith distinct investment policies, objectives and underlyinginvestment portfolios. Each share class is listed separatelyand traded on the London Stock Exchange. This capitalstructure means that shareholders may benefit from greaterinvestment flexibility in a tax-efficient manner.

Capital Structure

• Managed Growth Shares

Designed to provide a high return, predominantly in the formof long term capital growth by investing in a range of closedand open-ended funds managed principally by JPMAM.

• Managed Income Shares

Designed to provide a growing income together with thepotential for long term capital growth by investing in equitiesand shares of investment trusts and fixed income securities.

• Managed Cash Shares

Designed to preserve capital with a yield based on shortterm interest rates by investing in a range of liquidity funds,selected for their yield and credit rating and short datedAAA-rated UK government securities/G7 governmentsecurities hedged into sterling.

Repurchase of Managed Cash shares

In order to mitigate the impact of the market spread on theManaged Cash shares it is possible for holders of ManagedCash shares to elect to have all or part of their holding ofsuch shares repurchased by the Company for cash at a priceclose to net asset value on each conversion date (see below).

Conversion Opportunities

Shareholders in any of the three share classes are able toconvert some or all of their shares into shares of the otherclasses without such conversion being treated, under currentlaw, as a disposal for UK capital gains tax purposes.

The conversion mechanism allows shareholders to alter theirinvestment profile to match their changing investment needsin a tax-efficient manner. Conversion dates arise every sixmonths on 30th November and 31st May (if such a date is nota business day, then the conversion date will move to thenext business day). The Company, or its Manager, will makeno administrative charge for any of the above conversions.

Conversion between the share classes

Those who hold shares through the JPMorgan InvestmentTrust Share Plan/ISA or Pension Account must submit aconversion instruction form which can be found atwww.jpmelect.co.uk. Instructions for CREST holders can alsobe found at this address. Those who hold shares incertificated form on the main register must complete theconversion notice printed on the reverse of their certificate.

Instructions must be received no earlier than 45 and no laterthan 14 days before a chosen conversion date.

The number of shares that will arise upon conversion will bedetermined on the basis of the relative net asset values ofeach share class, taking into account the costs of theconversion process. Conversion will not affect the net assetvalue per share of those shares held by any shareholder whodoes not convert.

With regard to those who hold shares through the JPMorganInvestment Trust Share Plan/ISA or Pension Account,the minimum number of shares of any class which may beconverted is 1,000 shares (to a minimum value of £500).Conversion of fewer shares may only take place if thenumber to be converted constitutes the shareholder’sentire holding in that class. Please note that shareholderscannot convert into Managed Cash shares within the PensionAccount.

Shareholders who hold shares in certificated form on themain register or those who hold their shares in electronicform through CREST may convert a minimum of 1,000 sharesor, if lower, their entire holding.

More details concerning conversion dates and conversioninstruction forms can be found on the Company’s website:www.jpmelect.co.uk

TH

E

CO

MP

AN

Y

TH

E

CO

MP

AN

Y


Information about the Company

History

The Company was incorporated on 16th September 1999 andlaunched as an investment trust on 24th November 1999 withassets of £28m. The Company changed its name to JPMorganFleming Managed Growth plc on 5th December 2002. The Company’sname was changed to JPMorgan Fleming Elect plc on 14th January2004 following the capital reorganisation and combination ofJPMorgan Fleming Managed Growth plc and JPMorgan FlemingManaged Income plc. The Company adopted its present name on2nd February 2006.

Company Numbers

Company registration number: 3845060London Stock Exchange numbers:Managed Growth 0852814, Managed Income 3408021,Managed Cash 3408009ISIN: Managed Growth GB0008528142, Managed IncomeGB0034080217, Managed Cash GB0034080092Bloomberg codes:Managed Growth JPE LN, Managed Income JPEI LN,Managed Cash JPEC LN

Market Information

The Company’s net asset values (‘NAV’) is published daily via theLondon Stock Exchange. The Company’s shares are listed on theLondon Stock Exchange. The market price is shown daily in theFinancial Times, The Times, The Daily Telegraph, The Scotsman,The Independent and on the JPMorgan internet site atwww.jpmelect.co.uk, where the share prices are updated everyfifteen minutes during trading hours.

Website

www.jpmelect.co.uk

Share Transactions

The Company’s shares may be dealt in directly through astockbroker or through a professional adviser acting on an investor’sbehalf. They may also be purchased and held through the JPMorganInvestment Trust Share Plan, Individual Savings Account (‘ISA’) andthe Pension Account.

Manager and Secretary

JPMorgan Asset Management (UK) Limited

Company’s Registered Office

Finsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone: 020 7742 6000

For company secretarial and administrative matters,please contact Alison Vincent.

Registrars

EquinitiReference 2018Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone: 0871 384 2530

Notifications of changes of address and enquiries regardingcertificates or dividend cheques should be made in writing to theRegistrar quoting reference 2018.

Registered shareholders can obtain further details on individualholdings on the internet by visiting www.shareview.co.uk

Auditors

Ernst & Young LLP1 More London PlaceLondon SE1 2AF

Brokers

Winterflood Securities LimitedThe Atrium BuildingCannon Bridge25 Dowgate HillLondon EC4R 2GA

Savings Product Administrators

For queries on the JPMorgan ISA, Share Plan or Pension Account,see contact details on the back cover of this report.

A member of the AIC

Financial CalendarFinancial year end 31st AugustFinal results announced NovemberHalf year end FebruaryHalf year results announced AprilInterim Management Statements announced June/DecemberDividends payable (if any)

Managed Growth June and DecemberManaged Income and Managed Cash March, June, September and DecemberAnnual General Meeting December

TH

E

CO

MP

AN

Y


Notes


TH

E

CO

MP

AN

Y

Notes

JPMorgan HelplineFreephone 0800 20 40 20 or 0207 742 99999.00 am to 5.3o pm Monday to Friday

Your telephone call may be recorded for your security

www.jpmelect.co.uk

Date post:	03-Jul-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Annual Report JPMorgan Elect plc · Managed Cash– Preservation of capital with a yield based on...

Documents