Elect Cover A4 24/10/2016 16:53 Page FC1 JPMorgan Elect plc AR_… · 31st August 2016, supported by a recovering domestic economy, the devaluation of the pound and a continued low

JPMorgan Elect plcAnnual Report & Accounts for the year ended 31st August 2016— Managed Growth shares— Managed Income shares— Managed Cash shares

Elect Cover A4 24/10/2016 16:53 Page FC1

JPMorgan Elect plc (the ‘Company’) has three share classes,each with distinct investment policies, objectives and underlyinginvestment portfolios. Each share class is listed separately andtraded on the London Stock Exchange. The Company’s capitalstructure means that shareholders may benefit from greaterinvestment flexibility in a tax-efficient manner.

Objectives Managed Growth— Long term capital growth from investing in a range ofinvestment trusts and open-ended funds managed principallyby JPMorgan Asset Management.

Managed Income— A growing income return with potential for long term capitalgrowth by investing in equities, investment companies andfixed income securities.

Managed Cash— Preservation of capital with a yield based on short terminterest rates by investing in a range of liquidity funds andshort dated AAA-rated UK or G7 government securitieshedged into sterling. Based on its return characteristics andthe costs incurred in transacting in its shares, an investmentin Managed Cash should only be considered by existingholders of Managed Growth and/or Managed Income shareswho wish to switch into Managed Cash on the designatedquarterly conversion dates. Further details are given onpage 77.

GearingThe Board does not intend to utilise borrowings to increase thefunds available for investment.

Investment Policies, Restrictions and GuidelinesMore information on investment policies, risk management,restrictions and guidelines is given in the Business Review onpages 27 and 33.

Benchmarks Managed Growth— A composite comprising 50% FTSE All-Share Index and 50%FTSE World Index (ex-UK).

Managed Income— A composite comprising 85% FTSE All-Share Index and 15%Bloomberg Barclays Capital Global Corporate Bond Index(hedged) in sterling terms.

Managed Cash— There is no benchmark for this portfolio, other than to maintainthe net asset value as close to 100p per share as possible.

Capital Structure At 31st August 2016, the following shares were in issue.

Managed Growth:33,838,279 (2015: 35,423,887) Ordinary shares, excluding3,640,338 (2015: 2,087,353) Treasury shares.

Managed Income:51,506,786 (2015: 51,909,937) Ordinary shares, excluding2,398,499 (2015: 1,827,916) Treasury shares.

Managed Cash:3,731,318 (2015: 3,807,243) Ordinary shares. There were noshares held in treasury (2015: Nil).

Conversions and Repurchase of Managed CashSharesShareholders in any of the three share classes are able toconvert some or all of their shares to the other classes on aquarterly basis without such conversion being treated, undercurrent law, as a disposal for UK Capital Gains Tax purposes. Itis also possible for holders of Managed Cash shares to elect tohave all or part of their holding of those shares repurchased bythe Company for cash at a price close to net asset value at eachconversion date. Further details are given on page 77.

FCA regulation of ‘non-mainstream pooledinvestments’The Company currently conducts its affairs so that the shares itissues can be recommended by Independent Financial Advisersto ordinary retail investors in accordance with the rules of theFinancial Conduct Authority (‘FCA’) in relation tonon-mainstream investment products and intends to continueto do so for the foreseeable future. The shares are excludedfrom the FCA’s restrictions which apply to non-mainstreaminvestment products because they are shares in aninvestment trust.

Management Company The Company employs JPMorgan Funds Limited (‘JPMF’ or the‘Manager’) as its Alternative Investment Fund Manager. JPMFdelegates the management of the Company’s portfolio toJPMorgan Asset Management (UK) Limited (‘JPMAM’).

Association of Investment Companies The Company is a member of the Association of InvestmentCompanies (‘AIC’).

Website The Company’s website can be found at www.jpmelect.co.ukwhich includes useful information about the Company, such asdaily prices, factsheets and current and historic half year andannual reports.

Features

1

Contents

STRATEGIC REPORT

2 Chairman’s Statement

MANAGED GROWTH SHARE CLASS

4 Financial Results

5 Investment Manager’s Report

8 Financial Record

9 Ten Largest Investments

9 Geographical Analysis

10 List of Investments

11 Statement of Comprehensive Income

11 Statement of Financial Position

MANAGED INCOME SHARE CLASS

12 Financial Results

13 Investment Managers’ Report

17 Financial Record

18 Ten Largest Investments

18 Ten Largest Income Payers

19 Sector Analysis




MANAGED CASH SHARE CLASS

22 Financial Results

23 Investment Manager’s Report

24 Financial Record




27 Business Review

GOVERNANCE

34 Board of Directors

35 Directors’ Report

37 Corporate Governance

43 Directors’ Remuneration Report

46 Statement of Directors’ Responsibilities

47 Independent Auditor’s Report

FINANCIAL STATEMENTS


54 Statement of Changes in Equity


56 Notes to the Financial Statements

SHAREHOLDER INFORMATION

78 Notice of Annual General Meeting

82 Glossary of Terms and Definitions

83 Where to buy J.P. Morgan Investment Trusts

85 Information about the Company

THE COM

PANY

Elect pp01-11 24/10/2016 16:47 Page 1

2 JPMORGAN ELECT PLC. ANNUAL REPORT & ACCOUNTS 2016

Strategic Report

CHAIRMAN’S STATEMENT

Dear Shareholders,

In my report to you last year I predicted uncertainty and also cautioned against relying onthe continuation of the strong investment performance the Managed Growth and ManagedIncome share classes have historically enjoyed.

Despite bouts of volatility, including heavy falls in the immediate aftermath of thereferendum, global equities performed strongly in sterling terms over the year to31st August 2016, supported by a recovering domestic economy, the devaluation of thepound and a continued low interest rate environment. Consequently, the total return onthe Company’s net assets over the period was 11% for the Managed Growth portfolio and5.9% for the Managed Income portfolio. The total return on the Managed Cash portfoliowas 0.5%.

However, while returns for Managed Growth and Managed Income were positive, on arelative basis compared to their benchmarks performance was poor. The reasons for thisunderperformance are discussed in more detail in the Managers’ Reports.

Managed GrowthThe Managed Growth portfolio has delivered a total return on net assets of 11.0%,compared with the portfolio’s benchmark which returned 19.1%. The share price totalreturn was 11.5%.

As you know, the objective of this share class is long term capital growth. While a doubledigit return when the base rate ends the year under review at 0.25% is extremelywelcome, comparison with its benchmark is disappointing. We can take some comfort that,notwithstanding this relative underperformance in the last year, over three years the totalreturn is broadly in line with the benchmark and ahead over both five and ten years.

For the year ended 31st August 2016 the Board declared dividends of 8.70p per ManagedGrowth share compared to 6.75p for the year ended 31st August 2015.

Managed IncomeThe Managed Income portfolio has delivered a total return on net assets of 5.9% comparedwith the portfolio’s benchmark which returned 11.3%.

The objective of the portfolio is to deliver a growing income return with the potential forlong term capital growth. It is therefore pleasing to report that the dividend for this year is3.9p per share, an increase on 2015 of 2.6%. This is the sixth successive year where thedividend has been increased.

The outlook for UK dividend payments is, however, mixed. A number of factors, includingBrexit negotiations which are due to commence in early 2017, have the potential to impactthe profits and cash flow of domestic UK companies. Against this, the recent depreciation ofsterling should help the prospects of those companies with significant overseas earnings.

The Managed Income share class was less successful in achieving its secondary objectiveof delivering capital growth. While some growth was achieved this was significantly lessthan its benchmark. While disappointing, it is only fair to point out that the share class hasoutperformed this benchmark in each of the preceding five years.

Managed CashThe Managed Cash Portfolio has delivered a total return on net assets of 0.5%. Thedividend for this year is 0.35p per share, the same as last year.

THE COM

PANY

Elect pp01-11 24/10/2016 16:47 Page 2

3

THE COM

PANY

The portfolio’s primary objective remains capital preservation through investment in highquality liquidity funds. During the year the Bank of England base rate fell to 0.25%, placingadditional pressure on the portfolio’s underlying money market funds to generate returns.

The Managed Cash portfolio is invested in liquidity funds with AAA ratings as measured byStandard & Poor’s, or an equivalent rating agency.

The Board considers this class to be an asset allocation tool which continues to benefitshareholders of all of the Company’s share classes, offering the opportunity to switch intoa safer share class in times of market volatility.

JPMorgan Income and Growth Your Board is recommending proposals for the issue of new shares in connection with thescheme of reconstruction (‘Scheme’) of JPMorgan Income & Growth Investment Trust plc(‘JPMIG’). Under the proposals, shareholders of JPMIG will be able to exchange their JPMIGShares for any combination of Managed Growth Shares, Managed Income Shares, ManagedCash Shares, and/or cash. Full details are set out in the Circular and Prospectus, copies ofwhich are available to download from www.jpmelect.co.uk.

The proposals, which require amongst other things approval from shareholders, have thepotential to significantly grow the Company. The Board considers the proposals to be in thebest interests of the Company and Shareholders as a whole. Accordingly, the Boardrecommends that Shareholders vote in favour of the proposals at the General Meeting andClass Meetings to be held on 22nd November 2016.

In connection with the Scheme, it is proposed that the Chairman of JPMIG, Karl Sternberg,will be appointed to the Board shortly following admission of the new Elect Shares to theLondon Stock Exchange. A resolution for Mr Sternberg’s re-appointment as a Director willthen follow at the next Annual General Meeting of the Company in 2017. Mr Sternberg is anexperienced non-executive director and will make a welcome addition to the Board.

Annual General MeetingThe Company’s Annual General Meeting will be held at Trinity House, Tower Hill, LondonEC3N 4DH on Tuesday, 22nd November 2016 immediately following the conclusion of theGeneral Meeting and the Class Meetings. In addition to the formal part of the meeting, therewill be presentations from the Investment Managers of each share class and a question andanswer session.

Shareholders who are unable to attend the Annual General Meeting in person areencouraged to raise any concerns or comments by writing to me at the Company’sregistered address, or via the Company’s website by following the ‘Ask the Chairman’ link atwww.jpmelect.co.uk.

OutlookThe journey to leave the European Union involves uncertainty as the negotiations on theterms and timing of Brexit take place. These have the potential to have a profound impacton markets. Continued volatility seems likely, offering both risks and opportunity.

In the face of this volatility, shareholders are reminded that they have the option to switchbetween the share classes, each of which has a different investment objective and risk profile.

Angus MacphersonChairman 24th October 2016

Elect pp01-11 24/10/2016 16:47 Page 3


Managed Growth Share Class

FINANCIAL RESULTS

+19.1%Benchmark total return3

(2015: +0.0%)

Financial Data

31st August 31st August2016 2015

Shareholders’ funds (£’000) 224,749 214,391Net asset value per share 664.2p 605.2pShare price 648.8p 590.5pShare price discount to net asset value per share 2.3% 2.4%Dividend per share 8.70p 6.75pOngoing Charges 0.58% 0.54%

1 Source: Morningstar.2 Source: J.P. Morgan.3 Source: J.P. Morgan/Bloomberg. The benchmark is a composite comprising 50% FTSE All-Share Index and 50% FTSE World Index (ex-UK).

A glossary of terms and definitions is provided on page 82.

+11.5%Total return to shareholders1

(2015: +7.8%)

+11.0%Total return on net assets2

(2015: +8.0%)

MANAGED GROW

TH Managed Growth Long Term Performance

0

20

40

60

80

100

120

10 Year Performance5 Year Performance3 Year Performance2 Year Performance1 Year Performance6 Month Performance

JPMorgan Elect Managed Growth – return to shareholders1

JPMorgan Elect Managed Growth – return on net assets2

Benchmark3

12.8 12.5 16.911.5 11.0

19.1 20.2 19.9 19.1

33.0 32.9 33.0

82.2 82.274.4

114.8 114.6104.0

%

TOTAL RETURNS (INCLUDES DIVIDENDS REINVESTED)

Elect pp01-11 24/10/2016 16:47 Page 4

5

INVESTMENT MANAGER’S REPORT

Katy Thorneycroft

Market ReviewGlobal equity markets delivered positive returns (in local currency terms) over the periodunder review as economic data showed global growth to be on track. The path was a volatileone as the late summer drawdown in 2015 was followed by a rebound, only for equitymarkets to suffer in the face of another global growth scare at the beginning of the year.Economic data improved somewhat during late February and early March, but the damageto sentiment caused by market gyrations early in the year lingers still. The volatility at thestart of the year can be traced back to several coincident shocks. Weaker Chinese data, aslump in oil prices, renewed concerns over European bank solvency and the first Fed ratehike in a decade were manageable individually, but collectively they amounted to a sizableshock; especially, coming as they did, when developed market data were lacklustre.

As the second quarter of 2016 progressed, the UK’s referendum on European Union (EU)membership increasingly took centre stage. When voters opted to leave the EU by a marginof 51.9% to 48.1%, it came as a shock, as market participants assigned a high probability toa ‘remain’ vote. Given the immediate downgrade in the UK’s perceived near-term growthprospects, as well as the rise in uncertainty facing the global economy as a whole, equitymarkets sold off significantly and bond yields fell in the immediate aftermath. Marketsstabilised within a few days and risk assets performed well in July and August as equitiesand corporate bonds rose strongly. Preliminary economic data has been better than manyanticipated but it is still early days in the process of leaving the EU.

European economic data underlined the eurozone’s recovery story as the region continuedto grow at a slow pace, suggesting the outlook for the region is improving. Ultimately,markets rallied in the run up to the December announcement of extended ECB stimulus.However, a poor fourth-quarter earnings season for many large European lenders,combined with the impact of negative interest rates on bank balance sheets, resulted inheavy selling of European financials in February. More recently, the European Central Bankdelivered another significant easing package to bolster its chances of raising inflation backto target and support the recovery.

In anticipation of the economic effects of the Brexit shock, the Bank of England reducedinterest rates in August and renewed its asset purchase programme. Elsewhere the effectsof Brexit appear to be limited with the Euro area Purchasing Managers Index remaining at alevel suggestive of satisfactory growth.

Performance Managed Growth 6 Month 1 Year 2 Year 3 Year 5 Year 10 Year

Total return to shareholders (%) 12.8 11.5 20.2 33.0 82.2 114.8Total return on net assets (%) 12.5 11.0 19.9 32.9 82.2 114.6Benchmark return* (%) 16.9 19.1 19.1 33.0 74.4 104.0FTSE All-Share Index (%) 13.1 11.7 9.1 20.4 57.7 75.3FTSE World ex UK (%) 21.3 27.6 31.3 49.2 97.7 146.3

*Benchmark changed in 2007 from 35% FTSE World ex UK/65% FTSE All-Share to the current 50/50 split.

MANAGED GROW

TH

Elect pp01-11 24/10/2016 16:47 Page 5

MANAGED GROW

TH


Managed Growth Share Class continued

This was a difficult period for performance. The Managed Growth portfolio delivered apositive 11.0% return over the period, but lagged its benchmark, which was up 19.1%.For reference, the investment trust sector as measured by the FTSE Equity InvestmentInstruments Index (Net) rallied by 14.4%. While the underperformance was large for theperiod, it is not inconsistent with historical experience both on the upside and downside.

The underperformance relative to the benchmark can be traced down to three main drivers.Firstly, the performance of the underlying managers has been weak over the 12 monthperiod with a particularly difficult time around Brexit. Within the UK strategies (a large partof our portfolio), the domestically focussed stocks such as the homebuilders and bankssuffered the worst. Secondly, the portfolio had a headwind from widening discounts and theweighted average discount of the underlying holdings moved out by over 2% toapproximately 6% at the end of the period. This was an underperformance of the discountmovements that were seen in the broader investment trust universe.

A third factor impacting performance was that regional asset allocation decisions weremixed, with our overweight to US and Europe benefitting performance for most of the year,while our underweight emerging market positioning detracted. We felt that despite thesupport from a weaker US dollar and the recovering oil price, the economic data was not yetsupportive enough to move back into emerging markets in the early part of the year. Sincethen we have seen stabilisation in relative economic growth between emerging markets anddeveloped markets. In addition, currencies appear stable and China stress is moreconstrained and as a result we are now neutral emerging markets relative to thebenchmark.

During the review period, small and mid-cap equity returns outperformed relative to largecap equity returns in Europe and Japan but not in the UK and US. The impact on theportfolio was limited given the weight of small and mid-cap in the portfolio.

All of the top ten holdings posted positive absolute returns on a NAV basis, and whenaggregated, these make up 71.3% of the total portfolio. However, the relative performanceof our holdings compared to benchmarks was weak and this detracted from returns. On arelative basis, of our top 10 holdings, only Finsbury Growth & Income Trust and JPMEuropean Smaller Companies outperformed their respective benchmarks, each generatingexcess returns of over 6% on a NAV basis. The trusts that underperformed their ownbenchmarks were challenged by the reversal we witnessed from growth and momentumfactors in the market, although in some cases gearing played a part given the market sell offat the beginning of 2016.

Portfolio reviewAt the end of August 2016, 41.8% of the portfolio was invested in JPM managed investmenttrusts, 28.8% in JPMorgan managed open-ended funds, 24.2% in investment trusts managedby third party managers with the balance held in futures and cash.

One of the main themes behind transactions during the period was reducing exposure tosmall and mid cap focused UK strategies in the portfolio while increasing exposure tostrategies with a greater bias towards large cap. More recently, we have reduced ourunderweight emerging market exposure.

INVESTMENT MANAGER’S REPORT CONTINUED

Elect pp01-11 24/10/2016 16:47 Page 6

7

MANAGED GROW

TH

We have introduced some new names into the portfolio within the UK allocation: City ofLondon, Murray Income, Edinburgh Investment Trust and BlackRock Smaller Companies.Artemis Alpha was sold completely. In addition, while Biotech Growth has struggled thisyear, the secular drivers of the healthcare sector remain in place. We have thereforeintroduced Worldwide Healthcare as a new holding in this sector. We use equity indexfutures to better reflect our asset allocation views. As an example we may use futures if theliquidity of our underlying holdings is challenging, or we do not want to sell a strategy thatwe believe has attractive alpha opportunities. While ordinarily this results in quite smallexposures, our FTSE futures exposure was a little larger than normal over this period inorder to introduce more specific large cap exposure into the UK allocation.

Outlook Our September Strategy Summit has just taken place. We tested our thesis on global growthand the risks around it, and revisited our asset class views in turn. Our conclusions were thatwith a continued dovish stance from the Federal Reserve, we can see the US expansioncontinuing for some time, but that growth will only rise up to potential, rather than beyond.From a global perspective, we see that some of the downside risks have moderated as Chinain particular has stabilised. From an asset class perspective we still have a view that equityreturns will be positive but modest. We have upgraded our intermediate term view onemerging equity to a more neutral outlook, supported in particular by our expectation thatthe US dollar will remain stable even if US interest rates rise. Discounts have tightened forthe broader investment trust sector since the EU referendum but still remain moresupportive as a valuation metric than they did 12 months ago.

Katy ThorneycroftInvestment Manager 24th October 2016

Elect pp01-11 24/10/2016 16:47 Page 7



MANAGED GROW

TH

FINANCIAL RECORD

As at 31st August 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net asset value per share (p) 362.0 404.2 356.0 332.0 356.3 389.4 403.8 518.4 567.4 605.2 664.2

Share price (p) 353.5 389.5 346.5 321.0 349.0 382.0 388.5 507.5 554.0 590.5 648.8

Discount (%) 2.3 3.6 2.7 3.3 2.0 1.9 3.8 2.1 2.4 2.4 2.3

Year ended 31st August

Revenue return per share (p) 5.23 5.06 5.65 7.25 5.02 5.31 6.25 6.77 7.22 6.98 8.94

Dividend per share (p) 5.20 5.25 5.65 7.15 5.05 5.00 5.95 7.00 7.50 6.75 8.70

Gearing/(Net Cash)1 (%) (5.0) (2.6) (5.1) (2.6) (1.1) (1.9) (1.0) (2.8) (5.7) (6.8) (5.7)

Ongoing Charges (%) 0.41 0.44 0.43 0.63 0.49 0.51 0.51 0.58 0.52 0.54 0.58


Total return to shareholders (%)2 +22.1 +11.6 –9.5 –5.0 +10.6 +11.1 +3.3 +32.6 +10.7 +7.8 +11.5

Total return on net assets (%)3 +22.6 +14.0 –10.6 –4.6 +9.4 +10.9 +5.2 +30.3 +10.8 +8.0 +11.0

Benchmark total return (%)4 +14.4 +12.0 –5.2 –6.7 +9.7 +7.7 +9.8 +19.4 +11.7 0.0 +19.1

1 The methodology to calculate gearing has been amended during the year to be in line with current AIC methodology, therefore the comparative figure for 2015 has beenrecalculated for comparative purposes. Please refer to the glossary of terms and definitions on page 82 for the revised calculation.

2 Source: Morningstar.3 Source: J.P. Morgan.4 Source: J.P. Morgan/Bloomberg. The Benchmark is a composite comprising 50% FTSE All-Share Index and 50% FTSE World Index (ex-UK). Prior to 31st August 2007 the benchmark

was a composite comprising 65% FTSE All Share Index and 35% FTSE World Index (ex UK).


Elect pp01-11 24/10/2016 16:47 Page 8

9

MANAGED GROW

TH

TEN LARGEST INVESTMENTS

31st August 2016 31st August 2015Company £’000 %1 £’000 %1

JPMorgan UK Dynamic (‘C’ shares)2 23,956 11.3 24,592 12.3JPMorgan US Equity All Capital (‘C’ shares)2 22,528 10.6 24,198 12.1JPMorgan American 20,292 9.6 15,036 7.5JPMorgan Claverhouse 20,212 9.5 21,187 10.6JPMorgan US Select Equity (‘C’ shares)2 17,880 8.4 14,043 7.0Finsbury Growth & Income3 15,075 7.1 5,266 2.6 JPMorgan European (Growth shares) 10,014 4.7 10,198 5.1JPMorgan Japanese 8,534 4.0 7,848 3.9Schroder UK Growth3 7,194 3.4 5,839 2.9 JPMorgan European Smaller Companies3 5,726 2.7 4,764 2.4

Total4 151,411 71.3

1 Based on total portfolio of £212.0m (2015: £199.8m).2 Represents holdings in an Open Ended Investment Company (‘OEIC’) or a Société d’investissements à Capital Variable (‘SICAV’).3 Not included in the ten largest investments at 31st August 2015.4 At 31st August 2015, the value of the ten largest investments amounted to £140.3m, representing 70.2% of the total portfolio.

Futures positions are excluded for the purpose of this table.

GEOGRAPHICAL ANALYSIS (ON A LOOK THROUGH BASIS)

31st August 2016 31st August 2015 Portfolio1 Benchmark Portfolio1 BenchmarkRegion % % % %

UK 46.1 49.4 45.7 50.0North America 33.3 30.9 32.4 30.6Continental Europe 10.8 8.3 12.0 9.1Asia (excluding Japan) 4.2 4.1 2.7 2.9Japan 3.5 4.7 6.1 5.0Emerging Markets and others 2.1 2.6 1.1 2.4

Total 100.0 100.0 100.0 100.0

1 Based on total investments of £213.4m (2015: £198.8m), including open exposure to futures contracts. Refer to notes 11 and 12 on page 66 for further disclosure.

Elect pp01-11 24/10/2016 16:47 Page 9



MANAGED GROW

TH

MANAGED GROW

TH

LIST OF INVESTMENTS AT 31ST AUGUST 2016

ValuationCompany £’000

JPMorgan Managed Investment TrustsJPMorgan American 20,292JPMorgan Claverhouse 20,212JPMorgan European (Growth shares) 10,014JPMorgan Japanese 8,534JPMorgan European Smaller Companies 5,726The Mercantile 5,207JPMorgan Asian 4,668JPMorgan Smaller Companies1 4,504JPMorgan US Smaller Companies 4,296JPMorgan Emerging Markets 3,547JPMorgan Japan Smaller Companies 1,896JPMorgan Income & Capital (Ordinary shares) 1,782JPMorgan Indian 1,611JPMorgan Chinese 534JPMorgan Income & Growth (Units) 430JPMorgan Income & Growth (Capital shares) 181

93,434

JPMorgan Managed Open Ended Investment CompaniesJPMorgan UK Dynamic (‘C’ shares)2 23,956JPMorgan US Equity All Capital (‘C’ shares)2 22,528JPMorgan US Select Equity (‘C’ shares)2 17,880

64,364


Externally Managed Investment TrustsFinsbury Growth & Income 15,075Schroder UK Growth 7,194Allianz Technology 5,143Fidelity European Values 5,011Edinburgh Investment 3,800Fidelity Special Values 3,575Impax Environmental Markets 3,467Perpetual Income & Growth 2,531Jupiter European Opportunities 1,810BlackRock Frontier 1,347Biotech Growth 1,311City of London 1,154Murray Income 1,151Worldwide Healthcare 1,074BlackRock Smaller Companies 550Artemis Alpha (Subscription shares) 2

54,195

Total Portfolio 211,993

Derivative InstrumentsFutures3

FTSE 100 Index Futures Sep 2016 1,527S&P500 E-Mini Index Futures Sep 2016 358Topix Index Futures Sep 2016 (7)Russell 2000 Mini Index Futures Sep 2016 (181)Euro Stoxx 50 Index Futures Sep 2016 (248)Total Derivative Instruments 1,449

Total Portfolio and Derivatives 213,4421 Both ordinary and subscription shares held.2 Unlisted and represents a holding in an Open Ended Investment Company (‘OEIC’) or

a Société d’Investissements à Capital Variable (‘SICAV’).3 Refer to notes 11 and 12 on page 66 for further disclosure.

Elect pp01-11 24/10/2016 16:47 Page 10

11

MANAGED GROW

TH

STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)FOR THE YEAR ENDED 31ST AUGUST 2016

2016 2015Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss — 19,768 19,768 — 14,439 14,439

Net foreign currency gains — 58 58 — 30 30Income from investments 3,740 — 3,740 3,258 — 3,258Interest receivable and similar income 28 — 28 32 — 32

Gross return 3,768 19,826 23,594 3,290 14,469 17,759Management fee (186) (559) (745) (148) (444) (592)Other administrative expenses (486) — (486) (595) — (595)

Net return on ordinary activities before taxation 3,096 19,267 22,363 2,547 14,025 16,572

Taxation credit 1 — 1 1 — 1

Net return on ordinary activities after taxation 3,097 19,267 22,364 2,548 14,025 16,573

Return per Managed Growth share 8.94p 55.59p 64.53p 6.98p 38.40p 45.38p

STATEMENT OF FINANCIAL POSITION (UNAUDITED) AT 31ST AUGUST 2016

2016 2015 £’000 £’000

Fixed assets Investments held at fair value through profit or loss 211,993 199,782

Current assets Derivative financial assets 1,885 214Debtors 543 428Cash and cash equivalents 10,861 16,417

13,289 17,059Current liabilitiesCreditors: amounts falling due within one year (97) (1,263)Derivative financial liabilities (436) (1,187)

Net current assets 12,756 14,609

Net assets 224,749 214,391

Net asset value per Managed Growth share 664.2p 605.2p

MANAGED GROW

TH

Elect pp01-11 24/10/2016 16:47 Page 11


MA

NA

GE

D IN

CO

ME

Managed Income Share Class

FINANCIAL RESULTS

+11.3%Benchmark total return3

(2015: –1.8%)

Financial Data


Shareholders’ funds (£’000) 54,456 53,766Net asset value per share 105.7p 103.6pShare price 101.5p 99.3pShare price discount to net asset value per share 4.0% 4.2%Net yield per share4 3.8% 3.8%Ongoing Charges 0.73% 0.76%

1 Source: Morningstar.2 Source: J.P. Morgan.3 Source: J.P. Morgan/Bloomberg. The benchmark is a composite comprising 85% FTSE All-Share Index and 15% Bloomberg Barclays Capital Global Corporate Bond Index (hedged)

in sterling terms. 4 The net yield calculation is based on total dividends per share, expressed as a percentage of the closing share price.



(2015: +2.3%)


(2015: +2.8%)

Managed Income Long Term Performance

JPMorgan Elect Managed Income – return to shareholders1

JPMorgan Elect Managed Income – return on net assets2

Benchmark3

5.9 7.112.3 8.7 8.9 9.3

24.6 24.020.4

65.0 66.3

54.150.5 50.5

65.2

%

0

10

20

30

40

50

60

70

10 Year Performance5 Year Performance3 Year Performance2 Year Performance1 Year Performance6 Month Performance

6.4 5.911.3

+2.6%3.90p Dividend(2015: +4.1%)


Elect pp12-21 24/10/2016 16:47 Page 12

13

MA

NA

GE

D IN

CO

ME


Market reviewUK stocks rose strongly over the 12 months to 31st August 2016, with the FTSE All ShareIndex up 11.7% (source: FactSet, as at 31st August 2016, total return gross in sterling terms).Sterling corporate bonds rose in the period, with the Bloomberg Barclays Capital GlobalCorporate Bond Index (sterling hedged) up 9.0%, as demand for yield remained robust giventhe ongoing low interest rate environment.

The UK stock market performed strongly at the start of the review period, supported by arecovering domestic economy and continued low interest rate environment. However, theend of 2015 and the beginning of 2016 were characterised by bouts of volatility, as investorsbegan to worry that China’s economic slowdown may be having a greater impact on theglobal economy than had previously been expected. On the UK stock market, Chinesegrowth worries were most keenly felt in the mining and oil & gas sectors as commodityprices fell sharply, reflecting a drop in Chinese demand. Metal prices recorded big falls,although it was the precipitous drop in the oil price that grabbed the headlines, with Brentcrude continuing its downward journey from above $100 per barrel in September 2014, toend February 2016 at just $36 – its lowest level since mid 2004. Although a drop in Chinesedemand was a factor, the sharp drop in oil prices was driven more by oversupply, with oilsupplies boosted in recent years by US shale production, the lifting of internationalsanctions on Iranian oil exports, and the inability of the Organisation of the PetroleumExporting Countries to agree production cuts.

The dominant event over the second half of the review period was the lead up to the UKreferendum on European Union membership, culminating in the ‘Brexit’ vote at the endof June. UK stocks fell heavily in the immediate aftermath of the referendum result,compounding the losses suffered ahead of the ballot, while sterling sank against theUS dollar and the euro following the vote. Sentiment indicators suggested that Brexit hadcaused an economic shock, with both business and consumer confidence plunging in July,although purchasing managers’ indices (PMIs) bounced back sharply in August.

The PMIs for both services and manufacturing jumped to 52.9 and 53.3 respectively inAugust, well above market expectations and firmly in expansionary territory, while industrialproduction grew by a stronger-than-expected 2.1% year on year (y/y) in July. Retail salesgrew at the fastest pace in 10 months in July, on an annual basis, while the unemploymentrate was unchanged in the three months to June and the number of people claimingunemployment benefits fell in July.

Meanwhile, the UK economy grew by a better-than-forecast 0.6% in the second quarter,marking the strongest y/y pace in 12 months. Therefore, despite many political and marketcommentators forecasting doom and gloom ahead if the UK voted to leave the EU, the datasuggested that the economy may be holding up better than expected in the wake of theBrexit vote.

UK stocks rallied sharply following the release of better-than-expected economic data, andwere further supported by action from the Bank of England (BoE). The BoE held off onchanging monetary policy in July, presumably waiting for definitive signs of slowdown beforeacting. However, at its August meeting the BoE announced a package of measures designedto prevent a post-Brexit recession. It cut interest rates for the first time since 2009 andrestarted its Gilt-buying programme, while also introducing measures designed to support

John Baker

Sarah Emly

Elect pp12-21 24/10/2016 16:47 Page 13


MA

NA

GE

D IN

CO

ME

Managed Income Share Class continued


lending to UK companies. The action represented a significant step towards supportinggrowth and employment in the UK in the aftermath of the Brexit vote.

Dividend ReviewThe total revenue generated by Managed Income in this financial year was similar to that ofthe previous year, with the portfolio’s revenue return per share increasing by 1.9%. As aresult of this, Managed Income has been able to increase its own dividend per share, whilstalso strengthening its revenue reserves.

For the third year running, dividend growth from domestically focused UK companies wasstronger than that of the more internationally oriented companies, with UK housebuilderscontinuing to be strong dividend payers. Once again, special dividends were a key feature ofthe year, with a number of our companies announcing special dividends, as well as growth intheir normal dividends. We have seen special dividends from companies including thebroadcaster, ITV, which delivered strong growth in its ordinary dividend as well as anincreased special dividend due to its cash generation. The retailer Card Factory announceda special dividend, as did 888 Holdings, Booker and Headlam, whilst some of our long heldinsurance companies also paid special dividends, including Direct Line Insurance, Beazleyand Novae.

However, this masks the impact of less healthy dividend trends by a number of large UKcompanies over the past 12 months, particularly some of those within the mining sector.As highlighted in the Interim Report, Glencore and Anglo American, two significantcommodity companies, both cancelled their dividends, whilst BHP Billiton reduced itsdividend payout to its shareholders, as these companies’ profitability and cashflows werenegatively impacted by the precipitous fall in base metal and oil prices. Although UKdividend growth surprised positively in the most recent quarter (source: Capita AssetServices), this was driven by a flurry of large special dividends. Underlying dividendpayments fell by 2.7%, and this was despite an exchange rate gain on the weakening poundsterling. The outlook for UK dividend payments remains uncertain, due to the unknownimpact of the Brexit negotiations and the impact this could have on both profits and cashflow of domestic companies. The weakening of sterling may provide some offset to this, formore internationally oriented groups, and some companies will continue to generatesufficient cash to deliver dividend growth and/or special dividends.

Portfolio ReviewThe defining event of the portfolio’s financial year was the result of the referendum on theUK’s future membership of the European Union. Ahead of the vote we reduced theportfolio’s exposure to UK equities given the uncertainty of the outcome. This increased cashholdings to approximately 8.5% of the portfolio’s assets. That, along with an approximately5% holding in the JPM Global High Yield Bond Fund, meant our exposure to equities wasclose to neutral versus the portfolio’s composite benchmark. Subsequently, we havereinvested some of this cash giving a period end equity exposure of approximately 90%,a bond exposure of 5% and residual cash of 5%. Therefore at the close of the portfolio’sfinancial year we are overweight equities relative to the composite benchmark. We believeUK equities are attractively valued and offer a large yield premium to bonds.

Elect pp12-21 24/10/2016 16:47 Page 14

15

MA

NA

GE

D IN

CO

ME

We assess individual investment opportunities on whether earnings estimates are beingrevised up, whether the valuation is attractive and whether the balance sheet and forecastcash flows allow for dividend growth. As such, portfolio construction is determined bybottom up stock selection. We constantly analyse each of our holdings to ensure they satisfythese criteria whilst also assessing new investment opportunities against these criteria.

Our view going into the referendum was that we were confident in the long term outlook forour holdings whilst acknowledging that a vote to leave could result in significant volatilitygiven a high proportion of domestically focused companies in the portfolio. Whilst many ofthe companies we hold are cyclical we have always sought to match profit and loss accountsensitivity with balance sheet strength. Therefore, we remain confident that our holdings arefree of existential risk and that cash flow streams are visible and predictable. The imperativecourse of action is to constantly assess individual holdings as events unfold but avoid taking‘panicked’ steps. Behaviourally this is difficult but the strength of our investment approach isthat stock fundamentals drive our investment process and so long as these remain robustwe will maintain our position. Panicked reaction more often than not leads to trading atprices not consistent with inherent value.

We are encouraged that subsequent to the vote our companies have by and large deliveredreassuring results and more importantly have said that they have experienced no impactfrom ‘Brexit’ to date. This is true for domestically exposed companies as much as forcompanies whose earnings are predominantly overseas.

During the period we bought new positions in 888 Holdings, Serco and Morgan AdvancedMaterials amongst others. 888 Holdings is an on-line gaming company with a consistenttrack record of beating earnings estimates and returning excess cash to shareholders viaspecial dividends. Serco is an outsourcing company whose activities include running prisons,schools and hospitals. Following a long period of contract difficulties the company’sprofitability has begun to recover and the outlook is improving as evidenced by earningsupgrades. Morgan Advanced Materials has a 160 year trading history focused on materialsscience and engineering. Interim results beat expectations leading to earnings upgrades andthe stock has an attractive yield of 3.9%.

Conversely, our sales included BT Group, Ashtead and Easyjet. BT Group is facing anincreasingly competitive environment with the launch of mobile services by Sky andregulatory pressure on prices. Ashtead is an equipment rental company whose business ismainly conducted in the US. This market was showing evidence of oversupply leading tolower rental rates and consequently earnings for the full year were revised down. Easyjetwas sold when it warned that profits for the full year would be lower than expected forreasons that included ‘Brexit’.

Performance ReviewIn the 12 month period to the end of August the portfolio’s return was +5.9% in comparisonwith the composite benchmark return of +11.3%. Having performed broadly in line with thebenchmark over the first half of the year, the portfolio’s performance was disappointing inthe second half as it suffered from its bias to domestically focused cyclical stocks thatperformed poorly in the aftermath of the ‘Brexit’ referendum result. This underperformance

Elect pp12-21 24/10/2016 16:47 Page 15


MA

NA

GE

D IN

CO

ME


of some of our domestically focused premium dividend yielders included our holdings insectors such as the housebuilders, general retailers and media companies. This marketreaction to ‘Brexit’ resulted from a fear that these sectors will experience a greater impactfrom any post ‘Brexit’ slowdown than other sectors whose business is mainly conductedoverseas. For example, Taylor Wimpey, the housebuilder which is a long term holding in theportfolio, fell 40% in the two days subsequent to the referendum result. The stock thenbegan a grinding recovery, paring losses to 16% by period end as the company said thattrading remained strong and that they are confident they will be in a position to pay theirpromised special dividend.

For the 12 months as a whole the portfolio’s overweight position in the household goods andconstruction sector was the most detrimental to performance, in contrast to this sector’sstrong outperformance during the previous financial year. Our holdings in Galliford Try,Berkeley Group and Taylor Wimpey all detracted from performance, although their attractivedividend yields remained sound. Other domestic cyclical stocks, such as Next the clothingretailer and ITV, for whom advertising is a key source of revenue, also underperformed therising equity market, particularly in the aftermath of the referendum result. By contrast,some of our more internationally exposed holdings such as the premium dividend yielder,Imperial Brands, and British American Tobacco both performed strongly. Our long termoverweight position in the specialist insurer, Beazley, outperformed the wider market, whilstalso delivering a further special dividend to its shareholders.

Market OutlookThe UK stock market is currently riding high on the back of low interest rates and a cheapcurrency. Underlying risks are, however, increasing. Developed markets’ growth ratescontinue to disappoint and monetary policy is largely exhausted. The UK’s decision to leavethe EU only heightens the risks of an economic slowdown. Unpicking 40 years of EU tradeagreements will be a long, tortuous and costly process and the success or otherwise of suchnegotiations will not become apparent for some years yet.

The Governor of the Bank of England is sufficiently worried that he has recently cut baserates to just 25bps and the new Chancellor, Philip Hammond, has wasted no time inabandoning his predecessor’s target to run a fiscal surplus by 2020. The ‘fiscal reset’ inthe Autumn Statement could be significant, particularly as there is a worrying amount ofanecdotal evidence that many businesses are already holding back on investment.

However, even though the economic outlook is likely to remain uncertain for someconsiderable time yet, the UK stock market may continue to perform well if, as is likely,sterling remains weak and interest rates remain low. We continue to prefer equities withgood and growing dividends to low yielding bonds although overall investment returns arelikely to remain volatile until the investment skies start to clear.

John BakerSarah EmlyInvestment Managers 24th October 2016


Elect pp12-21 24/10/2016 16:47 Page 16

17

MA

NA

GE

D IN

CO

ME

FINANCIAL RECORD

As at 31st August 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Share price (p) 106.5 109.0 84.5 69.5 70.0 75.0 78.5 91.3 100.8 99.3 101.5

Discount (%) 2.0 4.2 2.2 0.1 4.0 2.5 3.6 3.8 3.4 4.2 4.0



Dividends per share (p) 3.75 4.12 4.30 4.30 3.30 3.35 3.40 3.55 3.65 3.80 3.90

Special dividends per share (p) — 1.00 1.15 — — — — — — — —

Net yield per share2 (%) 3.5 4.71 6.41 6.2 4.7 4.5 4.3 3.9 3.6 3.8 3.8

Gearing/(Net Cash)3 (%) (1.2) (2.6) (1.1) (1.8) (1.1) (5.9) (2.7) (1.1) (0.9) (2.5) (5.5)

Ongoing Charges (%) 0.79 0.79 0.74 0.92 0.66 0.69 0.71 0.73 0.72 0.76 0.73


Total return to shareholders (%)4 +16.3 +6.9 –17.6 –13.8 +7.6 +12.0 +9.5 +21.0 +14.5 +2.3 +6.4

Total return on net assets (%)5 +15.8 +8.7 –19.7 –14.1 +10.4 +10.5 +10.6 +21.2 +13.9 +2.8 +5.9

Benchmark total return (%)6 +12.1 +8.1 –10.5 –6.3 +10.9 +6.6 +10.2 +16.1 +10.1 –1.8 +11.3

1 Includes special dividends.2 The net yield calculation is based on total dividends per share, expressed as a percentage of the closing share price.3 The methodology to calculate gearing has been amended during the year to be in line with current AIC methodology. Therefore the comparative figure for 2015 has been

recalculated for comparative purposes. Please refer to the glossary of terms and definitions on page 82 for the revised calculation.4 Source: Morningstar.5 Source: J.P. Morgan6 Source: Bloomberg. The benchmark is a composite comprising 85% FTSE All-Share Index and 15% Bloomberg Barclays Capital Global Corporate Bond Index (hedged) in sterling

terms. Prior to 28th February 2009, the benchmark was a composite comprising 85% FTSE 350 High Yield Index and 15% Merrill Lynch 5-10 year Sterling Corporate Bond Index.


Elect pp12-21 24/10/2016 16:47 Page 17


MA

NA

GE

D IN

CO

ME


MA

NA

GE

D G

RO

WT

H

TEN LARGEST INVESTMENTS

31st August 2016 31st August 2015 £’000 %1 £’000 %1

Royal Dutch Shell 3,896 7.6 2,640 5.0British American Tobacco 3,029 5.9 2,001 3.8GlaxoSmithKline3 2,766 5.4 1,222 2.3JPMorgan Global High Yield Bond (‘A’ Income shares)2 2,625 5.1 2,618 5.0JPMorgan Income & Growth (Income shares) 2,606 5.1 2,475 4.7HSBC 2,339 4.5 2,495 4.8Imperial Brands 2,274 4.4 1,700 3.2BP 2,127 4.1 1,792 3.4National Grid3 1,624 3.2 973 1.9AstraZeneca 1,623 3.1 1,620 3.1

Total4 24,909 48.4

1 Based on total investments of £51.5m (2015: £52.4m).2 Represents holdings in an Open Ended Investment Company (‘OEIC’) or a Société d’investissements à Capital Variable (‘SICAV’).3 Not included in the ten largest investments at 31st August 2015.4 At 31st August 2015, the value of the ten largest investments amounted to £20.4m, representing 39.0% of total investments.

TEN LARGEST INCOME PAYERS1

FOR THE YEAR ENDED 31ST AUGUST 2016

£’000

Royal Dutch Shell 223HSBC 172JPMorgan Global High Yield Bond Fund (‘A’ Income Shares) 166BP 140Intermediate Capital Group 136JPMorgan Income & Growth (Income shares) 126GlaxoSmithKline 116British American Tobacco 100Direct Line Insurance 99Beazley 96

Total (50.4%)2 1,374

1 In terms of amounts of income received by the Managed Income portfolio.2 Represents the total ten largest dividend payments expressed as a percentage of income from investments

Elect pp12-21 24/10/2016 16:47 Page 18

19

MA

NA

GE

D IN

CO

ME

MA

NA

GE

D G

RO

WT

H

SECTOR ANALYSIS

31st August 2016 31st August 2015 Portfolio Benchmark Portfolio Benchmark %1 % % %

Consumer Goods 19.6 14.6 13.1 12.9 Financials 17.9 18.2 26.0 20.3 Consumer Services 12.7 9.8 13.1 10.7 Oil & Gas 11.7 9.4 8.4 9.4 Health Care 8.5 8.3 5.4 7.3 Industrials 7.1 9.1 6.5 8.8 Basic Materials 4.3 4.6 5.6 4.7 Utilities 4.1 3.3 3.2 3.1 Telecommunications 1.4 3.9 7.1 4.4 Technology 0.8 1.7 - 1.3

Total UK Equities 88.1 82.9 88.4 82.9

Investment Trusts 6.8 2.1 6.6 2.1 Bond Funds 5.1 15.0 5.0 15.0

Total 100.0 100.0 100.0 100.0

1 Based on total investments of £51.5m (2015: £52.4m).

Elect pp12-21 24/10/2016 16:47 Page 19


MA

NA

GE

D IN

CO

ME




UK EquitiesRoyal Dutch Shell 3,896British American Tobacco 3,029GlaxoSmithKline 2,766HSBC 2,339Imperial Brands 2,274BP 2,127National Grid 1,624AstraZeneca 1,623BAE Systems 1,323Beazley 1,307Rio Tinto 1,133Direct Line Insurance 1,109Diageo 1,084ITV 930Next 908Aviva 894Compass Group 881Berkeley Group 830Phoenix Group 829WPP 825Booker 810Taylor Wimpey 774Novae 753KCOM 717Mondi 711WH Smith 656Persimmon 635Fevertree Drinks 571888 Holdings 557Serco Group 493DCC 491Intermediate Capital Group 481Severn Trent 479


Galliford Try 473DS Smith 466Informa 458Micro Focus International 421Headlam Group 403Legal & General 401Lloyds Banking Group 387Croda International 374Costain 373Card Factory 368Schroders 359Jupiter Fund Management 343Connect Group 261Morgan Advanced Materials 246William Hill 143

45,335

JPMorgan Managed Investment TrustsJPMorgan Income & Growth (Income shares) 2,606JPMorgan European (Income shares) 862JPMorgan Income & Growth (Capital shares) 41

3,509

JPMorgan Managed Bond FundsJPMorgan Global High Yield Bond (‘A’ Income shares)1 2,625

2,625Total Portfolio 51,469

1 Unlisted and represents a holding in an Open Ended Investment Company (‘OEIC’).

Elect pp12-21 24/10/2016 16:47 Page 20

21

MA

NA

GE

D IN

CO

ME


2016 2015Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000

Gains/(losses) on investments held at fair value through profit or loss — 702 702 — (764) (764)

Net foreign currency (losses)/gains — (1) (1) — 1 1Income from investments 2,726 — 2,726 2,707 — 2,707Interest receivable and similar income 4 — 4 3 — 3

Gross return/(loss) 2,730 701 3,431 2,710 (763) 1,947Management fee (129) (129) (258) (135) (135) (270)Other administrative expenses (128) — (128) (142) — (142)

Net return/(loss) on ordinary activities before taxation 2,473 572 3,045 2,433 (898) 1,535

Taxation (6) — (6) (5) — (5)

Net return/(loss) on ordinary activities after taxation 2,467 572 3,039 2,428 (898) 1,530

Return/(loss) per Managed Income share 4.76p 1.10p 5.86p 4.67p (1.72)p 2.95p


2016 2015 £’000 £’000


Current assets Debtors 541 1,388Cash and cash equivalents 2,471 365

3,012 1,753Current liabilitiesCreditors: amounts falling due within one year (25) (422)

Net current assets 2,987 1,331

Net assets 54,456 53,766

Net asset value per Managed Income share 105.7p 103.6p

Elect pp12-21 24/10/2016 16:47 Page 21


MANAGED CASH

FINANCIAL RESULTS

Financial Data


Shareholders’ funds (£’000) 3,795 3,863Net asset value per share 101.7p 101.5pShare price 100.3p 100.0pShare price discount to net asset value per share 1.4% 1.5%Ongoing Charges 0.02% 0.02%

1 Source: Morningstar.2 Source: J.P. Morgan.



(2015: –0.2%)


(2015: +0.6%)

Unchanged0.35p Dividend

(2015: Unchanged)

Managed Cash Share Class


Elect pp22-26 24/10/2016 16:47 Page 22

23

MANAGED CASH


It was again a period of low returns for the Managed Cash portfolio. In August the Bank ofEngland (BoE) announced a package of measures which featured five key policy elements:it halved the Bank Rate from 0.5% to 0.25%, provided guidance that rates could fall furtherand restarted its Gilt-buying programme, to the tune of GBP 60 billion. The BoE alsointroduced two measures designed to support lending to UK companies: it added a newTerm Funding Scheme to reinforce the pass-through of the cut in the Bank Rate, andcommitted to purchasing up to GBP 10 billion of UK corporate bonds. This action by the BoErepresents a significant step towards supporting growth and employment in the UK in theaftermath of the referendum. UK second-quarter economic growth was unrevised at 0.6%and unemployment in the three months to June remained at 4.9% while CPI inflation edgedhigher to 0.6% in July.

The BoE’s monetary policy committee is likely to look through any rise in headline CPIpost-Brexit and is expected to keep rates on hold at the next meeting.

The Managed Cash portfolio invests in AAA-rated liquidity funds managed by Aberdeen,BlackRock, Deutsche, Fidelity, Insight and JPMorgan. The primary aim of the funds theManaged Cash portfolio invests in is to provide preservation of capital and liquidity with ayield in line with money market rates as a secondary aim. The return for the financial yearwas 0.6%.

Katy ThorneycroftInvestment Manager 24th October 2016

Katy Thorneycroft

Elect pp22-26 24/10/2016 16:47 Page 23


MANAGED CASH

Managed Cash Share Class continued

MANAGED GROW

TH

FINANCIAL RECORD

At 31st August 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Share price (p) 99.0 100.0 100.5 100.0 100.0 100.5 100.5 100.5 100.5 100.0 100.3

Discount (%) 2.1 1.4 1.0 0.3 0.7 0.7 0.7 0.4 0.7 1.5 1.4

Year to 31st August


Dividends per share (p) 3.73 3.93 4.07 1.70 0.00 0.35 0.50 0.15 0.35 0.35 0.35

Ongoing Charges(%) 0.15 0.12 0.16 0.21 0.20 0.19 0.24 0.22 0.02 0.02 0.02


Elect pp22-26 24/10/2016 16:47 Page 24

25

MANAGED CASH


31st August 2016 31st August 2015Yield Valuation Valuation

Company %1 Rating2 £’000 % £’000 %

Aberdeen Sterling Liquidity Fund 0.50 AAA 636 16.8 646 16.7BlackRock ICS Institutional Sterling Liquidity Fund 0.48 AAA 634 16.7 646 16.7Fidelity Institutional Sterling Liquidity Fund 0.48 AAA 632 16.7 643 16.7Deutsche Global Liquidity Fund 0.46 AAA 631 16.6 643 16.7Insight Sterling Liquidity Fund 0.45 AAA 631 16.6 642 16.5JPMorgan Sterling Liquidity Fund 0.41 AAA 631 16.6 646 16.7

Total Investments 3,795 100.0 3,866 100.0

1 Annual yield to 31st August 2016. Source: IMMFA Money Fund Report, iMoneyNet.2 Ratings given by Standard & Poor’s as at 31st August 2016.

Elect pp22-26 24/10/2016 16:47 Page 25


MANAGED CASH


2016 2015Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

Income from investments 18 — 18 18 — 18

Gross return 18 — 18 18 — 18Other administrative expenses (1) — (1) (1) — (1)

Net return on ordinary activities beforetaxation 17 — 17 17 — 17

Taxation (1) — (1) (2) — (2)

Net return on ordinary activities after taxation 16 — 16 15 — 15

Return per Managed Cash share 0.39p 0.00p 0.39p 0.37p 0.00p 0.37p


2016 2015 £’000 £’000


Current assets Debtors — 1Cash and cash equivalents 2 68

2 69Current liabilitiesCreditors: amounts falling due within one year (2) (72)

Net current liabilities — (3)

Net assets 3,795 3,863

Net asset value per Managed Cash share 101.7p 101.5p

Managed Cash Share Class continued

Elect pp22-26 24/10/2016 16:47 Page 26

27

THE COM

PANY

The aim of the Strategic Report is to provide shareholders with theability to assess how the Directors have performed their duty topromote the success of the Company during the year under review.To assist shareholders with this assessment, the Strategic Reportsets out the structure and objective of the Company, its investmentpolicies and risk management, investment limits and restrictions,performance and key performance indicators, share capital,principal risks and how the Company seeks to manage those risks,the Company’s environmental, social and ethical policy and finallyits future developments.

Business of the CompanyJPMorgan Elect plc is an investment trust company that has apremium listing on the London Stock Exchange. In seeking toachieve its objectives, the Company employs JPMF which, in turn,delegates portfolio management to JPMAM to manage theCompany’s assets actively. The Board has determined investmentpolicies and related guidelines and limits. These objectives,investment policies and related guidelines and limits are detailedbelow.

The Company is subject to UK and European legislation andregulations including UK company law, UK Financial ReportingStandards, the UK Listing, Prospectus, Disclosure and TransparencyRules, taxation law, the Company’s own Articles of Association andthe Alternative Investment Fund Managers Directive.

The Company is an investment company within the meaning ofSection 833 of the Companies Act 2006 and has been approved byHM Revenue & Customs as an investment trust (for the purposes ofSections 1158 and 1159 of the Corporation Tax Act 2010). As a resultthe Company is not liable for taxation on capital gains. TheDirectors have no reason to believe that approval will not continueto be retained. The Company is not a close company for taxationpurposes.

The Board holds an annual Strategy meeting at which theCompany’s objectives and policies are reviewed in detail. The Boardseeks to determine whether the strategies in place are conducive tomeeting the expectations of shareholders. As part of this exercise,the performance of each of the Company’s share classes ismonitored against the respective objectives, policies and targets.The process also includes the taking into account of shareholderviews. Alternative strategies are modelled, considered anddiscussed to determine whether their implementation may beappropriate.

Managed Growth Objective The objective of the Managed Growth portfolio is to achieve longterm capital growth from investing in a range of investment trustsand open-ended funds managed principally by J.P. Morgan AssetManagement.

Investment Policies and Risk Management In order to achieve its stated investment policy and to seek tomanage investment risks, the Managed Growth portfolio is investedin a diversified range of investment trusts and open-ended funds,which themselves invest in the UK and overseas. The number ofinvestments in the portfolio will normally range between 30 and 50.

Investment Restrictions and Guidelines • The Investment Manager must obtain Board approval for any new

investment in excess of 10% of the portfolio’s gross assets.

• The portfolio does not invest more than 10% of its gross assets inany company that itself may invest more than 15% of its grossassets in UK listed investment companies.

• An investment in any open-ended fund will not exceed 25% of themarket capital of the investee fund.

• Investments in third party managed funds will not normallyexceed 30% of the portfolio’s gross assets.

• Board permission has been granted for the limited use of futuresfor tactical asset allocation purposes. Other than this, theportfolio will not normally invest in derivative instruments – priorapproval is required from the Board if such an investment isdesired.

• The Board does not intend to utilise borrowings to increase thefunds available for investment. The Board monitors closely thelevel of indirect gearing through the underlying investments. Theunderlying portfolio should be invested 95-120%.

These limits and restrictions may be varied by the Board at any timeat its discretion.

Managed Income Objective The objective of the Managed Income portfolio is to achieve agrowing income return with potential for long term capital growthby investing in equities, investment companies and fixed incomesecurities.

BUSINESS REVIEW

Elect pp27-46 24/10/2016 16:48 Page 27

THE COM

PANY


Strategic Report continued

BUSINESS REVIEW CONTINUED

Investment Policies and Risk Management In order to achieve its stated investment policy and to seek tomanage investment risks, the Managed Income portfolio is investedin a diversified portfolio of UK equities (including investmentcompanies) and open-ended funds. Please see the InvestmentManagers’ report for more details on portfolio activity. Thenumber of investments in the portfolio will normally range between50 and 80.

Investment Restrictions and Guidelines• The portfolio does not invest more than 10% of its gross assets in

any company that itself may invest more than 15% of its grossassets in UK listed investment companies.

• The portfolio will be between 90-100% invested in equities(including investment companies) and fixed interest securities.

• The Investment Managers may write options within parametersset by the Board. Prior approval is required from the Board forinvestment in all other derivative instruments. Board permissionhas been granted for the limited use of futures for tactical assetallocation purposes.

• The Board does not intend to utilise borrowings to increase thefunds available for investment.


Managed Cash Objective The objective of the Managed Cash portfolio is to providepreservation of capital with a yield based on short term interestrates by investing in a range of sterling liquidity funds, selected fortheir yield and credit rating, and short dated AAA-rated UK or G7government securities hedged into sterling.

Investment Policies and Risk Management In order to achieve its stated investment policy and to seek tomanage investment risks, the Managed Cash portfolio invests nomore than 20% of the value of the portfolio in any one liquidityfund or short dated (i.e. with a maturity of less than two years) UKor G7 government security hedged into sterling. All liquidity fundsor government securities shall have a AAA credit rating (asmeasured by Standard & Poor’s) or equivalent rating from arecognised credit rating agency.

Investment Restrictions and Guidelines• No more than 20% of the value of the portfolio to be invested in

any one sterling liquidity fund.

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

• The Board does not intend to utilise borrowings to increase thefunds available for investment.


Monitoring of ComplianceCompliance with the Board’s investment restrictions and guidelinesfor all three portfolios is monitored continuously by the Managerand is reported to the Board on a monthly basis.

Performance Managed Growth: In the year ended 31st August 2016, the Managed Growth portfolioproduced a total return to shareholders of +11.5% and a total returnon net assets of +11.0%. This compares with the return on thecomposite benchmark of +19.1%. As at 31st August 2016, the valueof the Managed Growth investment portfolio was £212.0 million. TheInvestment Managers’ Report on pages 5 to 7 includes a review ofdevelopments during the year as well as information on investmentactivity within the portfolio.

Managed Income: In the year ended 31st August 2016, the Managed Income portfolioproduced a total return to shareholders of +6.4% and a total returnon net assets of +5.9%. This compares with the return on thecomposite benchmark of +11.3%. As at 31st August 2016, the valueof the Managed Income investment portfolio was £51.5 million. TheInvestment Managers’ Report on pages 13 to 16 includes a review ofdevelopments during the year as well as information on investmentactivity within the portfolio.

Managed Cash: In the year ended 31st August 2016, the Managed Cash portfolioproduced a total return to shareholders of +0.6% and a total returnon net assets of +0.5%. There is no benchmark for this share classother than to maintain the net asset value as close to 100p pershare as possible. As at 31st August 2016, the value of theinvestment portfolio was £3.8 million. The Investment Managers’Report on page 23 includes a review of developments during theyear.

Revenue and Dividends Full details of the dividends paid and declared on the ManagedGrowth, Managed Income and Managed Cash share classes duringthe year are given in note 8 on pages 63 and 64.

Key Performance Indicators (‘KPIs’) The Board uses a number of financial KPIs to monitor and assessthe performance of the Company. The principal KPIs areperformance against the benchmark index; performance against

Elect pp27-46 24/10/2016 16:48 Page 28

29

THE COM

PANY

the Company’s peers; share price discount/premium to net assetvalue per share; ongoing charges; and dividends.

• Performance against the benchmark index: This is the most important KPI by which performance is judged.Information on the Company’s performance is given in theChairman’s Statement and information on the performance of theportfolios is given in the Investment Managers’ Reports.

Performance against the benchmark index – ManagedGrowth

Ten Year PerformanceFIGURES HAVE BEEN REBASED TO 100 AT 31ST AUGUST 2006

Source: Morningstar/FTSE.

JPMorgan Elect Managed Growth – share price total return.

JPMorgan Elect Managed Growth – net asset value per share total return.

Benchmark.

Performance Relative to Benchmark IndexFIGURES HAVE BEEN REBASED TO 100 AT 31ST AUGUST 2006


JPMorgan Elect Managed Growth – share price total return.

JPMorgan Elect Managed Growth – net asset value per share total return.

The benchmark is represented by the horizontal black line.

Performance against the benchmark index – ManagedIncome

Ten Year PerformanceFIGURES HAVE BEEN REBASED TO 100 AT 31ST AUGUST 2006


JPMorgan Elect Managed Income – share price total return.

JPMorgan Elect Managed Income – net asset value per share total return.

Benchmark.

Performance Relative to Benchmark IndexFIGURES HAVE BEEN REBASED TO 100 AT 31ST AUGUST 2006


JPMorgan Elect Managed Income – share price total return.

JPMorgan Elect Managed Income – net asset value per share total return.

The benchmark is represented by the horizontal black line.

• Performance against the benchmark index – Managed CashThere is no benchmark for the Managed Cash share class, otherthan to maintain the net asset value as close to 100p per share aspossible.

• Performance against the Company’s peers – Managed Growthand Managed IncomeThe principal objective of the Managed Growth share class is toachieve capital growth. The principal objective of the ManagedIncome share class is to achieve growing income with thepotential for long term capital growth. However, the Board alsomonitors the performance of the Managed Growth and ManagedIncome share classes relative to a broad range of competitorfunds.

50

75

100

125

150

175

200

225

20162015201420132012201120102009200820072006

90

95

100

105

110

115

20162015201420132012201120102009200820072006

40

60

80

100

120

140

160

180

20162015201420132012201120102009200820072006

75

80

85

90

95

100

105

110

115

20162015201420132012201120102009200820072006

Elect pp27-46 24/10/2016 16:48 Page 29

THE COM

PANY




• Share price discount/premium to net asset value (‘NAV’) pershareThe Board has for several years operated share issue andrepurchase programmes which seek to address imbalances insupply and demand of the Company’s shares within the marketand thereby seek to reduce the volatility and absolute level ofthe discount/premium to NAV per share at which the Company’sshares trade.

Share price discount/premium to NAV per share –Managed Growth

Source: Morningstar.

JPMorgan Managed Growth – premium/(discount)

In the year to 31st August 2016, the Managed Growth shares tradedbetween a discount of 1.0% and 4.3% (on a month end to monthend basis).

Share price discount/premium to NAV per share –Managed Income


JPMorgan Managed Income – premium/(discount)

In the year to 31st August 2016, the Managed Income shares tradedbetween a discount of 1.0% and 4.9% (on a month end to monthend basis).

Share price discount/premium to NAV per share –Managed Cash


JPMorgan Managed Cash – premium/(discount)

In the year to 31st August 2016, the Managed Cash shares tradedbetween a discount of 1.1% and 1.4% (on a month end to month endbasis).

• Ongoing charges – Managed Growth, Managed Income andManaged CashThe ongoing charges represent the Company’s management feeand all other operating expenses, excluding any finance costs,expressed as a percentage of the average daily net assets duringthe year. The Managed Growth ongoing charges for the yearended 31st August 2016 were 0.58% (2015: 0.54%), the ManagedIncome ongoing charges were 0.73% (2015: 0.76%) and theManaged Cash ongoing charges were 0.02% (2015: 0.02%). Eachyear, the Board reviews an analysis which shows a comparison ofthe Managed Growth and Managed Income ongoing charges andits main expenses with those of its peers.

• Income Return – Managed IncomeThe Board regards growing the income return as the first priorityfor the Managed Income share class. The Board monitors forecastlevels at each Board meeting and receives analyses from theManager accordingly.

Share CapitalThe Company has the authority to issue new shares, reissue sharesfrom Treasury and repurchase shares for cancellation or to be heldin Treasury.

Resolutions to renew the authorities to issue new shares, reissueshares from Treasury and repurchase Managed Growth, Managed

–5

–4

–3

–2

–1

0

1

20162015201420132012201120102009200820072006

–5

–4

–3

–2

–1

0

1

2

3

20162015201420132012201120102009200820072006

–3.0

–2.5

–2.0

–1.5

–1.0

–0.5

0.0

0.5

1.0

20162015201420132012201120102009200820072006

Elect pp27-46 24/10/2016 16:48 Page 30

31

THE COM

PANY

Income and Managed Cash shares for cancellation or to be held inTreasury will be put to shareholders at the forthcoming AnnualGeneral Meeting. It should be noted that the Board would onlyreissue shares from Treasury at a premium to NAV. It is not seekingauthority to reissue shares from Treasury at a discount to NAV.

The full text of these resolutions are set out in the Notice of AnnualGeneral Meeting on pages 78 to 81.

There are 50,000 Founder shares of £1 each in issue, partly paid asto 25p each. The Founder shares are non-voting and carry the rightto receive a fixed dividend at the rate of 0.01% on their nominalvalue. However, the holders of the Founder shares have waived theright to receive such dividends.

Of all shares outstanding at year end, 38.0% were Managed Growthshares, 57.8% were Managed Income shares and 4.2% wereManaged Cash shares.

The following table sets out the percentage of called-up sharecapital in each class that was bought back in the year ending31st August 2016:

Percentage of Called-up Share Capital Bought Share Class Back in the Year

Managed Growth 4.38Managed Income 1.34Managed Cash 2.18

Conversions The Company’s capital structure allows shareholders theopportunity, four times each year, to convert part or all of theirshareholdings into shares of the Company’s other share classeswithout such conversions being treated, under current law, as adisposal for UK capital gains tax purposes.

Employees, Social, Community and Human RightsIssuesThe Company has a management contract with JPMF. It has noemployees and all of its Directors are non-executive. The day today activities are carried out by third parties. There are thereforeno disclosures to be made in respect of employees. The Board notesthe policy statements of JPMAM in respect of Social, Community andEnvironmental and Human Rights issues, as set out in italics below:

Social, Community, Environmental and Human Rights

JPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economicinterests of our clients, we recognise that, increasingly, non-financialissues such as social and environmental factors have the potential toimpact the share price, as well as the reputation of companies.Specialists within JPMAM’s environmental, social and governance(‘ESG’) team are tasked with assessing how companies deal with andreport on social and environmental risks and issues specific to theirindustry.

JPMAM is also a signatory to the United Nations Principles ofResponsible Investment, which commits participants to six principles,with the aim of incorporating ESG criteria into their processes whenmaking stock selection decisions and promoting ESG disclosure. Ourdetailed approach to how we implement the principles is available onrequest.

Greenhouse Gas EmissionsThe Company itself has no premises, consumes no electricity, gas ordiesel fuel and consequently does not have a measurable carbonfootprint. JPMAM is a signatory to the Carbon Disclosure Project andJPMorgan Chase is a signatory to the Equator Principles onmanaging social and environmental risk in project finance.

The Modern Slavery Act 2015 (the ‘MSA’)The MSA requires companies to prepare a slavery and humantrafficking statement for each financial year of the organisation.As the Company has no employees and does not supply goodsand services, the MSA does not apply directly to it. The MSArequirements more appropriately relate to JPMF and JPMAM.JPMorgan’s statement on Human Rights can be found on thefollowing website: www.jpmorganchase.com/corporate/About-JPMC/ab-human-rights.htm

Principal RisksThe Board seeks to minimise the impact of risk. With the assistanceof the Manager, the Board has drawn up a risk matrix, whichidentifies the key risks to the Company. These key risks fall broadlyunder the following categories:

• Investment Strategy: An inappropriate investment strategy, forexample asset allocation, or the level of indirect gearing, maylead to underperformance against the relevant benchmark index

Elect pp27-46 24/10/2016 16:48 Page 31

THE COM

PANY




and peer companies, resulting in the Company’s shares trading ona wider discount. The Board manages these risks bydiversification of investments through its investment restrictionsand guidelines which are monitored and reported on by theManager. The Manager provides the Directors with timely andaccurate management information, including performance dataand attribution analyses, revenue estimates, transaction reportsand shareholder analyses. The Board monitors theimplementation and results of the investment process with theInvestment Managers, who attend all Board meetings, andreviews data which show statistical measures of the Company’srisk profile. The Board does not intend that any of the Company’sportfolios will use borrowings to increase the funds available forinvestment and it monitors closely the level of indirect gearingthrough the underlying investments. The Board holds a separatemeeting devoted to strategy each year.

• Market: Market risk arises from uncertainty about the futureprices of the Company’s investments. It represents the potentialloss that the Company might suffer through holding investmentsin the face of negative market movements. The Board considersasset allocation, stock selection and levels of indirect gearing ona regular basis and has set investment restrictions and guidelineswhich are monitored and reported on by the Manager. The Boardmonitors the implementation and results of the investmentprocess with the Manager.

• Accounting, Legal and Regulatory: In order to qualify as aninvestment trust, the Company must comply with Section 1158 ofthe Corporation Tax Act 2010 (‘Section 1158’). Details of theCompany’s approval are given under ‘Business of the Company’above. Were the Company to breach Section 1158, it might loseinvestment trust status and, as a consequence, gains within theCompany’s portfolios could be subject to Capital Gains Tax. TheSection 1158 qualification criteria are continually monitored bythe Manager and the results reported to the Board each month.The Company must also comply with the provisions of theCompanies Act 2006 and, since its shares have premium listings onthe London Stock Exchange, the UKLA Listing Rules, the Disclosureand Transparency Guidelines (‘DTGs’) and, as an investment trust,the Alternative Investment Fund Managers Directive (‘AIFMD’).A breach of the Companies Act 2006 could result in the Companyand/or the Directors being fined or being the subject of criminalproceedings. Breach of the UKLA Listing Rules or DTGs could resultin the Company’s shares being suspended from listing which in turnwould breach Section 1158. The Board relies on the services of itsCompany Secretary, the Manager and its professional advisers toensure compliance with the Companies Act 2006, the UKLA ListingRules, DTGs and AIFMD. The Board conducts an annual evaluation

of the Company Secretary and the Manager, further details can befound on page 37.

• Corporate Governance and Shareholder Relations: Details of theCompany’s compliance with Corporate Governance best practice,including information on relations with shareholders, are set outin the Corporate Governance Statement on pages 37 to 46.

• Operational: Loss of key staff by the Manager or JPMorgan AssetManagement (UK) Limited, such as the Investment Managers,could affect the performance of the Company. Disruption to, orfailure of, the Manager’s accounting, dealing or paymentssystems or the Depositary or Custodian’s records could preventaccurate reporting and monitoring of the Company’s financialposition. Details of how the Board monitors the services providedby JPMF and its associates and the key elements designed toprovide effective internal controls are included within the RiskManagement and Internal Controls section of the CorporateGovernance report on pages 39 and 40.

• Financial: The financial risks faced by the Company includemarket price risk, interest rate risk, liquidity risk and credit risk.Further details are disclosed in note 19 on pages 70 to 75.

Viability StatementIn accordance with the 2014 UK Corporate Governance Code, theBoard has assessed the prospects of the Company over a longerperiod than the 12 months required by the ‘Going Concern’provision. The new provisions require the Board to explain, takingaccount of the Company’s current position and principal risks, howthey have assessed its prospects and over what period and why theyconsider that period to be appropriate.

The Directors have determined that a five year period to 24th October2021 is an appropriate period over which to provide its viabilitystatement. This period aligns with the Company’s objective ofproviding long term capital growth and is the minimum period of timethat shareholders ought to consider an investment in the Company.

In making this assessment the Directors have taken into account theCompany’s current position and have conducted a robustassessment of its principal risks and uncertainties (as detailed onpages 31 and 32), in particular the risk that the portfolio’s securitiescould reduce in value in a falling market.

The assessment identified the following features which support theCompany’s ability to continue in operation and meet its liabilities asthey fall due over the [five] year period:

• the vast majority of the Company’s investments are readilyrealisable and can be sold to meet its liabilities as they fall due;

Elect pp27-46 24/10/2016 16:48 Page 32

33

THE COM

PANY

• the essential services required by the Company are outsourced tothird party service providers. This allows key service providers tobe replaced at relatively short notice where necessary;

• as at 31st August 2016 the Company had a cash balance of£[13,334,000] which can be used to meet its liabilities in the shortterm; and

• the expenses of the Company are predictable and modest incomparison with the assets and there are no capital commitmentscurrently foreseen which would alter that position.

Based on the results of its review, and taking into account thelong-term nature of the Company and its financing, the Board has areasonable expectation that the Company will be able to continue itsoperations and meet its expenses and liabilities as they fall due forat least the next [five] years.

Future Developments Clearly, the future development of the Company is much dependentupon the success of the Company’s investment strategies in the lightof economic and equity market developments and the continuedsupport of its shareholders. The Investment Managers discuss theoutlook for each share class in their reports on pages 5 to 7, 13 to 16and 23.

By order of the Board Rhys Williams, for and on behalf of JPMorgan Funds Limited, Company Secretary

24th October 2016

Elect pp27-46 24/10/2016 16:48 Page 33

THE COM

PANY


Carla Stent

Independent Non-Executive Director

A Director since April 2015

Member of the Nomination Committee and Audit Committee

Carla Stent is a director of Marex Spectron Limited and Post Office Limited (including Chair of the Audit, Complianceand Risk Committees) and is Deputy Chair of the Power to Change Trust. Ms Stent also serves as chairwoman ofseveral start-up companies. She spent over 20 years in senior, international executive positions in banking, brandedprivate equity and retail industries for blue chip organisations such as Barclays Bank plc, Thomas Cook AG and theVirgin Group. Ms Stent is a qualified Chartered Accountant, she has had direct responsibility for finance, post-mergerintegration, strategy, business operations, brand development and business transformation. She holds 4,919 ManagedGrowth Shares in the Company.

Roger Yates Independent Non-Executive Director

A Director since August 2009.

Member of the Nomination Committee and Audit Committee

Roger Yates is chairman of Pioneer Investments and a non-executive director of St James’s Place plc. He was chiefexecutive of Henderson Group plc from 1999 to 2008 and, prior to that, chief investment officer of Invesco Globaland Morgan Grenfell Investment Management Limited. He has 35 years’ experience in the fund management industryhaving begun his career with GT Management Limited in 1981. He holds 25,000 Managed Income shares in theCompany.

James Robinson


A Director since April 2012

Chairman of the Audit Committee. Member of the Nomination Committee

James Robinson is chairman of Polar Capital Global Healthcare Growth and Income Trust plc and a director of,Fidelity European Values PLC, Montanaro UK Smaller Companies Investment Trust plc and Invesco Asia Trust plc.He was chief investment officer, investment trusts and director of hedge funds at Henderson Global Investors priorto his retirement in 2005. A chartered accountant, Mr Robinson has 37 years’ investment experience. He holds5,000 Managed Growth shares in the Company.

Angus Macpherson


A Director since March 2008

Chairman of the Board and Nomination Committee. Member of the Audit Committee

Angus Macpherson is the Chief Executive of Noble & Company (UK) Limited, a non-executive director of HendersonDiversified Income Limited and chairman of the Belhaven Hill School Trust Ltd. Mr Macpherson spent much of hiscareer working overseas for Merrill Lynch, latterly as head of Capital Markets and Financing for Asia. He also serves asa member of the Scottish Government’s Financial Services Advisory Board. He holds 5,568 Managed Growth shares inthe Company.

Alan Hodson


A Director since January 2012.

Senior Independent Director. Member of the Nomination Committee and Audit Committee.

Alan Hodson is a non-executive Director of HarbourVest Global Private Equity Limited and Woodford Patient CapitalTrust plc. Mr Hodson joined SGWarburg (subsequently UBS) in 1984, rising to Global Head of Equities, a member of theExecutive Committee of UBS Investment Bank and of the UBS AG Group Managing Board until his retirement in June2005. He holds 10,000 Managed Growth shares and 25,000 Managed Income shares in the Company.

BOARD OF DIRECTORS

Governance

Elect pp27-46 24/10/2016 16:48 Page 34

35

THE COM

PANY

The Directors present their report and the audited financialstatements for the year ended 31st August 2016.

Management of the CompanyThe Manager and Company Secretary is a wholly owned subsidiaryof JPMorgan Chase Bank which, through other subsidiaries, alsoprovides banking, dealing and custodial services to the Company.

Principal ActivitiesThe principal activities of the Company throughout the year ended31st August 2016 are disclosed in the Investment Managers’ Reportson pages 5 to 7, 13 to 16 and 23.

Management FeeThe management fee is calculated and paid quarterly in arrears andis charged at the following rates:

• Managed Growth assets: The management fee is 0.3% per annumon assets invested in JPMorgan managed funds and 0.6% perannum on assets invested in non-JPMorgan managed funds anddirect investments. Investments in JPMorgan’s retail open-endedpooled funds qualify for a partial rebate of 50% of the underlyingfee which is paid back to the Company.

• Managed Income assets: There is no management fee on assetsinvested in JPMorgan managed funds. The management fee is0.6% per annum on assets invested in non-JPMorgan managedfunds and direct investments. Investments in JPMorgan’s retailopen-ended pooled funds qualify for a partial rebate of 50% ofthe underlying fee.

• Managed Cash assets: no management fee charged.

The management fees in the financial statements are shown net ofrebates.

Director Indemnification and InsuranceAs permitted by the Company’s Articles of Association, the Directorshave the benefit of an indemnity which was in place during the yearand as at the date of this report. An insurance policy is maintainedby the Company which indemnifies the Directors of the Companyagainst certain liabilities arising in the conduct of their duties. Thereis no cover against fraudulent or dishonest actions.

Notifiable Share InterestsAt 31st August 2016 the following had declared a notifiable interestin the Company’s voting rights:

Percentage Number of Number of Number of of issued Managed Managed Managed shareShareholder Cash Shares Growth Shares Income Shares capital

Brewin Dolphin

Limited 0 3,608,443 6,449,229 3.79%

There have been no changes to this disclosure since the year end tothe date of this report.

The Company is aware that as at 31st August 2016, approximately33% of the Company’s total voting rights were held by individualsthrough the savings products managed by J.P. Morgan AssetManagement and registered in the name of Chase NomineesLimited. If those voting rights are not exercised by the beneficialholders, in accordance with the terms and conditions of the savingsproducts, under certain circumstances J.P. Morgan AssetManagement has the right to exercise those voting rights. That rightis subject to certain limits and restrictions and falls away at theconclusion of the relevant general meeting.

The percentage of total voting rights is calculated by reference tothe NAVs per share which, as at 31st August 2016 were as follows:

Managed Growth 6.64Managed Income 1.06Managed Cash 1.02

The rules concerning the appointment, reappointment andreplacement of Directors, amendment of the Company’s Articles ofAssociation and powers to issue or repurchase the Company’sshares are contained in the Articles of Association of the Companyand the Companies Act 2006. There are no restrictions concerningthe transfer of securities in the Company; no special rights withregard to control attached to securities; no agreements betweenholders of securities regarding their transfer known to theCompany; and no agreements to which the Company is party thataffect its control following a takeover bid.

Environmental Matters, Social and CommunityIssuesInformation on environmental matters, social and community issuesis set out on page 31. The Company has no employees.

DIRECTORS’ REPORT

Elect pp27-46 24/10/2016 16:48 Page 35

THE COM

PANY


DIRECTORS’ REPORT CONTINUED

Governance continued

Independent AuditorsErnst & Young LLP have expressed their willingness to continue inoffice as auditors to the Company and a resolution proposing theirreappointment and to authorise the Directors to determine theirremuneration for the ensuing year will be put to shareholders at theforthcoming Annual General Meeting.

Disclosure of information to AuditorsIn 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 no relevantaudit information of which the Company’s auditor is unaware,and

(b) each of the Directors has taken all the steps that he/sheought to have taken as a Director in order to makehimself/herself aware of any relevant audit information(as defined) and to establish that the Company’s auditor isaware of that information.

Annual General MeetingNOTE: 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 business willbe proposed at the forthcoming Annual General Meeting.

The full text of the resolutions is set out in the Notice of Meeting onpages 78 to 81:

(i) Authority to allot new shares and disapply statutory pre-emption rights (resolutions 10 and 11)

The Directors will seek renewal of the authority at the AnnualGeneral Meeting to issue new ordinary shares for cash or by way ofa sale of Treasury shares up to 3,367,461 Managed Growth shares,5,143,432 Managed Income shares and 373,131 Managed Cashshares (or, if different, the number of ordinary shares which is equalto approximately 10% of the Company’s issued share capital(excluding Treasury shares) of each share class as at the admissionto trading of new Managed Growth Shares, Managed Income Sharesand Managed Cash Shares to be issued in connection with thescheme of reconstruction of JPMorgan Income & Growth InvestmentTrust plc.

This authority will expire at the conclusion of the Annual GeneralMeeting of the Company in 2017 unless renewed at a prior generalmeeting.

Resolution 11 will enable the allotment of shares otherwise than byway of a pro rata issue to existing shareholders. This resolutiontakes into account the likely increase to the number of shares ofeach class in issue as a result of the scheme of reconstruction ofJPMorgan Income & Growth Investment Trust plc. It is advantageousfor the Company to be able to issue new shares (or to sell Treasuryshares) to participants purchasing shares through the JPMorgansavings products and also to other investors when the Directorsconsider that it is in the best interests of shareholders to do so. Anysuch issues would only be made at prices greater than the net assetvalue (‘NAV’), thereby increasing the NAV per share and spreadingthe Company’s administrative expenses, other than themanagement fee which is charged on the value of the Company’smarket capitalisation, over a greater number of shares. The issueproceeds would be available for investment in line with theCompany’s investment policies. No issue of shares will be madewhich would effectively alter the control of the Company withoutthe prior approval of shareholders in general meeting.

(ii) Authority to repurchase the Company’s shares(resolution 12)

The authority to repurchase up to 14.99% of the shares of any classof the Company’s issued share capital, granted by shareholders atthe 2015 Annual General Meeting, will expire on 17th June 2017unless renewed at the forthcoming Annual General Meeting. TheDirectors consider that the renewal of this authority is in theinterests of shareholders as a whole, as the repurchase of shares ata discount to the underlying NAV of a particular share classenhances the NAV of the remaining shares of that share class.

Resolution 12 gives the Company authority to repurchase its ownissued ordinary shares of any class in the market as permitted bythe Companies Act 2006. This resolution takes into account thelikely increase to the number of shares of each class in issue as aresult of the scheme of reconstruction of JPMorgan Income &Growth Investment Trust plc. The authority limits the number ofshares that could be purchased to a maximum number of ordinaryshares which is equal to 14.99% of the Company’s issued sharecapital (excluding Treasury shares) of each share class as at thedate of the admission to trading of new Managed Growth Shares,Managed Income Shares and Managed Cash Shares to be issued inconnection with the scheme of reconstruction of JPMorgan Income& Growth Investment Trust plc. The authority also sets minimumand maximum prices.

If resolution 12 is passed at the Annual General Meeting, the Boardmay repurchase the shares for cancellation or hold them inTreasury pursuant to the authority granted to it for possible reissueat a premium to NAV. During the year ended 31st August 2016,shares repurchased were held in Treasury or cancelled.Repurchases will be made at the discretion of the Board and willonly be made in the market at prices below the prevailing NAV per

Elect pp27-46 24/10/2016 16:48 Page 36

37

THE COM

PANY

share, thereby enhancing the NAV of the remaining shares of thatshare class as and when market conditions are appropriate. Thisauthority will expire on 22nd June 2018, or when the whole of the14.99% has been acquired, whichever is the earlier; however it isthe Board’s intention to seek renewal of the authority at the 2017Annual General Meeting.

(iii) Approval of the proposed Contingent Purchase Contract(resolution 13)

The purchase contract is part of the mechanism by whichshareholders are entitled to require the Company to repurchaseManaged Cash shares. This resolution gives the Company authorityto buy its Managed Cash shares and Deferred shares arising onconversion of any of the Managed Growth, Managed Income orManaged Cash shares into other classes of share. This resolutionfollows the requirements of Section 694 of the Companies Act2006. The Deferred shares are repurchased for nominalconsideration (as they have no economic value) in order to keep thebalance sheet manageable. By law the Company can only purchasethese shares off-market if such purchase is pursuant to a contract inthe form approved at a general meeting of the Company.

RecommendationThe Board considers that resolutions 10 to 13 are likely to promotethe success of the Company and are in the best interests of theCompany and its shareholders as a whole. The Directorsunanimously recommend that you vote in favour of the resolutionsas they intend to do, where voting rights are exercisable, in respectof their own beneficial holdings which amounted in aggregate to25,487 Managed Growth and 50,000 Managed Income sharesrepresenting approximately 0.1% of the voting rights of theCompany as at the year end.

Corporate Governance

Compliance The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 46, indicates how the Companyhas applied the principles and complied with the provisions set outin the Financial Reporting Council’s UK Corporate Governance CodeSeptember 2014 version (the ‘UK Code’), which can be accessed atwww.frc.org.uk. The Company is also required to comply with theCode of Corporate Governance issued by the Association ofInvestment Companies (the ‘AIC Code’), which can be accessed atwww.theaic.co.uk.

Companies who report against the AIC Code and who follow the AICGuide meet their obligations in relation to the UK Code andparagraph 9.8.6 of the Listing Rules.

The Board has considered the principles and recommendations ofthe UK Code and the AIC Code and considers that, throughout theyear under review and insofar as they are relevant to the Company’sbusiness, the Company has complied with the best practiceprovisions except for the following:

– Role of the CEO as the Company does not appoint a CEO;

– Executive Director remuneration as the Company does notappoint Executive Directors;

– Internal audit function as the Company relies on the internalaudit department of the Manager; and

Meetings and CommitteesThe Board delegates certain responsibilities and functions to itsCommittees. Committee membership is detailed in the Directors’biographies on page 34. The table below details the number ofBoard and Committee meetings attended by each Director.

Audit NominationsBoard Committee Committee

Angus Macpherson 6/6 3/3 1/1Alan Hodson 6/6 3/3 1/1James Robinson 6/6 3/3 1/1Carla Stent 6/6 3/3 1/1Roger Yates 6/6 3/3 1/1

Training and AppraisalOn appointment, the Manager and Company Secretary provide allDirectors with a formal and tailored induction. Thereafter regularbriefings and training is provided on changes in regulatoryrequirements that affect the Company and Directors. Directors areencouraged to attend industry and other seminars covering issuesand developments relevant to the Company.

Role of the BoardA management agreement between the Company and the Managersets out the matters which have been delegated to the Manager.This includes management of the Company’s assets and theprovision of accounting, company secretarial, administration andsome marketing services. All other matters are reserved for theapproval of the Board. A formal schedule of matters reserved to theBoard for decision has been approved. This includes determinationand monitoring of the Company’s investment objectives and policyand its future strategic direction, gearing policy, management of thecapital structure, appointment and removal of third party serviceproviders, review of key investment and financial data and theCompany’s corporate governance and risk control arrangements.

Elect pp27-46 24/10/2016 16:48 Page 37

THE COM

PANY




The Board has procedures in place to deal with potential conflicts ofinterest and confirms that the procedures have operated effectivelyduring the year under review.

The Board meets on at least four occasions during the year andadditional meetings are arranged as necessary. Full and timelyinformation is provided to the Board to enable it to functioneffectively and to allow Directors to discharge their responsibilities.

There is an agreed procedure for Directors to take independentprofessional advice if necessary and at the Company’s expense. Thisis in addition to the access that every Director has to the advice andservices of the Company Secretary, who is responsible to the Boardfor ensuring that Board procedures are followed and for compliancewith applicable rules and regulations.

Board CompositionThe Board, chaired by Angus Macpherson, consists of five Non-executive Directors, all of whom are regarded by the Board asindependent, including the Chairman. The Directors have a breadthof investment, business and financial skills and experience relevantto the Company’s business. The Board constructively challenges theManager, who assists the Board in the development of theCompany’s strategy.

A review of Board composition and balance is included as part ofthe annual performance evaluation of the Board, details of whichmay be found on page 41.

The Senior Independent Director is available to shareholders if theyhave concerns that cannot be resolved through discussion with theChairman.

TenureDirectors are initially appointed until the following Annual GeneralMeeting when, under the Company’s Articles of Association, it isrequired that they be reappointed by shareholders. Subject to theperformance evaluation carried out each year, the Board will agreewhether it is appropriate for the Director to seek an additional term.The Board does not believe that the length of service in itselfnecessarily disqualifies a Director from seeking reappointment butwhen making a recommendation, the Board will take into accountthe requirements of the UK Corporate Governance Code, includingthe need to refresh the Board and its Committees.

The Company’s Articles of Association require that Directors standfor reappointment at least every three years. However, the Boardhas taken a decision to adopt corporate governance best practice,resulting in annual reappointment for all Directors.

The terms and conditions of Directors’ appointments are set out informal letters of appointment, copies of which are available for

inspection on request at the Company’s registered office and at theAnnual General Meeting.

Evaluation of the ManagerThe Board has reviewed the investment management, companysecretarial, sales and marketing services provided to the Companyby the Manager. This review, which is conducted on an annual basis,included investment performance, risk management,administration, controls and compliance.

The review concluded that the Manager’s overall performance forthe year was satisfactory. The Board therefore believes that thecontinuing appointment of the Manager for the provision of theseservices, on the terms agreed, continues to be in the best interestsof shareholders as a whole.

Evaluation of Other Service ProvidersThe Board also carried out reviews of its other key serviceproviders.

Audit CommitteePurpose and ResponsibilitiesThe purpose of the Audit Committee is to monitor and review theprinciples, policies and practices adopted in the preparation andaudit of the accounts of the Company and the integrity of thefinancial statements and any other announcement relating to theCompany’s financial performance. The Committee also monitors theeffectiveness of the internal controls and the risk managementframework, the external auditors’ independence and objectivity, theeffectiveness of the audit process, corporate governance standardsand regulatory compliance and reports its findings to the Board.A full list of the Committee’s responsibilities is detailed in the termsof reference, which can be found on our website atwww.www.jpmelect.co.uk

Composition, Skills and ExperienceAll members of the Audit Committee, which includes the Chairmanof the Board, are independent non-executive Directors. TheChairman of the Audit Committee is James Robinson. Whilst allmembers assist the Committee in discharging its responsibilities, forthe purposes of the UK Code, the Board is satisfied that MrRobinson has recent and relevant financial experience.

Significant Financial JudgmentsDuring its review of the Company’s financial statements for the yearended 31st August 2016, the Audit Committee considered thefollowing significant issues, including those communicated by theAuditors during their reporting:

Elect pp27-46 24/10/2016 16:48 Page 38

39

THE COM

PANY

Significant issue How the issue was addressed

The valuation of investments is undertaken inaccordance with the accounting policies, disclosedin note 1 to the accounts on page 56. Controls are inplace to ensure that valuations are appropriate andexistence is verified through Depositary andCustodian reconciliations. The audit includes thereview of the existence of the investments.

The recognition of investment income is undertakenin accordance with accounting policy note 1(e) to theaccounts on page 57. The Board regularly reviewssubjective elements of income such as specialdividends and agrees their accounting treatment.

Approval for the Company as an investment trustunder Sections 1158 and 1159 for financial yearscommencing on or after 1st September 2012 hasbeen obtained and ongoing compliance with theeligibility criteria is monitored on a regular basis.

The management fee is calculated in accordancewith the Investment Management Agreement anddetails of the allocation of rebates are reviewed.These items are also subject to external audit.

The conversions undertaken on a quarterly basisare calculated in accordance with the terms of theCompany’s Articles of Association and separatelyreviewed by the Company’s auditor.

WhistleblowingThe Committee is satisfied that the Manager has in place awhistleblowing framework through which employees of theManager, including temporary workers and independentcontractors, can make confidential disclosures concerning possibleimproprieties in financial reporting or other matters, includingthose that affect the Company.

Disclosures can be made directly to the Manager’s Complianceteam, or anonymously via reporting hotlines which areadministered externally.

Auditor Objectivity and IndependenceThe Committee has implemented safeguards to ensure that theprovision of non-audit services does not impair the externalAuditors’ objectivity or independence. All non-audit fees areapproved by the Committee and an assessment of the safeguardsis carried out on an annual basis.

Ernst & Young LLP are the Company’s Auditors. They wereappointed in 2004 and again, following a public tender exercise,in 2013. For the year ended 31st August 2016 the Auditor was paid£8,000 to perform a review of the share conversions.

Assessment of the Effectiveness of the ExternalAudit ProcessThe Audit Committee has a primary responsibility for makingrecommendations to the Board on the reappointment and removalof external Auditors. Representatives of the Company’s Auditorsattended the Audit Committee meeting at which the draft AnnualReport & Accounts were considered and also engage with Directorsas and when required.

Having considered the external Auditors’ performance, includingtheir technical competence, strategic knowledge, the quality ofwork, communications and reporting, the Committee was satisfiedwith the effectiveness of the external audit process and consideredit appropriate to recommend their reappointment. The Boardsupported this recommendation which will be put to shareholdersat the 2016 Annual General Meeting.

Risk Management and Internal ControlThe UK Code requires the Directors, at least annually, to review theeffectiveness of the Company’s system of risk management andinternal control and to report to shareholders that they have doneso. This encompasses a review of all controls, which the Board hasidentified as including business, financial, operational, complianceand risk management controls.

The Board is responsible for the Company’s system of riskmanagement and internal control, which is designed to safeguardthe Company’s assets, maintain proper accounting records andensure that financial information used within the business, orpublished, is reliable. However, such a system can only be designedto manage rather than eliminate the risk of failure to achievebusiness objectives and therefore can only provide reasonable, butnot absolute, assurance against fraud, material mis-statement orloss.

Since investment management, custody of assets and alladministrative services are provided to the Company by theManager, its associates and the Bank of New York Mellon, theCompany’s system of risk management and internal control mainlycomprises the monitoring of their services including the operatingcontrols established by them, to ensure they meet the Company’sbusiness objectives.

The Company does not have an internal audit function of its own,but relies on the internal audit department of the Manager. Thisarrangement is kept under review. The key elements designed toprovide effective risk management and internal control are asfollows:

Financial Reporting — Regular and comprehensive review by theAudit Committee and the Board of key investment and financialdata, including management accounts, revenue projections, analysisof transactions and performance comparisons.

Calculation ofmanagement fee

Share capital

Compliance withSections 1158 and1159 Corporation TaxAct 2010

Recognition ofinvestment income

Valuation, existenceand ownership ofinvestments

Elect pp27-46 24/10/2016 16:48 Page 39

THE COM

PANY




Management Agreement — Appointment of a manager, regulated bythe FCA, whose responsibilities are clearly defined in a writtenagreement.

Management Systems — The Manager’s system of internal controlincludes organisational agreements which clearly define the lines ofresponsibility, delegated authority, control procedures and systems.These are monitored by the Manager’s compliance departmentwhich regularly monitors compliance with FCA rules.

Investment Strategy — Authorisation and monitoring of theCompany’s investment strategy and exposure limits by the Board.

The Board, either directly or through the Audit Committee, keepsunder review the effectiveness of the Company’s system of riskmanagement and internal control by monitoring the operation ofthe key operating controls of the Manager and its associates asfollows:

• maintaining a risk matrix and reviewing the key risks to theCompany at each quarterly meeting;

• reviewing the quarterly compliance report received from theManager;

• receiving a report from the Depositary on the results of itsmonitoring of the Company’s transactions;

• reviewing the terms of the agreements and undertaking anevaluation of each service provider;

• reviewing reports on the internal controls and operations of thecustodian, JPMorgan Chase Bank, which is itself independentlyreviewed; and

• reviewing every six months an independent report on the internalcontrols and the operations of the Manager.

By means of the procedures set out above, the Board confirms thatit has reviewed the effectiveness of the Company’s system of riskmanagement and internal control for the year ended 31st August2016, and to the date of approval of this Annual Report andAccounts.

During the course of its review of the system of risk managementand internal control, the Board did not identify nor was it advised ofany failings or weaknesses which it determined to be significant.

Role of the DepositaryThe Depositary is responsible for the safekeeping of all custodialassets of the Company, for verifying and maintaining a record of allother assets of the Company and for the collection of income thatarises from those assets. The Board conducts an annual evaluationof the services provided to the Company by the Depositary.

Fair, Balanced and UnderstandableHaving taken all available information into consideration and havingdiscussed the content of the Annual Report and Accounts with theManager and other third party service providers, the AuditCommittee has concluded that the Annual Report and Accounts forthe year ended 31st August 2016 taken as a whole, are fair,balanced and understandable and provide the informationnecessary for shareholders to assess the Company’s performance,business model and strategy, and has reported these findings to theBoard. The Board’s conclusions in this respect are set out in theStatement of Directors’ Responsibilities on page 46.

Going ConcernThe Directors, having assessed the Company’s investment objective(see pages 27 to 28), risk management policies (see pages 70 to 75),capital management policies and procedures (see page 75), thenature of the portfolio and expenditure projections, considered itappropriate to adopt the going concern basis of accounting in thepreparation of the 2016 annual financial statements. As part of itsassessment, the Directors concluded that there are no materialuncertainties relating to events or conditions that might castsignificant doubt upon the continuing use of the going concern basisof accounting for a period of at least twelve months from the dateof approval of the financial statements.

Nomination CommitteePurpose and ResponsibilitiesThe purpose of the Nomination Committee is to review the size,structure and composition of the Board, lead the process for boardappointments, review the adequacy of succession plans, oversee anannual performance evaluation of the Board, the Committees andeach of the Directors and to make recommendations on theappropriateness of Directors’ fees and the Board’s policy ondiversity. A full list of the Committee’s responsibilities is detailed inthe terms of reference, which can be found on our website atwww.www.jpmelect.co.uk.

Composition, Skills and ExperienceAll members of the Nomination Committee are independentnon-executive Directors. The Chairman of the Committee is AngusMacpherson, who is also Chairman of the Board.

Board and Board Committee CompositionThe Nomination Committee assists the Chairman of the Board in hisassessment of the skills, experience, knowledge, composition anddiversity of the Board and its Committees. Non-executive Directorsare appointed by the Board for an initial period which expires at thenext Annual General Meeting where they are required to retire andsubmit themselves for election by shareholders.

Elect pp27-46 24/10/2016 16:48 Page 40

41

THE COM

PANY

EffectivenessThe annual evaluation of the effectiveness of the Board, the Board’sCommittees and each individual Director was performed externallyfor 2016 by Stephenson & Co. The evaluation consisted of a series ofmeetings with the Chairman and each of the Directors as required.A summary of the key themes arising from the evaluation wasdiscussed by the Committee and Actions were agreed to addressparticular concerns.

The evaluation of the Chairman was also performed by Stephenson& Co with the assistance of the Senior Independent Director. Theappraisal of his performance was then discussed by the Directors.In light of the annual evaluation, the Board decides whether it isappropriate for each Director to seek an additional term.

The 2016 evaluations concluded that the performance of the Board,its Committees, the Chairman and each of the Directors continues tobe effective. If Directors have concerns about the Company or aproposed action which cannot be resolved, it is recorded in theBoard minutes. No such concerns were raised during the year.

The Board recommends to shareholders that each Director bere-elected at the forthcoming Annual General Meeting.

IndependenceThe Nomination Committee is responsible for the ongoingassessment of the independence of non-executive Directors,including the independence of the Chairman. In assessingindependence, in particular independence from the Manager, theCommittee considers whether a Director is independent in characterand judgement and whether there are relationships orcircumstances, including those contained in the UK Code, which arelikely to affect, or could appear to affect, the Director’s judgement.It does this with reference to the individual’s performance andconduct in reaching decisions.

The Board does not believe that length of service in itselfnecessarily disqualifies a Director from seeking re-election but,when making a recommendation, the Board will take into accountthe ongoing requirements of the UK Code, including the need torefresh the Board and its Committees.

The Committee is satisfied that, throughout the year, allnon-executive Directors, including the Chairman, who wasindependent on appointment, remained independent as to bothcharacter and judgement.

Board DiversityThe combination of personalities and experience on the Boardprovides a range of perspectives and challenge. When recruiting anew director, the Board’s policy is to appoint individuals on merit,with due regard to the benefits of diversity.

Relations with ShareholdersThe Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a full understandingof the Company’s activities and performance and reports formally toshareholders by way of the annual report and accounts and the halfyear financial report. These are supplemented by the dailypublication, through the London Stock Exchange, of the net assetvalues of the Company’s shares.

All shareholders are encouraged to attend the Company’s AnnualGeneral Meeting at which the Directors and representatives of theManager are available in person to meet shareholders and answertheir questions. In addition, presentations are given by theInvestment Managers who review the Company’s performance.

During the year the Company’s brokers, the Investment Managersand JPMF hold regular discussions with larger shareholders. TheDirectors are made fully aware of their views. The Chairman andDirectors make themselves available as and when required tosupport these meetings and to address shareholder queries. TheDirectors may be contacted through the Company Secretary whosedetails are shown on page 85. The Chairman can also be contactedvia the Company’s website by following the ‘Ask the Chairman’ linkat wwwjpmelect.co.uk.

The Company’s annual report and accounts are published in time togive shareholders at least 20 working days’ notice of the AnnualGeneral Meeting. Shareholders wishing to raise questions inadvance of the meeting are encouraged to do so via the Company’swebsite or write to the Company Secretary at the address shown onpage 85.

Corporate Governance and Voting Policy The Company delegates responsibility for voting to the Manager. Setout below in italics is a summary of the policy statements of JPMAMon corporate governance, voting policy and social andenvironmental issues, which has been reviewed and noted by theBoard. Details on social and environmental issues are included inthe Strategic Report on page 31.

Corporate Governance JPMAM believes that corporate governance is integral to ourinvestment process. As part of our commitment to delivering superiorinvestment performance to our clients, we expect and encourage thecompanies in which we invest to demonstrate the highest standards ofcorporate governance and best business practice. We examine theshare structure and voting structure of the companies in which weinvest, as well as the board balance, oversight functions andremuneration policy. These analyses then form the basis of our proxyvoting and engagement activity.

Elect pp27-46 24/10/2016 16:48 Page 41

THE COM

PANY



Proxy Voting JPMAM manages the voting rights of the shares entrusted to it as itwould manage any other asset. It is the policy of JPMAM to vote in aprudent and diligent manner, based exclusively on our reasonablejudgement of what will best serve the financial interests of our clients.So far as is practicable, we will vote at all of the meetings called bycompanies in which we are invested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clientsas a major asset owner. To this end, we support the introduction of theFRC Stewardship Code, which sets out the responsibilities ofinstitutional shareholders in respect of investee companies. Under theCode, managers should:

– publicly disclose their policy on how they will discharge theirstewardship responsibilities to their clients;

– disclose their policy on managing conflicts of interest;

– monitor their investee companies;

– establish clear guidelines on how they escalate engagement;

– be willing to act collectively with other investors where appropriate;

– have a clear policy on proxy voting and disclose their voting record;and

– report to clients.

JPMAM endorses the Stewardship Code for its UK investments andsupports the principles as best practice elsewhere. We believe thatregular contact with the companies in which we invest is central to ourinvestment process and we also recognise the importance of being an‘active’ owner on behalf of our clients.

JPMAM’s Voting Policy and Corporate Governance Guidelines areavailable on request from the Company Secretary or can bedownloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/governance, which alsosets out its approach to the seven principles of the FRC StewardshipCode, its policy relating to conflicts of interest and its detailedvoting record.

By order of the Board James RobinsonDirector

24th October 2016


Elect pp27-46 24/10/2016 16:48 Page 42

43

THE COM

PANY

The Board presents the Directors’ Remuneration Report for the yearended 31st August 2016, which has been prepared in accordancewith the requirements of Section 421 of the Companies Act 2006 asamended.

The law requires the Company’s Auditor to audit certain of thedisclosures provided. Where disclosures have been audited, they areindicated as such. The Auditor’s opinion is included in its report onpages 47 to 52.

As all of the Directors are non-executive, the Board has notestablished a Remuneration Committee. Instead, the NominationCommittee reviews Directors’ fees on a regular basis and makesrecommendations to the Board as and when appropriate.

Directors’ Remuneration PolicyAn ordinary resolution to approve the Directors’ RemunerationPolicy will be put to shareholders at the forthcoming AnnualGeneral Meeting. It is the Board’s intention to put this resolution toshareholders annually. The policy subject to the vote is set out infull below and is currently in force.

The Board’s policy for this and subsequent years is that Directors’fees should properly reflect the time spent by the Directors on theCompany’s business and should be at a level to ensure thatcandidates of a high calibre are recruited to the Board and retained.The Chairman of the Board and the Chairman of the AuditCommittee are paid higher fees than the other Directors, reflectingthe greater time commitment involved in fulfilling those roles.

Reviews of the levels of Directors’ remuneration are based oninformation provided by the Manager, and industry research carriedout by third parties on the level of fees paid to the directors of theCompany’s peers and within the investment trust industry generally.The involvement of remuneration consultants has not been deemednecessary as part of this review. The Company has no ChiefExecutive Officer and no employees and therefore no consultationof employees is required and there is no employee comparativedata to provide, in relation to the setting of the remuneration policyfor Directors.

All of the Directors are non-executive. There are no performance-related elements to their fees and the Company does not operateany type of incentive, share scheme, award or pension scheme andtherefore no Directors receive bonus payments or pensioncontributions from the Company or hold options to acquire sharesin the Company. Directors are not granted exit payments and arenot provided with compensation for loss of office. No otherpayments are made to Directors, other than the reimbursement ofreasonable out-of-pocket expenses incurred in attending theCompany’s business.

In the year under review, Directors’ fees were paid at the followingrates: Chairman £33,500; Chairman of the Audit Committee£27,000; and other Directors £23,000.

During the year the Board decided to increase the fees paid toDirectors to better reflect current market rates, the time spent on theCompany’s business and to ensure that candidates of a high calibre arerecruited to the Board and retained. From 1st September 2016Director’s fees will be paid at the following rates: Chairman £34,500;Chairman of the Audit Committee £28,500; and other Directors£24,000. This is the first general increase since 2013. The increase inDirectors’ fees remains within the shareholder approved maximumaggregate annual limit of £200,000.

The Company has not sought shareholder views on its remunerationpolicy. The Nomination Committee considers any commentsreceived from shareholders on remuneration policy on an ongoingbasis and takes account of those views.

The terms and conditions of Directors’ appointments are set out informal letters of appointment which are available for review at theCompany’s Annual General Meeting and the Company’s registeredoffice. Details of the Board’s policy on tenure are set out onpage 38.

Directors’ Remuneration Policy ImplementationThe Directors’ Remuneration Report, which includes details of theDirectors’ remuneration policy and its implementation, is subject toan annual advisory vote and therefore an ordinary resolution toapprove this report will be put to shareholders at the forthcomingAnnual General Meeting. There have been no changes to the policycompared with the year ended 31st August 2015 and no changes areproposed for the year ending 31st August 2017.

At the Annual General Meeting held on 18th December 2015, of allvotes cast on the Directors’ Remuneration Policy (including thosevotes that the Chairman was granted discretion) 99.20% were infavour whilst 0.80% were against. Of all votes cast on the Directors’Remuneration implementation report (including those votes thatthe Chairman was granted discretion) 99.16% were in favour whilst0.84% were against. Both resolutions received abstentions fromless than 1% of all votes cast.

Details of voting on both the Remuneration Policy and the Directors’Remuneration Report from the 2016 Annual General Meeting will begiven in the annual report for the year ending 31st August 2017.Thereafter, the reporting will be annually for both the advisory voteon the Directors’ Remuneration Report and binding vote on theRemuneration Policy.

DIRECTORS’ REMUNERATION REPORT

Elect pp27-46 24/10/2016 16:48 Page 43

THE COM

PANY


DIRECTORS’ REMUNERATION REPORT CONTINUED


Details of the implementation of the Company’s remuneration policyare given below.

Single total figure of remunerationThe single total figure of remuneration for each Director is detailedbelow together with the prior year comparative.

Single total figure tableTotal fees

2016 2015£ £

Alan Hodson 23,000 23,000Angus Macpherson 33,500 27,2351

Robert Ottley — 22,3342

James Robinson 27,000 27,000Carla Stent 23,000 8,4623

Roger Yates 23,000 23,000

Total 129,500 131,031

1 Angus Macpherson was appointed Chairman in May 2015.2 Robert Ottley retired in April 2015.3 Carla Stent was appointed in April 2015.

A table showing the total remuneration for the Chairman over thefive years ended 31st August 2016 is below:

Remuneration for the Chairman over the five yearsended 31st August 2016Year ended31st August Fees

2016 £33,5002015 £33,5002014 £33,5002013 £32,0002012 £32,000

Directors’ Shareholdings1

There are no requirements pursuant to the Company’s Articles ofAssociation for the Directors to own shares in the Company. TheDirectors’ shareholdings are detailed below. All shares are heldbeneficially.

31st August 2016Managed Managed ManagedGrowth Income Cash

Directors Shares Shares Shares

Alan Hodson 10,000 25,000 —Angus Macpherson 5,568 — —James Robinson 5,000 — —Carla Stent 4,919 — —Roger Yates — 25,000 —

31st August 2015 Managed Managed ManagedGrowth Income Cash

Directors Shares Shares Shares

Alan Hodson 10,000 25,000 —Angus Macpherson 5,568 — —James Robinson 5,000 — —Carla Stent — — —Roger Yates — 25,000 —

1 Audited Information.

As at the latest practicable date before the publication of thisdocument, there have been no changes to the Directors’shareholdings. The Directors have no other share interests or shareoptions in the Company and no share schemes are available.

In accordance with the Companies Act 2006, graphs showing thetotal return of the Managed Growth and Managed Income shareclasses compared with their respective benchmarks over the lastseven years is shown below. (The benchmarks are a compositecomprising 50% FTSE All-Share Index and 50% FTSE World Index(ex-UK) for Managed Growth and a composite comprising 85% FTSEAll-Share Index and 15% Barclays Capital Global Corporate BondIndex (hedged) in sterling terms for Managed Income.) Becausethese benchmarks are the adopted benchmarks for ManagedGrowth and Managed Income, they are deemed by the Board to bethe most representative comparators for these share classes.

Elect pp27-46 24/10/2016 16:48 Page 44

45

THE COM

PANY

Managed Growth: Seven Year Share Price and Benchmark Total Return to31st August 2016


Share price total return.

Benchmark total return.

Managed Income: Seven Year Share Price and Benchmark Total Return to31st August 2016


Share price total return.

Benchmark total return.

Although the Managed Cash share class has no adopted benchmark,it is a requirement of the Companies Act 2006 to provide abenchmark against which to measure performance for the purposesof the Directors’ Remuneration Report. The Board’s main objectiveis to protect investors’ capital and so the Managed Cash share priceis measured relative to a benchmark of 100.0p. The Managed Cashshare price traded in the range of 98.5p to 100.5p in the seven yearperiod ended 31st August 2016.

A table showing actual expenditure by the Company onremuneration and distributions to shareholders for the year and theprior year is below:

Expenditure by the Company on remuneration anddistributions to shareholders

Year ended31st August

2016 2015£ £

Remuneration paid to all Directors £129,500 £131,031Distribution to shareholders – by way of dividend £5,024,000 £4,447,000– by way of share repurchases £10,116,000 £11,701,000

By order of the Board James RobinsonDirector

24th October 2016

100

125

150

175

200

225

20162015201420132012201120102009

100

125

150

175

200

225

20162015201420132012201120102009

Elect pp27-46 24/10/2016 16:48 Page 45

THE COM

PANY


The Directors are responsible for preparing the annual report andaccounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statementsfor each financial year. Under that law, the Directors have elected toprepare the financial statements in accordance with UnitedKingdom Generally Accepted Accounting Practice (United KingdomAccounting Standards), including FRS 102. The Financial ReportingStandard applicable in the UK and Republic of Ireland, andapplicable law. Under company law the Directors must not approvethe financial statements unless they are satisfied that, taken as awhole, the annual report and accounts are fair, balanced andunderstandable, provide the information necessary for shareholdersto assess the Company’s performance, business model and strategyand that they give a true and fair view of the state of affairs of theCompany and of the total return or loss of the Company for thatperiod. In order to provide these confirmations, and in preparingthese financial statements, the Directors 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 have beenfollowed, subject to any material departures disclosed andexplained in the financial statements; and

• prepare the financial statements on a going concern basis unlessit is inappropriate to presume that the Company will continue inbusiness

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any time thefinancial position of the Company and to enable them to ensure thatthe financial statements comply with the Companies Act 2006. Theyare also responsible for safeguarding the assets of the Companyand hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

The accounts are published on the www.jpmelect.co.uk website,which is maintained by the Company’s Manager. The maintenanceand integrity of the website maintained by the Manager is, so far asit relates to the Company, the responsibility of the Manager. Thework carried out by the Auditor does not involve consideration ofthe maintenance and integrity of this website and, accordingly, theAuditor accepts no responsibility for any changes that haveoccurred to the accounts since they were initially presented on thewebsite. The accounts are prepared in accordance with UKlegislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report, Strategic Report,Statement of Corporate Governance and Directors’ RemunerationReport that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed onpage 34, confirms that, to the best of their knowledge:

• the financial statements, which have been prepared inaccordance with United Kingdom Generally Accepted AccountingPractice (United Kingdom Accounting Standards) and applicablelaw, give a true and fair view of the assets, liabilities, financialposition and return or loss of the Company; and

• the Strategic Report and Directors’ Report include a fair review ofthe development and performance of the business and theposition of the Company, together with a description of theprincipal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the annual report andaccounts taken as a whole are fair, balanced and understandableand provide the information necessary for shareholders to assessthe strategy and business model of the Company.

For and on behalf of the BoardJames RobinsonDirector

24th October 2016

STATEMENT OF DIRECTORS’ RESPONSIBILITIES


Elect pp27-46 24/10/2016 16:48 Page 46

47

THE COM

PANY

Our opinion on the financial statementsIn our opinion:

• the financial statements give a true and fair view of the state of the Company’s affairs as at 31st August 2016 and of the Company’s netreturn for the year then ended;

• the financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006; and

What we have auditedJPMorgan Elect plc’s financial statements comprise:

Statement of Comprehensive Income for the year ended 31st August 2016

Statement of Changes in Equity for the year ended 31st August 2016

Statement of Financial Position as at 31st August 2016

Related notes 1 to 20 to the financial statements

The financial reporting framework that has been applied in the preparation of the Company financial statements is applicable law andUnited Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 ‘The Financial ReportingStandard applicable in the UK and Republic of Ireland’.

Overview of our audit approach

Risks of material misstatement • Incomplete or inaccurate income recognition through failure to recognise proper incomeentitlements or apply appropriate accounting treatment.

• Incorrect valuation and existence of the investment portfolio.

• Incorrect accounting for share capital transactions.

Audit scope • All audit work was performed directly by the audit engagement team.

Materiality • Materiality of £2.8 million which represents 1% of total shareholders’ funds (2015: £2.7 million)

Our assessment of risk of material misstatement We identified the risks of material misstatement described below as those with the greatest effect on our overall audit strategy, theallocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed theprocedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express anyopinion on these individual areas.

Independent Auditor’s Report

TO THE MEMBERS OF JPMORGAN ELECT PLC

Elect pp47-55 24/10/2016 16:46 Page 47


THE COM

PANY

Independent Auditors’ Report continued

Risk Our response to the risk

• We agreed a sample of dividends to the corresponding announcement madeby the investee company and agreed cash received to bank statements.

• We agreed, for a sample of investee companies, the dividend declarationsmade by the investee company from an external third party source to theincome entitlements recorded by the Company.

• We agreed all accrued dividends to third party source and to post year endbank statements where possible to assess the recoverability of theseamounts.

• We reviewed the recognition criteria applied to a sample of five of the specialdividends received during the year and assessed the appropriateness of theconclusion on the relevant treatment as documented by the administrator.

What we concluded to the Audit Committee

We noted no issues in agreeing the sample of dividend receipts to and from an independent source and to the bank statements.

We noted no issues in agreeing the sample of dividend declarations to the income entitlements recorded by the Company.

We noted no issues in agreeing the accrued dividend receipts to an independent source and to the bank statements.

We ensured that the accounting treatment adopted for the five special dividends reviewed was consistent with the evidence provided andour understanding of the underlying circumstances giving rise to the related dividends.


• For all investments in the portfolio, we agreed the prices to an independentsource.

• We have independently obtained confirmations from the Company’s custodianand depositary to confirm the existence of the assets held as at 31st August2016.

Incomplete or inaccurate income recognition throughfailure to recognise proper income entitlements orapply appropriate accounting treatment (as describedon page 39 in the Audit Committee Report).

Substantially all of the Company’s income is receivedin the form of dividends and distributions frominvestments, being £6.5 million for the year (2015:£6.0 million).

The investment income receivable by the Companyduring the period directly affects the Company’s abilityto pay a dividend to shareholders. Given the manualand judgemental element in allocating specialdividends between revenue and capital, we consideredthere to be a fraud risk, in accordance with AuditingStandards, in this area of our audit.

During the year, the Company received twelve specialdividends, with an aggregate value of £0.3 million.None of these, individually or in aggregate, werematerial.

Incorrect valuation and existence of the investmentportfolios (as described on page 39 in the AuditCommittee Report).

The Company’s investment portfolios consist of listedequities, quoted open-ended funds and liquidity fundswith a total valuation of £267.3 million as at 31st August2016 (2015: £256.1 million).

The valuation of the assets held in the investmentportfolio is the key driver of the Company’s net assetvalue and total return. Incorrect asset pricing or afailure to maintain proper legal title of the assets heldby the Company could have a significant impact on theportfolio valuation and the return generated forshareholders.

Elect pp47-55 24/10/2016 16:46 Page 48

49

THE COM

PANY


For all investments, we noted no material differences in market value or exchange rates used.

We noted no differences between the custodian and depositary confirmations and the Company’s underlying financial records.


• We agreed the movements in the Company’s share capital to externalpublications.

• We agreed the consideration paid and received in relation to a sample ofshare capital transactions to the Company’s bank statements.

• We reviewed the methodology for share conversions to ensure that theconversion of shares between classes is calculated and accounted forcorrectly.

• We performed a review of the appropriateness of the accounting treatmentand disclosures in the financial statements in respect of movements in theCompany’s share capital.


For all movements in share capital, we noted no issues in agreeing to external publications.

We noted no issues in agreeing the sample of share capital transactions selected to Company bank statements.

We noted no issues in our review of the methodology for share conversions.

We are satisfied that the accounting treatment and disclosures of the share capital movements are appropriate.

In the current year, we recognise a risk of material misstatement in relation to the recognition of revenue. We have assessed this as both afraud risk and a significant risk in the current year, as investment income receivable by the Company during the period directly affects theCompany’s ability to pay a dividend to shareholders and judgement is used in allocating special dividends between revenue and capital.Potentially, these factors could give those charged with governance both the incentive and the opportunity to misstate the revenue of theCompany in order to meet shareholder expectations. In addition, we continue to recognise a risk of material misstatement in relation tovaluation and existence of the investment portfolio as well as the risk of incorrect accounting for share capital transactions. We haveremoved the risk in relation to the management fee. The management fees are determined by a relatively straightforward calculation andwe can verify the inputs to supporting documentation. There is also no history of errors in these calculations and the management fees areat a low level when compared to the NAV of the Company.

The scope of our audit Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for theCompany. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of theCompany and effectiveness of controls and changes in the business environment when assessing the level of work to be performed. All auditwork was performed directly by the audit engagement team.

Incorrect accounting for share capital transactions (asdescribed on page 39 in the Audit Committee Report).

For the year ended 31st August 2016, there were34,923 shares repurchased for cancellation costing£0.04 million, 2,248,568 shares repurchased intoTreasury costing £10.0 million and 125,000 sharesissued from Treasury for a consideration of £0.01 million(2015: 574,841 shares repurchased for cancellationcosting £0.6 million, 2,657,052 shares repurchased intoTreasury costing £10.9 million and 135,000 sharesissued from Treasury for a consideration of£0.4 million).

The Articles allow for the quarterly conversion of sharesbetween each of the three share classes of the Companyat the option of the shareholder. The net impact in theyear was a reduction in Managed Growth shares by32,623 shares, an increase in Managed Income sharesby 167,432 and an increase in Managed Cash shares by7,188 (2015: Growth 282,740, Income 1,370,056 and Cash247,994).

Elect pp47-55 24/10/2016 16:46 Page 49


THE COM

PANY


Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the auditand in forming our audit opinion.

MaterialityThe magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economicdecisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

We determined planning materiality for the Company to be £2.8 million (2015: £2.7 million), which is 1% of equity shareholders’ funds.We derived our materiality calculation from a proportion of total equity as we consider that to be the key measurement of the Company’sperformance.

Performance materialityThe application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level theprobability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Company’s overall control environment, our judgment was thatoverall performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Company should be 75% ofplanning materiality, being £2.1 million (2015: £2.0 million). Our objective in adopting this approach was to ensure that total undetected anduncorrected audit differences in all accounts did not exceed our planning materiality level. We have set performance materiality at thispercentage due to our past experience of the audit that indicates a lower risk of misstatements, both corrected and uncorrected.

Given the importance of the distinction between revenue and capital for the Company we also applied a separate testing threshold of£0.3 million (2015: £0.2 million) for the revenue column of the Income Statement, being 5% of the revenue return on ordinary activitiesbefore taxation.

Reporting thresholdAn amount below which identified misstatements are considered to be clearly trivial.

We agreed with the audit committee that we would report all audit differences in excess of £0.1 million (2015: £0.1 million) as well asdifferences below that threshold that, in our view, warranted reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the light of otherrelevant qualitative considerations.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurancethat the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequatelydisclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financialstatements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies withthe audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistentwith, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

Respective responsibilities of directors and auditorAs explained more fully in the Statement of Directors’ Responsibilities set out on page 46 the Directors are responsible for the preparationof the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion

Elect pp47-55 24/10/2016 16:46 Page 50

51

THE COM

PANY

on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standardsrequire us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Ouraudit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in anauditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone otherthan the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Opinion on other matters prescribed by the Companies Act 2006In our opinion:

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

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

Matters on which we are required to report by exception

ISAs (UK & Ireland) reporting

We are required to report to you if, in our opinion, financial and non-financial information in theannual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of theCompany acquired in the course of performing our audit; or

• otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies betweenour knowledge acquired in the course of performing the audit and the Directors’ statement that theyconsider the annual report and accounts taken as a whole is fair, balanced and understandable andprovides the information necessary for shareholders to assess the entity’s performance, businessmodel and strategy; and whether the annual report appropriately addresses those matters that wecommunicated to the audit committee that we consider should have been disclosed.

Companies Act 2006 reporting

We are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audithave not been received from branches not visited by us; or

• the Company financial statements and the part of the Directors’ Remuneration Report to be auditedare not in agreement with the accounting records and returns; or

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

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

We have no exceptions to report.


Elect pp47-55 24/10/2016 16:46 Page 51


THE COM

PANY

Listing Rules review requirements

We are required to review:

• the Directors’ statement in relation to going concern set out on page 40, and longer-term viability,set out on page 32; and

• the part of the Corporate Governance Statement relating to the Company’s compliance with theprovisions of the UK Corporate Governance Code specified for our review.

Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidityof the Entity

ISAs (UK and Ireland) reporting

We are required to give a statement as to whether we have anything material to add or to drawattention to in relation to:

• the Directors’ confirmation in the annual report that they have carried out a robust assessment ofthe principal risks facing the entity, including those that would threaten its business model, futureperformance, solvency or liquidity;

• the disclosures in the annual report that describe those risks and explain how they are beingmanaged or mitigated;

• the Directors’ statement in the financial statements about whether they considered it appropriateto adopt the going concern basis of accounting in preparing them, and their identification of anymaterial uncertainties to the entity’s ability to continue to do so over a period of at least 12 monthsfrom the date of approval of the financial statements; and

• the Directors’ explanation in the annual report as to how they have assessed the prospects of theentity, over what period they have done so and why they consider that period to be appropriate, andtheir statement as to whether they have a reasonable expectation that the entity will be able tocontinue in operation and meet its liabilities as they fall due over the period of their assessment,including any related disclosures drawing attention to any necessary qualifications or assumptions.

Caroline Mercer (Senior statutory auditor)for and on behalf of Ernst & Young LLPStatutory AuditorLondon

24th October 2016


We have nothing material to addor to draw attention to.


Elect pp47-55 24/10/2016 16:46 Page 52

53

THE COM

PANY

Financial Statements

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST AUGUST 2016

2016 2015Revenue Capital Total Revenue Capital Total

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

Gains on investments held at fair value through profit or loss 3 — 20,470 20,470 — 13,675 13,675

Net foreign currency gains — 57 57 — 31 31Income from investments 4 6,484 — 6,484 5,983 — 5,983Interest receivable and similar income 4 32 — 32 35 — 35

Gross return 6,516 20,527 27,043 6,018 13,706 19,724Management fee 5 (315) (688) (1,003) (283) (579) (862)Other administrative expenses 6 (615) — (615) (738) — (738)

Net return on ordinary activitiesbefore taxation 5,586 19,839 25,425 4,997 13,127 18,124

Taxation 7 (6) — (6) (6) — (6)

Net return on ordinary activities after taxation 5,580 19,839 25,419 4,991 13,127 18,118

Return/(loss) per share: 9Managed Growth 8.94p 55.59p 64.53p 6.98p 38.40p 45.38pManaged Income 4.76p 1.10p 5.86p 4.67p (1.72)p 2.95pManaged Cash 0.39p 0.00p 0.39p 0.37p 0.00p 0.37p

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

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns representsupplementary information prepared under guidance issued by the Association of Investment Companies. Net return on ordinary activitiesafter taxation represents the profit for the year and also Total Comprehensive Income.

The notes on pages 56 to 75 form an integral part of these financial statements.

Elect pp47-55 24/10/2016 16:46 Page 53


THE COM

PANY

Financial Statements continued

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST AUGUST 2016

Called up share Share Other Capital Revenue capital premium reserve reserves reserve1 Total £’000 £’000 £’000 £’000 £’000 £’000

At 31st August 2014 24 82,076 69,356 115,341 2,954 269,751Repurchase and cancellation of the

Company’s own shares — — (833) — — (833)Issue of shares from Treasury — 34 343 — — 377Repurchase of shares into Treasury — — (10,868) — — (10,868)Share conversions during the year — 1,985 (1,985) — — —Expenses in relation to share conversion — (1) — — — (1)Net return on ordinary activities — — — 13,127 4,991 18,118Dividends paid in the year — — — — (4,524) (4,524)

At 31st August 2015 24 84,094 56,013 128,468 3,421 272,020Repurchase and cancellation of the

Company’s own shares — — (84) — — (84)Issue of shares from Treasury — 5 123 — — 128Repurchase of shares into Treasury — — (10,032) — — (10,032)Share conversions during the year — 1,326 (1,326) — — —Net return on ordinary activities — — — 19,839 5,580 25,419Dividends paid in the year — — — — (4,451) (4,451)

At 31st August 2016 24 85,425 44,694 148,307 4,550 283,000

1 This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.


Elect pp47-55 24/10/2016 16:46 Page 54

55

THE COM

PANY

STATEMENT OF FINANCIAL POSITION AT 31ST AUGUST 2016

2016 2015 Audited Audited Growth Income Cash Total Total Notes £’000 £’000 £’000 £’000 £’000

Fixed assets Investments held at fair value through

profit or loss 10 211,993 51,469 3,795 267,257 256,083

Current assets Derivative financial assets 11 1,885 — — 1,885 214 Debtors 11 543 541 — 1,084 1,817 Cash and cash equivalents 10,861 2,471 2 13,334 16,850

13,289 3,012 2 16,303 18,881Current liabilitiesCreditors: amounts falling due within one year 12 (97) (25) (2) (124) (1,757) Derivative financial liabilities 12 (436) — — (436) (1,187)

Net current assets 12,756 2,987 — 15,743 15,937

Net assets 224,749 54,456 3,795 283,000 272,020

Capital and reserves Called up share capital 14 18 4 2 24 24Share premium 14 28,585 37,107 19,733 85,425 84,094Other reserve 14 55,507 5,208 (16,021) 44,694 56,013Capital reserves 14 138,495 9,823 (11) 148,307 128,468Revenue reserve 14 2,144 2,314 92 4,550 3,421

Total shareholders’ funds 224,749 54,456 3,795 283,000 272,020

31st August 2016 31st August 2015Net asset value Net assets Net asset value Net assets

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

Managed Growth 15 664.2 224,749 605.2 214,391Managed Income 15 105.7 54,456 103.6 53,766Managed Cash 15 101.7 3,795 101.5 3,863

The financial statements on pages 53 to 55 were approved and authorised for issue by the Directors on 24th October 2016 and are signed ontheir behalf by:

James Robinson

Director


Company registration number: 3845060

Elect pp47-55 24/10/2016 16:46 Page 55



TH

E CO

MPAN

Y

1. Accounting policies(a) Basis of accounting

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ and with theStatement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ‘SORP’)issued by the Association of Investment Companies in November 2014.

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

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

The Managed Growth, Managed Income and Managed Cash Statement of Comprehensive Income and Statement of Financial Position,together with the notes to those statements are not required under UK GAAP or the SORP, and have not been audited but have beendisclosed to assist shareholders’ understanding of the net assets and liabilities, and income and expenses of the different shareclasses.

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 40 of the Directors’Report form part of these financial statements.

(b) Transition to FRS 102

This set of financial statements, in accordance with the SORP includes changes arising from the adoption of FRS 102 which theCompany is required to comply with for the first time for the year ended 31st August 2016.

Aside from presentational aspects, no significant changes have arisen from the adoption of the new standards. Where changes havearisen, they are substantially in relation to presentation, disclosure and non-quantifiable aspects – there has been no impact tofinancial position or financial performance and no comparative figures require restating.

The Company has elected not to prepare a Statement of Cash flows for the current year applying the exemption from FRS 102section 7.1A(c).

Early adoption

In March 2016, the FRC published amendments to FRS 102 concerning the fair value hierarchy disclosures. These amendments areeffective for accounting periods beginning on or after 1st January 2017. The Company has elected to adopt these amendments earlyin this set of financial statements. Full disclosure is given in note 18 on page 70.

(c) Investments

The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income andcapital growth. The 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 included initially at fair value which is taken to be their cost, excluding expenses incidental to purchase which are written offto capital at the time of acquisition. Subsequently the investments are valued at fair value, which are quoted bid prices forinvestments traded in active markets. For investments which are not traded in active markets, unlisted and restricted investments,the Board takes into account the latest traded prices, other observable market data and net asset values based on the latestmanagement accounts.

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

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST AUGUST 2016

Elect pp56-76 24/10/2016 16:46 Page 56

57

TH

E CO

MPAN

Y

(d) Accounting for reserves

Gains and losses on sales of investments and derivatives, including the related foreign exchange gains and losses, management feesallocated to capital and any other capital charges, are included in the Statement of Comprehensive Income and dealt with in capitalreserves within ‘Gains and losses on sales of investments’.

Increases and decreases in the valuation of investments and derivatives held at the year end including the related foreign exchangegains and losses, are included in the Statement of Comprehensive Income and dealt with in capital reserves within ‘Investmentholding gains and losses’.

(e) Income

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

UK dividends are included net of tax credits. Overseas dividends are included gross of any withholding tax.

Special dividends are looked at individually to ascertain the reason behind the payment. This will determine whether they are treatedas income or capital.

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 revenue. Any excess in the value of the shares received over the amount of the cash dividend isrecognised in capital.

Underwriting commission and deposit interest are recognised in revenue on an accruals basis.

(f) Expenses

All expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue except 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 theBoard’s expected 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 theBoard’s expected split of the revenue and capital return from the Managed Income investment portfolio.

(iii) Expenses incidental to the purchase of an investment are charged to capital and those incidental to the sale are deducted fromthe sales proceeds and then recognised in capital alongside the realised gain or loss on the investment. These expenses arecommonly referred to as transaction costs and include items such as stamp duty and brokerage commissions.

0.25% of the total costs of the Company as a whole, excluding marketing fees, are allocated to Managed Cash. Expenses charged tothe Company, common to Managed Growth and Managed Income are apportioned to the revenue account of each pool in the sameproportion as their net assets on a quarterly basis. Expenses charged to the Company in relation to a specific pool are allocateddirectly to that pool, with the other two pools remaining unaffected.

(g) Finance costs

Finance costs are accounted for on an accruals basis using the effective interest rate method.

(h) Financial instruments

Cash and cash equivalents may comprise cash including demand deposits which are readily convertible to a known amount of cashand are subject to an insignificant risk of change in value.

Other debtors and creditors do not carry any interest, are short term in nature and are accordingly stated at nominal value, withdebtors reduced by appropriate allowances for estimated irrecoverable amounts.

Elect pp56-76 24/10/2016 16:46 Page 57


NOTES TO THE FINANCIAL STATEMENTS CONTINUED


TH

E CO

MPAN

Y

1. Accounting policies continued

(h) Financial instruments continued

Derivative financial instruments, including futures contracts are based on their quoted price on the futures exchange and are includedin current assets or current liabilities. Any profits or losses on the closure or revaluation of positions are recognised in the Statementof Comprehensive Income and taken to capital reserves. Derivative financial instruments are initially recognised and de-recognised ona trade date basis.

(i) Taxation

Tax expense represents the sum of tax currently payable and deferred tax. Any tax payable is based on taxable profit for the period.Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items ofincome or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.

The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balancesheet date.

For the Company, any allocation of tax relief to capital is based on the marginal basis, such that tax allowable capital expenses areoffset against taxable income.

As an investment trust which has received approval under the appropriate tax regulations, the Company is not liable for taxation oncapital gains.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred taxliabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is morelikely than not that taxable profits 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 ismade in the donor pool and a charge in the recipient pool, based on half the value of these expenses to the Company as a whole.

(j) Value Added Tax (‘VAT’)

Expenses are disclosed inclusive of the related irrecoverable VAT. Recoverable VAT is calculated using the partial exemption methodbased on the proportion of zero rated supplies to total supplies.

(k) Functional currency

The Company is required to identify its functional currency, being the currency of the primary economic environment in which theCompany operates. The Board, having regard to the currency of the Company’s share capital and the predominant currency in whichits shareholders operate, has determined that sterling is the functional currency. Sterling is also the currency in which the financialstatements are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates at the date of the transaction. Monetaryassets, liabilities and equity investments held at fair value, denominated in foreign currencies at the year end are translated at therates of exchange prevailing at the year end.

(l) Dividends

Dividends are included in the financial statements in the year in which they are paid.

(m) Repurchase of Ordinary shares for cancellation

The cost of repurchasing ordinary shares including the related stamp duty and transactions costs is charged to ‘Other reserves’ anddealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis. The nominalvalue of ordinary share capital repurchased and cancelled is transferred out of ‘Called up share capital’ and into ‘Capital redemptionreserve’.

Elect pp56-76 24/10/2016 16:46 Page 58

59

TH

E CO

MPAN

Y

(n) Repurchase of Ordinary shares to hold in Treasury

The cost of repurchasing shares into Treasury, including the related stamp duty and transaction costs is charged to ‘Other reserves’and dealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis. Whereshares held in Treasury are subsequently cancelled, the nominal value of those shares is transferred out of ‘Called up share capital’and into ‘Capital redemption reserve’.

Should shares held in Treasury be reissued, the sales proceeds will be treated as recognised in ‘Other reserves’ at the value of theoriginal purchase price of those shares. The excess of the sales proceeds over the purchase price will be credited to share premium.

(o) Share issue costs

The costs of issuing shares are charged against any premium received on those shares. If no premium is receivable, the costs areincluded in the Statement of Comprehensive Income and charged to capital reserves.

2. Significant accounting judgments, estimates and assumptionsThe preparation of the Company’s financial statements on occasion requires management to make judgments, estimates andassumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. Theseassumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilitiesaffected in the current and future periods, depending on circumstance.

Management do not believe that any significant accounting judgments or estimates have been applied to this set of financialstatements, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within thenext financial year.

3. Gains on investments held at fair value through profit or loss 2016 2015£’000 £’000

Realised gains on sales of investments held at fair value through profit or loss based onhistorical cost 8,892 23,817

Amounts recognised in investment holding gains and losses in the previous year in respect ofinvestments sold during the year (12,388) (20,282)

(Losses)/gains on sales of investments based on the carrying value at the previous balance sheet date (3,496) 3,535Realised (losses)/gains on close out of futures contracts (973) 311Net movement in investment holding gains and losses 22,529 11,110Unrealised gains/(losses) on futures contracts 2,422 (1,273)Other capital charges (12) (8)

Total capital gains on investments held at fair value through profit or loss 20,470 13,675

Elect pp56-76 24/10/2016 16:46 Page 59




TH

E CO

MPAN

Y

4. Income Managed Managed ManagedGrowth Income Cash Total Total 2016 2016 2016 2016 2015£’000 £’000 £’000 £’000 £’000

Income from investmentsUK dividends 2,865 2,369 — 5,234 5,143Income from OEICs 875 166 — 1,041 668Overseas dividends — 176 18 194 141Property income distribution from UK REITS — 15 — 15 31

3,740 2,726 18 6,484 5,983

Interest receivable and similar incomeDeposit interest 28 4 — 32 32Underwriting commission — — — — 3

28 4 — 32 35

Total income 3,768 2,730 18 6,516 6,018

5. Management fee Managed Managed ManagedGrowth Income Cash Total Total 2016 2016 2016 2016 2015£’000 £’000 £’000 £’000 £’000

Charged to revenue 186 129 — 315 283Charged to capital 559 129 — 688 579

745 258 — 1,003 862

The management fees are included net of rebates. Details of the management fee of each share class are given in the Directors’Report on page 35.

Elect pp56-76 24/10/2016 16:46 Page 60

61

TH

E CO

MPAN

Y

6. Other administrative expenses Managed Managed ManagedGrowth Income Cash Total Total 2016 2016 2016 2016 2015£’000 £’000 £’000 £’000 £’000

Administration expenses 168 47 1 216 258Savings scheme costs1 137 38 — 175 244Directors’ fees2 104 25 — 129 131Depositary fees3 44 10 — 54 66Fees paid to the Company’s Auditor for the audit of the

financial statements4 27 6 — 33 31Audit related assurance services5 6 2 — 8 8

Total charged to revenue 486 128 1 615 738

1 Paid to the Manager for marketing and administration of saving scheme products. Includes £29,000 (2015: £41,000) irrecoverable VAT.2 Full disclosure is given in the Directors’ Remuneration Report on page 43.3 Includes £8,000 (2015: £11,000) irrecoverable VAT.4 Includes £5,000 (2015: £5,000) irrecoverable VAT.5 Review of quarterly conversion calculations, includes £1,600 (2015: £1,600) irrecoverable VAT.

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

7. Taxation(a) Analysis of tax charge in the year

2016 2015Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Overseas withholding tax 6 — 6 6 — 6

Total tax charge for the year 6 — 6 6 — 6

Elect pp56-76 24/10/2016 16:46 Page 61




TH

E CO

MPAN

Y

7. Taxation continued(b) Factors affecting current tax charge for the year

The tax charge for the year is lower (2015: lower) than the Company’s applicable rate of corporation tax for the year of 20% (2015:20.58%). The factors affecting the total tax charge for the year are as follows:

2016 2015Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Net return on ordinary activities before taxation 5,586 19,839 25,425 4,997 13,127 18,124

Net return on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of 20%(2015: 20.58%) 1,117 3,968 5,085 1,029 2,701 3,730

Effects of:Non taxable capital gains — (4,105) (4,105) — (2,820) (2,820)Non taxable UK dividends (1,163) — (1,163) (1,133) — (1,133)Non taxable overseas dividends (94) — (94) (51) — (51)Unutilised expenses 140 137 277 155 119 274Overseas withholding tax 6 — 6 6 — 6

Total tax charge for the year 6 — 6 6 — 6

(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £1,302,000 (2015: £1,168,000) based on a prospective corporation tax rate of18% (2015: 20%). The UK Government announced in July 2015 that the corporation tax rate is set to be cut to 19% in 2017 and 18% in2020. These reductions in the standard rate of corporation tax were substantively enacted on 26th October 2015 and becameeffective from 18th November 2015. The deferred tax asset has arisen due to the cumulative excess of deductible expenses overtaxable income. Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeablefuture and therefore no asset has been recognised in the financial statements.

Given the Company’s status as an investment trust company, and the intention to continue meeting the conditions required to obtainapproval, the Company has not provided deferred tax on any capital gains or losses arising on the revaluation or disposal ofinvestments.

Elect pp56-76 24/10/2016 16:46 Page 62

63

TH

E CO

MPAN

Y

8. Dividends(a) Dividends paid

2016 2015£’000 £’000

Managed Growth shares 2015 4th interim dividend of 1.50p (2014: 1.85p) 535 690Managed Growth shares 2016 1st interim dividend of 2.55p (2015: 2.55p) 892 948Managed Growth shares 2016 2nd interim dividend of 1.50p (2015: 1.35p) 522 494Managed Growth shares 2016 3rd interim dividend of 1.50p (2015: 1.35p) 515 487Managed Income shares 2015 4th interim dividend of 1.25p (2014: 1.10p) 650 566Managed Income shares 2016 1st interim dividend of 0.85p (2015: 0.85p) 441 436Managed Income shares 2016 2nd interim dividend of 0.85p (2015: 0.85p) 441 446Managed Income shares 2016 3rd interim dividend of 0.85p (2015: 0.85p) 441 442Managed Cash shares 2015 interim dividend of 0.35p (2014: 0.35p) 14 15

Total dividends paid in the year 4,451 4,524

In respect of dividends paid during the year ended 31st August 2016:

The 2015 4th interim dividends were paid on 25th September 2015 to shareholders on the register as at the close of business on28th August 2015.

The 1st interim dividends were paid on 23rd December 2015 to shareholders on the register as at the close of business on27th November 2015.

The 2nd interim dividends were paid on 23rd March 2016 to shareholders on the register as at the close of business on19th February 2016.

The 3rd interim dividends were paid on 24th June 2016 to shareholders on the register as at the close of business on 20th May 2016.

(b) Dividends declared2016 2015£’000 £’000

Managed Growth shares 2016 4th interim dividend of 3.15p (2015: 1.50p) 1,066 531Managed Income shares 2016 4th interim dividend of 1.35p (2015: 1.25p) 692 649Managed Cash shares 2016 interim dividend of 0.35p (2015: 0.35p) 14 14

Total dividends declared 1,772 1,194

In respect of the dividends declared, but not paid, during the year ended 31st August 2016, the dividends were paid on23rd September 2016 to shareholders on the register as at the close of business on 26th August 2016.

Elect pp56-76 24/10/2016 16:46 Page 63




TH

E CO

MPAN

Y

8. Dividends continued(c) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 (‘Section 1158’)

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

2016 2015£’000 £’000

Managed Growth shares 1st interim dividend of 2.55p (2015: 2.55p) 892 948Managed Growth shares 2nd interim dividend of 1.50p (2015: 1.35p) 522 494Managed Growth shares 3rd interim dividend of 1.50p (2015: 1.35p) 515 487Managed Growth shares 4th interim dividend of 3.15p (2015: 1.50p) 1,066 531Managed Income shares 1st interim dividend of 0.85p (2015: 0.85p) 441 436Managed Income shares 2nd interim dividend of 0.85p (2015: 0.85p) 441 446Managed Income shares 3rd interim dividend of 0.85p (2015: 0.85p) 441 442Managed Income shares 4th interim dividend of 1.35p (2015: 1.25p) 692 649Managed Cash shares interim dividend of 0.35p (2015: 0.35p) 14 14

Total dividends for Section 1158 purposes 5,024 4,447

The revenue available for distribution by way of dividend for the year is £5,580,000 (2015: £4,991,000).

9. Return per share2016 2015£’000 £’000

Managed GrowthReturn per Managed Growth share is based on the following:Revenue return 3,097 2,548Capital return 19,267 14,025

Total return 22,364 16,573

Weighted average number of shares in issue during the year 34,658,666 36,526,557

Revenue return per share 8.94p 6.98pCapital return per share 55.59p 38.40p

Total return per share 64.53p 45.38p

2016 2015£’000 £’000

Managed IncomeReturn per Managed Income share is based on the following:Revenue return 2,467 2,428Capital return/(loss) 572 (898)

Total return 3,039 1,530


Revenue return per share 4.76p 4.67pCapital return/(loss) per share 1.10p (1.72)p


Elect pp56-76 24/10/2016 16:46 Page 64

65

TH

E CO

MPAN

Y

2016 2015£’000 £’000

Managed CashReturn per Managed Cash share is based on the following:Revenue return 16 15Capital return — —

Total return 16 15


Revenue return per share 0.39p 0.37pCapital return per share 0.00p 0.00p


10. Investments 2016 2015£’000 £’000

Investments listed on a recognised stock exchange 196,473 186,766Unlisted investments1 70,784 69,317

Total investments held at fair value 267,257 256,083

1 Unlisted investments comprise investments in mutual funds, bond funds and liquidity funds.

2016Listed Unlisted Total £’000 £’000 £’000

Opening book cost 128,388 63,440 191,828Opening investment holding gains 58,378 5,877 64,255

Opening valuation 186,766 69,317 256,083Movement in the year:Purchases at cost 32,780 654 33,434Sales – proceeds (32,986) (8,307) (41,293)(Losses)/gains on sales of investments based on the carrying value at the previous

balance sheet date (4,019) 523 (3,496)Net movement in investment holding gains 13,932 8,597 22,529

196,473 70,784 267,257

Closing book cost 135,959 56,902 192,861Closing investment holding gains 60,514 13,882 74,396

Total investments held at fair value through profit or loss 196,473 70,784 267,257

Transaction costs on purchases during the year amounted to £206,000 (2015: £99,000) and on sales during the year amounted to£41,000 (2015: £38,000). These costs comprise mainly brokerage commission.

During the year, prior year investment holding gains amounting to £12,388,000 were transferred to gains on sales of investments asdisclosed in note 14.

Elect pp56-76 24/10/2016 16:46 Page 65




TH

E CO

MPAN

Y

11. Current assets2016 2015£’000 £’000

Derivative financial assetsFutures contracts1 1,885 214

Total 1,885 214

1 FTSE 100 Index futures at a contract value of £11,231,000 and a market value of £12,758,000 giving an unrealised asset of £1,527,000 and S&P500 E-Mini Index futures at a contractvalue of £6,893,000 and a market value of £7,251,000 giving an unrealised asset of £358,000.

2016 2015£’000 £’000

Debtors Securities sold awaiting settlement — 826Overseas tax recoverable 9 18Dividends and interest receivable 994 874Taxation recoverable 70 72Other debtors 11 27

Total 1,084 1,817

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

Cash and cash equivalents

Cash and cash equivalents comprise bank balances and short term deposits. The carrying amount of these represents their fair value.

12. Current liabilities2016 2015£’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement — 331Repurchase of the Company’s own shares awaiting settlement — 1,299Other creditors and accruals 124 127

124 1,757

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

2016 2015£’000 £’000

Derivative financial liabilitiesFutures contracts1 436 1,187

436 1,187

1 Short Euro Stoxx 50 Index Futures at a contract cost of £2,800,000 and a market value of £3,048,000 giving an unrealised liability of £248,000. Short TOPIX Index futures at acontract cost of £2,393,000 and a market value of £2,400,000 giving an unrealised liability of £7,000. Short Russell 2000 Index Futures at a contract cost of £2,027,000 and a marketvalue of £2,208,000 giving an unrealised liability of £181,000.

Elect pp56-76 24/10/2016 16:46 Page 66

67

TH

E CO

MPAN

Y

13. Called up share capital2016 2015

Number Numberof shares of shares

Managed GrowthShares in issue at the beginning of the year 35,423,887 37,294,296Net share conversion reduction (32,623) (282,740)Shares issued from Treasury — 50,000Shares repurchased into Treasury (1,552,985) (1,637,669)

Closing balance of shares in issue (excluding Treasury shares) 33,838,279 35,423,887Shares held in Treasury at the beginning of the year 2,087,353 499,684Shares repurchased into Treasury 1,552,985 1,637,669Shares issued from Treasury — (50,000)

Closing balance of shares held in Treasury 3,640,338 2,087,353

Closing balance of shares in issue (including Treasury shares) 37,478,617 37,511,240

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

Managed IncomeShares in issue at the beginning of the year 51,909,937 51,474,264Net share conversion increase 167,432 1,370,056Shares issued from Treasury 125,000 85,000Shares repurchased into Treasury (695,583) (1,019,383)

Closing balance of shares in issue (excluding Treasury shares) 51,506,786 51,909,937

Shares held in Treasury at the beginning of the year 1,827,916 893,533Shares repurchased into Treasury 695,583 1,019,383Shares issued from Treasury (125,000) (85,000)

Closing balance of shares held in Treasury 2,398,499 1,827,916

Closing balance of shares in issue (including Treasury shares) 53,905,285 53,737,853

Managed CashShares in issue at the beginning of the year 3,807,243 4,393,404Net share conversion increase 7,188 247,994Shares redeemed (48,190) (259,314)Shares repurchased for cancellation (34,923) (574,841)

Closing balance of shares in issue 3,731,318 3,807,243

During the year, nil Managed Growth shares, nil Managed Income shares and 34,923 Managed Cash shares were repurchased forcancellation for an aggregate consideration of £35,000. The reason for these purchases was to address imbalances in supply of anddemand for the Company’s shares within the market and thereby reduce the volatility and absolute level of the discount to net assetvalue per share at which those shares trade.

During the year, 1,552,985 Managed Growth shares, 695,583 Managed Income shares and nil Managed Cash shares were repurchasedinto Treasury for a total consideration of £10,032,000.

Elect pp56-76 24/10/2016 16:46 Page 67




TH

E CO

MPAN

Y

13. Called up share capital continuedShareholders of Managed Growth, Managed Income and Managed Cash shares are entitled to convert some or all of their holdings inany of these share classes into one or more of the other two share classes on 28th February, 31st May, 31st August and 30thNovember each year (or, if such days are not business days, the next business day).

Managed Cash shareholders can also elect to have all or part of their holding of such shares repurchased by the Company for cash atthe net asset value on each conversion date. During the year, the holders of 48,190 Managed Cash shares elected to have thoseholdings repurchased by the Company in these conversion opportunities for a total consideration of £49,000.

During the year, nil Managed Growth shares and 125,000 Managed Income shares were issued from Treasury for a total netconsideration of £128,000.

The Founder shares are non-voting and carry the right to receive a fixed dividend at the rate of 0.01% on their nominal value, but theholders have waived the right to receive such dividends.

14. Reserves Capital reserves

Gains and HoldingCalled up losses on gains and

share Share Other sales of losses on Revenuecapital premium reserve investments investments reserve1

£’000 £’000 £’000 £’000 £’000 £’000

Opening balance 24 84,094 56,013 65,477 62,991 3,421Realised foreign currency gains on cash and cash

equivalents — — — 57 — —Realised losses on investments — — — (3,496) — —Unrealised gains on investments — — — — 22,529 —Transfer on disposal of investments — — — 12,388 (12,388) —Realised gains on close out of futures — — — 1 — —Unrealised losses on futures from prior period now realised — — — (1,274) 1,274 —Unrealised gains on futures — — — — 1,448 —Issue of shares from Treasury (net of costs) — 5 123 — — —Repurchase of ordinary shares into Treasury — — (10,032) — — —Repurchase of ordinary shares for cancellation — — (35) — — —Shares redeemed during the year (at Conversion point) — — (49) — — —Issue proceeds arising from ordinary share conversion — 1,326 — — — —Repurchase of ordinary shares for cancellation

arising from share conversion — — (1,326) — — —Expenses charged to capital — — — (688) — —Other capital charges — — — (12) — —Dividends paid in the year — — — — — (4,451)Net revenue return for the year — — — — — 5,580

Closing balance 24 85,425 44,694 72,453 75,854 4,550

1 This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

Repurchase and cancellation of the Company’s own sharesDuring the year, nil Managed Growth shares, nil Managed Income shares and 34,923 Managed Cash shares were repurchased by theCompany and cancelled. In addition, the holders of 48,190 Managed Cash shares elected to have those holdings repurchased by theCompany in the four conversion opportunities available to holders of those shares in the year. The transfer from share capital tocapital redemption reserve is not shown above as the total nominal value of the shares cancelled is less than £1,000. No capitalredemption reserve is shown as the cumulative balance on the reserve at 31st August 2016 is less than £1,000.

Elect pp56-76 24/10/2016 16:46 Page 68

69

TH

E CO

MPAN

Y

15. Net asset value per shareThe net asset values per share are calculated as follows:

2016 2015Managed Managed Managed Managed Managed ManagedGrowth Income Cash Growth Income Cash

Net assets (£’000) 224,749 54,456 3,795 214,391 53,766 3,863Number of shares in issue (excluding shares

held in Treasury) 33,838,279 51,506,786 3,731,318 35,423,887 51,909,937 3,807,243

Net asset value per share 664.2p 105.7p 101.7p 605.2p 103.6p 101.5p

16. Contingent liabilities and capital commitmentsAt the balance sheet date there were no contingent liabilities or capital commitments (2015: none).

17. Related Party TransactionsDetails of the management contracts are set out in the Directors’ Report on page 35. The total amount payable to the Manager for theyear in respect of these contracts was £1,003,000 (2015: £862,000) net of rebates, of which £nil (2015: £nil) was outstanding at theyear end. In addition £175,000 (2015: £244,000) was payable to the Manager for the marketing and administration of savings schemeproducts of which £nil (2015: £nil) was outstanding at the year end.

Included in other administration expenses in note 6 on page 61 are safe custody fees amounting to £3,000 (2015: £3,000) payable toJPMorgan Chase of which £1,000 (2015: £1,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm’slength. Commission amounting to £32,000 (2015: £18,000) was payable to JPMorgan Securities Limited for the year of which £nil(2015: £nil) was outstanding at the year end.

The Company holds investments in funds managed by JPMAM. At 31st August 2016 these were valued at £164.6 million (2015:£162.0 million) and represented 61.57% (2015: 63.28%) of the Company’s investment portfolio. During the year the Company made£4.3 million purchases of such investments (2015: £25.6 million) and sales with a total value of £17.2 million (2015: £12.8 million).Income amounting to £3.2 million (2015: £2.8 million) was receivable from these investments during the year of which £608,000(2015: £480,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £12,000 (2015: £8,000) were payable to JPMorgan Chase during the year ofwhich £4,000 (2015: £2,000) was outstanding at the year end.

At the year end, total cash of £1,780,000 (2015: £1,373,000) was held with JPMorgan Chase. A net amount of interest of £1,000 (2015:£3,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2015: £nil) was outstanding at the yearend.

Full details of Directors’ remuneration and shareholdings can be found on page 43 and in note 6 on page 61.

Elect pp56-76 24/10/2016 16:46 Page 69




TH

E CO

MPAN

Y

18. Disclosures regarding financial instruments held at fair valueThe Company’s financial instruments within the scope of FRS 102 that are held at fair value comprise its investment portfolio andderivative financial instruments.

The investments are categorised into a hierarchy consisting of the following three levels:

(1) The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurementdate

(2) Inputs other than quoted prices included within Level 1 that are observable (i.e.: developed using market data) for the asset orliability, either directly or indirectly

(3) Inputs are unobservable (i.e.: for which market data is unavailable) for the asset or liability

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair valuemeasurement of the relevant asset.

Details of the valuation techniques used by the Company are given in note 1(c) on page 56.

The following table sets out the fair value measurements using the FRS 102 hierarchy at 31st August.

2016 2015Assets Liabilities Assets Liabilities £’000 £’000 £’000 £’000

Level 11 202,153 (436) 190,846 (1,187)Level 22 66,989 — 65,451 —

Total 269,142 (436) 256,297 (1,187)

1 Includes liquidity funds and futures currency contracts.2 Includes investments in Open Ended Investment Schemes (OEIC's) and Société d'investissement à Capital Variable (SICAV).

19. Financial instruments’ exposure to risk and risk management policiesAs an investment trust, the Company invests in equities and other securities for the long term so as to secure its investment objectivestated on the ‘Features’ page of this report. In pursuing this objective, the Company is exposed to a variety of financial risks that couldresult in a reduction in the Company’s net assets or a reduction in the revenue available for dividends.

These financial risks include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.The Directors’ policy for managing these risks is set out below. The Company Secretary, in close cooperation with the Board and theManager, coordinates the Company’s risk management policy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, havenot changed from those applying in the comparative year.

The Company’s financial instruments may comprise the following:

– investments in investment trusts, equities, investment companies, open ended investment companies, bond funds and sterlingliquidity funds;

– derivative financial instruments including futures contracts and forward currency contracts; and

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

Elect pp56-76 24/10/2016 16:46 Page 70

71

TH

E CO

MPAN

Y

(a) Market riskThe fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices.This market risk comprises three elements – currency risk, interest rate risk and other price risk. Information to enable an evaluationof the nature and extent of these three elements of market risk is given in parts (i) to (iii) of this note, together with sensitivityanalyses where appropriate. The Board reviews and agrees policies for managing these risks and these policies have remainedunchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when making eachinvestment decision and monitors the overall level of market 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 financial assets arealmost entirely denominated in sterling (the Company’s functional currency and the currency in which it reports). As a result,movements in exchange rates will have no direct material effect on the value of those items. The investments in the ManagedCash pool of assets comprise sterling liquidity funds and consequently there is no foreign currency exposure. The investmentsin the Managed Growth and Managed Income pools of assets are almost entirely priced in sterling. However, there is someindirect exposure to foreign currencies, particularly in the Managed Growth portfolio which includes holdings in investmenttrusts and open ended investment companies 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 funds held inthe Managed Cash pool of assets. The Company had no borrowings at the year end (2015: none). Interest rate movements mayalso affect the income receivable from and the fair value of investments in bond funds held by the Company. However, it is notpossible to assess the impact of interest rate movements on the value of these investments accurately and therefore theexposure has been included in other price risk in part (iii) to this note. The Company has no other direct exposure to fair valueinterest rate risk.

Management of interest rate risk

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

Interest rate exposure

The exposure of financial assets and liabilities to floating interest rates using the year end figures, giving cash flow interest raterisk when rates are reset, is shown below.

2016 2015

Managed Managed Managed Managed Managed ManagedGrowth Income Cash Total Growth Income Cash Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Exposure to floating interest rates:Cash and short term deposits 10,861 2,471 2 13,334 16,417 365 68 16,850Investments in liquidity funds — — 3,795 3,795 — — 3,866 3,866

Total exposure 10,861 2,471 3,797 17,129 16,417 365 3,934 20,716

Interest receivable on cash balances, or paid on overdrafts, is at a margin below or above LIBOR respectively (2015: same).The liquidity funds generally aim to produce a yield comparable to the seven day sterling London Interbank Bid Rate.

Elect pp56-76 24/10/2016 16:46 Page 71




TH

E CO

MPAN

Y

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

(ii) Interest rate risk continued

Interest rate sensitivity

The following tables illustrate the sensitivity of the return after taxation for the year and net assets to a 1% (2015: 1%) increaseor decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level of changeis considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is basedon the Company’s monetary financial instruments with a direct interest rate exposure held at the balance sheet date with allother variables held constant.

A 1% increase in interest rates would have the following effect:

2016 2015


Statement of Comprehensive Income –return after taxation

Revenue return 109 25 38 172 164 4 39 207

Net assets 109 25 38 172 164 4 39 207

In the event of a 1% decrease in interest rates, the interest receivable on cash balances and liquidity funds would fall to zero, asthe interest earned on these balances is currently less than 1%.

In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposure to aninterest rate rise due to fluctuations in the level of cash balances and investment in liquidity funds.

(iii) Other price risk

Other price risk includes changes in market prices, other than those arising from interest rate risk or currency movements,which may 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 risk associatedwith particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which isselected in accordance with the Company’s investment objectives and seeks to ensure that individual stocks meet an acceptablerisk profile.

Other price risk exposure

The Company’s exposure to changes in market prices at the year end comprises its holdings in equity investments, OEIC funds,bond funds and futures contracts as follows. Holdings in liquidity funds are not deemed to be exposed to other price risk.

Elect pp56-76 24/10/2016 16:46 Page 72

73

THE COMPANY

2016 2015


Equity investments held at fair value through profit or loss1 211,993 48,844 — 260,837 199,782 49,817 — 249,599

Investments in bond funds held at fair value through profit or loss — 2,625 — 2,625 — 2,618 — 2,618

Derivative instruments – futures contracts 1,449 — — 1,449 (973) — — (973)

213,442 51,469 — 264,911 198,809 52,435 — 251,244

1 Includes investments in OEIC funds shown on page 70.

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

Concentration of exposure to other price risk

A list of investments in the Managed Growth and Managed Income portfolios is given on pages 10 and 18. This shows that theManaged Growth portfolio comprises investments with a broad geographical exposure through investment in UK listedinvestment trusts and open-ended funds, with no concentration of exposure to any one country with the exception of the UK.A substantial proportion of the Managed Income portfolio is invested in UK equities and accordingly there is a concentration ofexposure. However it should be noted that an investment may not necessarily be wholly exposed to the economic conditions inits country of domicile or of listing.

Other price risk sensitivity

The following table illustrates the sensitivity of revenue after taxation for the year and net assets to an increase or decrease of10% (2015: 10%) in the fair value of equity investments, bond funds and futures contracts held in the Managed Growth andManaged Income portfolios. This level of change is considered to be a reasonable illustration based on observation of currentmarket conditions. The sensitivity analysis is based on the Company’s investments and adjusting for a change in themanagement fee, but with all other variables held constant.

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

2016 2015


Statement of Comprehensive Income —return after taxation:

Revenue return (22) (14) — (36) (21) (14) — (35)Capital return 22,371 5,133 — 27,504 21,429 5,230 — 26,659

Total return after taxation 22,349 5,119 — 27,468 21,408 5,216 — 26,624

Net assets 22,349 5,119 — 27,468 21,408 5,216 — 26,624

Elect pp56-76 26/10/2016 16:52 Page 73




TH

E CO

MPAN

Y

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

(iii) Other price risk continued

Other price risk sensitivity continued

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

2016 2015


Statement of Comprehensive Income —return after taxation:

Revenue return 22 14 — 36 21 14 — 35Capital return (22,371) (5,133) — (27,504) (21,429) (5,230) — (26,659)

Total return after taxation (22,349) (5,119) — (27,468) (21,408) (5,216) — (26,624)

Net assets (22,349) (5,119) — (27,468) (21,408) (5,216) — (26,624)

(b) Liquidity riskThis is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled bydelivering cash or another financial asset.

Management of the risk

Liquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can be sold to meetfunding requirements if necessary. The Board would expect to be fully invested in normal market conditions but to retain sufficientcash balances 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 are asfollows:

2016 2015More than More than

Three three months Three three monthsmonths but less than months but less thanor less six months Total or less six months Total£’000 £’000 £’000 £’000 £’000 £’000

Creditors:Securities purchased awaiting settlement — — — 331 — 331Repurchase of the Company’s own shares

awaiting settlement — — — 1,299 — 1,299Other creditors and accruals 124 — 124 127 — 127Derivative financial liabilities – futures contracts 436 — 436 1,187 — 1,187

560 — 560 2,944 — 2,944

The liabilities shown above represent future contractual payments and therefore may differ from the amounts shown in theStatement of Financial Position.

(c) Credit riskCredit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction couldresult in loss to the Company.

Elect pp56-76 24/10/2016 16:46 Page 74

75

TH

E CO

MPAN

Y

Management of credit risk

Portfolio dealing

The Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates the risk oflosing the principal of a trade during the settlement process. The Manager continuously monitors dealing activity to ensure bestexecution, a process that involves measuring various indicators including the quality of trade settlement and incidence of failedtrades. Counterparty lists are maintained and adjusted accordingly.

The credit ratings of the liquidity funds held in the Managed Cash portfolio are disclosed in the list of investments for Managed Cash.

Cash and cash equivalents

Counterparties are subject to regular credit analysis by the Manager and deposits can only be placed with counterparties that havebeen approved by JPMAM’s Counterparty Risk Group.

Exposure to JPMorgan Chase

JPMorgan Chase Bank, N.A. is the custodian of the Company’s assets. The Company’s assets are segregated from JPMorgan Chase’sown trading assets. Therefore these assets are designed to be protected from creditors in the event that JPMorgan Chase were tocease trading. The Depositary, BNY Mellon Trust and Depositary (UK) Limited, is responsible for the safekeeping of all custodial assetsof the Company and for verifying and maintaining a record of all other assets of the Company. However, no absolute guarantee canbe given on the protection of all the assets of the Company.

Credit risk exposure

The Company's investments in liquidity funds and the amounts shown in the Statement of Financial Position under current assetsrepresent the maximum exposure to credit risk at the current and comparative year ends.

20. Capital management policies and proceduresThe Company’s capital is divided into three share classes, each with distinct objectives and investment policies. The capital of thethree share classes is as disclosed in the Statement of Financial Position and is managed on a basis consistent with the investmentobjectives and policies disclosed in the Business Review on pages 27 to 28.

The Company’s capital structure is as detailed in note 13 on pages 67 and 68. The Company has no gearing. The Board, with theassistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing basis. This reviewincludes:

– the need to buy back equity shares, either for cancellation or to be held in Treasury, which takes into account the share pricediscount or premium; and the need for issues of new shares;

– the Board does not intend to utilise borrowings to increase the funds available for investment;

– the opportunity for issues of new shares, including from Treasury; and

– the level of dividend distribution in excess of that which is required to be distributed.

Elect pp56-76 24/10/2016 16:46 Page 75


TH

E CO

MPAN

Y

Regulatory Disclosures

LeverageFor the purposes of the Alternative Investment Fund Managers Directive (‘AIFMD’), leverage is any method which increases the Company’sexposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its netasset value and can be calculated on a gross and a commitment method in accordance with AIFMD. Under the gross method, exposurerepresents the sum of the Company’s positions without taking into account any hedging and netting arrangements. Under the commitmentmethod, exposure is calculated after certain hedging and netting positions are offset against each other.

The Company’s maximum and actual leverage (see Glossary of Terms and Definitions on page 82) levels at 31st August 2016 are shownbelow:

Leverage Exposure

Gross CommitmentMethod Method

% %

Managed GrowthMaximum limit 200 200Actual 110 112

Managed IncomeMaximum limit 200 200Actual 104 99

Managed CashMaximum limit 200 200Actual 100 100

JPMorgan Funds Limited Remuneration JPMF is the authorised manager of the Company and is part of the J.P. Morgan Chase & Co. group of companies. In this disclosure, the terms‘J.P. Morgan’ or ‘Firm’ refer to that group, and each of the entities in that group globally, unless otherwise specified. This disclosure hasbeen prepared in accordance with the AIFMD, the European Commission Delegated Regulation supplementing the AIFMD, the ‘Guidelines onSound Remuneration Policies’ under the AIFMD issued by the European Securities and Markets Authority and the Financial ConductAuthority Handbook (SYSC 19B: The AIFM Remuneration Code and FUND 3.3).

JPMF Remuneration PolicyThe current remuneration policy for the EMEA Global Investment business of J.P. Morgan can be found athttps://am.jpmorgan.com/gb/en/asset-management/gim/adv/legal/emea-remuneration-policy. This policy includes details of the alignmentwith risk management, the financial and non-financial criteria used to evaluate performance and the measures adopted to avoid or manageconflicts of interest.

JPMF Quantitative DisclosuresDisclosures in accordance with FUND 3.3.5, Article 22(2)e and 22(2)f of the AIFMD and Article 107 of the Delegated Regulation are disclosedon the Company’s website at www.jpmelect.co.uk

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (‘AIFMD’) DISCLOSURES(UNAUDITED)

Elect pp56-76 24/10/2016 16:46 Page 76

77

TH

E

CO

MP

AN

Y

The name JPMorgan Elect plc reflects the capital structure and theinvestment flexibility the Company offers to shareholders.

Capital Structure • Managed Growth Shares

Designed to provide long term capital growth by investing in arange of closed and open-ended funds managed principally byJPMAM.

• Managed Income Shares Designed to provide a growing income together with the potentialfor long term capital growth by investing in equities, investmenttrusts and fixed income securities.

• Managed Cash Shares Designed to preserve capital with a yield based on short terminterest rates by investing in a range of liquidity funds, selectedfor their yield and credit rating, and short dated AAA-rated UK orG7 government securities hedged into sterling.

Investing in Managed Cash SharesBased on its return characteristics and the costs incurred intransacting in its shares, an investment in Managed Cash shouldonly be considered by existing holders of Managed Growth and/orManaged Income who wish to switch into Managed Cash on thedesignated quarterly conversion dates. Accordingly, Managed Cashshares are not available for purchase through the J.P. MorganInvestment Account, J.P. Morgan ISA or J.P. Morgan SIPP or onJ.P. Morgan WealthManager+.

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 Managed Cashshares to elect to have all or part of their holding of such sharesrepurchased by the Company for cash at a price close to net assetvalue on each conversion date (see below).

The amount payable per Managed Cash share on repurchase is thenet asset value of a Managed Cash share at the date of the relevantconversion calculation, less the applicable stamp duty at a rate of0.5%.

Conversion Opportunities Shareholders in any of the three share classes are able to convertsome or all of their shares into shares of the other classes on aquarterly basis without such conversion being treated, undercurrent law, as a disposal for UK capital gains tax purposes.

The conversion mechanism allows shareholders to alter theirinvestment profile to match their changing investment needs in atax-efficient manner. Conversion dates arise every three months on28th/29th February, 31st May, 31st August and 30th November(if such a date is not a business day, then the conversion date willmove to the next business day). The Company, or its Manager, willmake no administrative charge for any of the above conversions.

Conversion Between the Share Classes Those who hold shares through the J.P. Morgan Investment Account,J.P. Morgan ISA or J.P. Morgan SIPP must complete and submit aconversion instruction form which can be found atwww.jpmelect.co.uk. Instructions for CREST holders can also befound at this address. Those who hold shares in certificated form onthe main register must complete the conversion notice printed onthe reverse of their certificate and send it to the Company’sRegistrars at the following address:

Equiniti LimitedRepayments TeamCorporate ActionsAspect HouseSpencer RoadLancingWest SussexBN99 6DA

Instructions must be received no earlier than 45 and no later than14 calendar days before the chosen conversion date.

The number of shares that will arise upon conversion will bedetermined on the basis of the relative net asset values of eachshare class, taking into account the costs of the conversion process.Conversion will not affect the net asset value per share of thoseshares held by any shareholder who does not convert.

With regard to those who hold shares through the J.P. MorganInvestment Account, J.P. Morgan ISA or J.P. Morgan SIPP, theminimum number of shares of any class which may be converted is1,000 shares (subject to a minimum value of £500). Conversion offewer shares may only take place if the number to be convertedconstitutes the shareholder’s entire holding in that class.

Shareholders who hold shares in certificated form on the mainregister or those who hold their shares in electronic form throughCREST may convert a minimum of 1,000 shares or, if lower, theirentire holding.

More details concerning conversion dates and conversioninstruction forms can be found on the Company’s website:www.jpmelect.co.uk.

CAPITAL STRUCTURE AND CONVERSION BETWEEN SHARE CLASSES

Shareholder Information

Elect pp77-84 24/10/2016 16:45 Page 77


TH

E

CO

MP

AN

Y

Shareholder Information continued

Notice is hereby given that the Annual General Meeting of JPMorganElect plc will be held at Trinity House, Tower Hill, London EC3N 4DHon Tuesday, 22nd November 2016 at 3.00 p.m. (or, if later,immediately following the conclusion of the General Meeting, whichis scheduled to start at 2.50 p.m.) for the following purposes:

1. To receive the Directors’ Report, the Annual Accounts and theAuditor’s Report for the year ended 31st August 2016.

2. To approve the Directors’ Remuneration Policy.

3. To approve the Directors’ Remuneration Report for the yearended 31st August 2016.

4. To reappoint Alan Hodson as a Non-Executive Director of theCompany.

5. To reappoint James Robinson as a Non-Executive Director ofthe Company.

6. To reappoint Angus Macpherson as a Non-Executive Director ofthe Company.

7. To reappoint Carla Stent as a Non-Executive Director of theCompany.

8. To reappoint Roger Yates as a Non-Executive Director of theCompany.

9. To reappoint Ernst & Young LLP as the Auditor of the Companyand to authorise the Directors to determine theirremuneration.

Special Business To consider the following resolutions:

Authority to allot relevant securities – Ordinary Resolution 10. THAT the Board be and is hereby generally and unconditionally

authorised (without prejudice to the authority proposed forapproval by Shareholders at the General Meeting immediatelypreceding this Annual General Meeting and in substitution ofany authorities previously granted to the Directors), pursuantto and in accordance with Section 551 of the Companies Act2006, to exercise all the powers of the Company to allotrelevant securities in the Company and to grant rights tosubscribe for, or to convert any security into, shares in theCompany, up to 3,367,461 Managed Growth Shares, 5,143,432Managed Income Shares and 373,131 Managed Cash Shares (or,if different, the aggregate amount representing approximately10% of the issued share capital of each share class of theCompany as at the date of the admission to trading of newManaged Growth Shares, Managed Income Shares andManaged Cash Shares to be issued in connection with the

scheme of reconstruction of JPMorgan Income & GrowthInvestment Trust plc) provided that this authority shall expireat the conclusion of the Annual General Meeting of theCompany to be held in 2017 unless renewed at a generalmeeting prior to such time, save that the Company may beforesuch expiry make offers, agreements or arrangements whichwould or might require relevant securities to be allotted, orrights to be granted, after such expiry and so that the Directorsof the Company may allot relevant securities, and grant rights,in pursuance of such offers, agreements or arrangements as ifthe authority conferred hereby had not expired.

Authority to disapply pre-emption rights on allotment ofrelevant securities – Special Resolution 11. THAT, subject to the passing of resolution 10 set out above, the

Directors of the Company be and are hereby empoweredpursuant to Sections 570 and 573 of the Companies Act 2006to allot equity securities (within the meaning of Section 560 ofthe Act) for cash pursuant to the authority conferred byresolution 10 or by way of a sale of Treasury shares as ifSection 561(1) of the Companies Act 2006 did not apply to anysuch allotment, provided that this power shall be limited to:

(a) the allotment of equity securities in the Company by way ofrights issue, open offer or otherwise to holders of ManagedGrowth shares, Managed Income shares and Managed Cashshares where the equity securities respectively attributable tothe interest of all Managed Growth shares, Managed Incomeshares and Managed Cash shares are proportionate to therespective numbers of Managed Growth shares, ManagedIncome shares and Managed Cash shares held by them subjectto such exclusions or other arrangements as the Board maydeem necessary or expedient in relation to fractionalentitlements or local or practical problems under the laws of,or the requirements of, any regulatory body or any stockexchange or any territory or otherwise howsoever; and/or

(b) the allotment (otherwise than pursuant to sub-paragraph (a)above) of equity securities for cash or by way of a sale ofTreasury shares up to 3,367,461 Managed Growth Shares,5,143,432 Managed Income Shares and 373,131 Managed CashShares (or, if different, the aggregate amount representingapproximately 10% of the issued share capital of each shareclass of the Company as at the date of the admission to tradingof new Managed Growth Shares, Managed Income Shares andManaged Cash Shares to be issued in connection with thescheme of reconstruction of JPMorgan Income & GrowthInvestment Trust plc) at a price not less than the net asset valueper share; and shall expire upon the expiry of the generalauthority conferred by resolution 10 above, save that the

NOTICE OF ANNUAL GENERAL MEETING

Elect pp77-84 24/10/2016 16:45 Page 78

79

TH

E

CO

MP

AN

Y

Company may before such expiry make offers or agreementswhich would or might require equity securities to be allottedafter such expiry and the Board may allot equity securities inpursuance of such offers, agreements or arrangements as if thepower conferred hereby had not expired.

Authority to repurchase the Company’s shares – SpecialResolution 12. THAT the Company be generally and, subject as hereinafter

appears, unconditionally authorised in accordance with Section701 of the Companies Act 2006 to make market purchases(within the meaning of Section 693 of the Companies Act 2006)of its issued Managed Growth shares, Managed Income sharesand Managed Cash shares (all being classes of ordinary sharesin the capital of the Company), on such terms and in suchmanner as the Directors may from time to time determine.

PROVIDED ALWAYS THAT:

(i) the maximum number of Managed Growth, ManagedIncome and Managed Cash shares hereby authorised to bepurchased shall be 5,047,825, 7,710,005 or 559,324respectively, or, if different, that number of ManagedGrowth, Managed Income and Managed Cash shares whichis equal to 14.99% of the issued share capital of therelevant share class as at the date of the admission totrading of new Managed Growth Shares, Managed IncomeShares and Managed Cash Shares to be issued inconnection with the scheme of reconstruction of JPMorganIncome & Growth Investment Trust plc;

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

(iii) the maximum price which may be paid for a share shall bean amount equal to the highest of: (a) 105% of theaverage of the middle market quotations for the sharetaken from and calculated by reference to the LondonStock Exchange Daily Official List for the five business daysimmediately preceding the day on which the share ispurchased; (b) the price of the last independent trade; 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 date ofpurchase;

(v) the authority hereby conferred shall expire on 22nd June2018 unless the authority is renewed at the Company’sAnnual General Meeting in 2017 or at any other generalmeeting prior to such time; and

(vi) the Company may make a contract to purchase sharesunder the authority hereby conferred prior to the expiryof such authority which contract will or may be executedwholly or partly after the expiry of such authority and maymake a purchase of shares pursuant to any such contractnotwithstanding such expiry.

Authority to make off-market purchases – Special Resolution 13. THAT the proposed Contingent Purchase contract between

Winterflood Securities Limited and JPMorgan Elect plc toenable the Company to make off-market purchases of its ownsecurities pursuant to Section 694 of the Companies Act 2006in the form produced at the meeting and initialled by theChairman, be and is hereby approved and the Company be andis hereby authorised to enter into and perform such contract,but so that the approval and authority conferred by thisresolution shall expire on the day immediately preceding thedate which is 18 months after the passing of this resolution or,if earlier, the next Annual General Meeting of the Company.

By order of the Board Rhys Williams, for and on behalf of JPMorgan Funds Limited, Company Secretary.

24th October 2016

Elect pp77-84 24/10/2016 16:45 Page 79


TH

E

CO

MP

AN

Y


NOTICE OF ANNUAL GENERAL MEETING CONTINUED

Notes These notes should be read in conjunction with the notes on the reverse ofthe proxy form.

1. A member entitled to attend and vote at the Meeting may appointanother person(s) (who need not be a member of the Company) toexercise all or any of his rights to attend, speak and vote at theMeeting. A member can appoint more than one proxy in relation to theMeeting, provided that each proxy is appointed to exercise the rightsattaching to different shares held by him.

2. A proxy does not need to be a member of the Company but mustattend the Meeting to represent you. Your proxy could be theChairman, another Director of the Company or another person who hasagreed to attend to represent you. Details of how to appoint theChairman or another person(s) as your proxy or proxies using theproxy form are set out in the notes to the proxy form. If a voting box onthe proxy form is left blank, the proxy or proxies will exercise his/theirdiscretion both as to how to vote and whether he/they abstain(s) fromvoting. Your proxy must attend the Meeting for your vote to count.Appointing a proxy or proxies does not preclude you from attendingthe Meeting and voting in person.

3. Any instrument appointing a proxy, to be valid, must be lodged inaccordance with the instructions given on the proxy form no later than12 noon two business days prior to the Meeting (i.e. excludingweekends and bank holidays).

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments alsoapplies in relation to amended instructions. Any attempt to terminateor amend a proxy appointment received after the relevant deadline willbe disregarded. Where two or more valid separate appointments ofproxy are received in respect of the same share in respect of the sameMeeting, the one which is last received (regardless of its date or thedate of its signature) shall be treated as replacing and revoking theother or others as regards that share; if the Company is unable todetermine which was last received, none of them shall be treated asvalid in respect of that share.

5. To be entitled to attend and vote at the Meeting (and for the purpose ofthe determination by the Company of the number of votes they maycast), members must be entered on the Company’s register ofmembers as at 6.30 p.m. two business days prior to the Meeting (the‘specified time’). If the Meeting is adjourned to a time not more than48 hours after the specified time applicable to the original Meeting,that time will also apply for the purpose of determining the entitlementof members to attend and vote (and for the purpose of determining thenumber 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 at6.30 p.m. two business days prior to the adjourned Meeting or, if theCompany gives notice of the adjourned Meeting, at the time specifiedin that notice. Changes to entries on the register after this time shall bedisregarded in determining the rights of persons to attend or vote atthe Meeting or adjourned Meeting.

6. Entry to the Meeting will be restricted to shareholders and their proxyor proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s) toact as its representative(s) and to vote in person at the Meeting (seeinstructions given on the proxy form). In accordance with theprovisions of the Companies Act 2006, each such representative mayexercise (on behalf of the corporation) the same powers as thecorporation could exercise if it were an individual member of theCompany, provided that they do not do so in relation to the sameshares. It is therefore no longer necessary to nominate a designatedcorporate representative.

Representatives should bring to the meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of the CompaniesAct 2006 can require the Company to publish a statement on itswebsite setting out any matter relating to: (a) the audit of theCompany’s accounts (including the Auditor’s report and the conduct ofthe audit) that are to be laid before the Annual General Meeting(‘AGM’); or (b) any circumstances connected with an Auditor of theCompany ceasing to hold office since the previous AGM, which themembers propose to raise at the Meeting. The Company cannot requirethe members requesting the publication to pay its expenses. Anystatement placed on the website must also be sent to the Company’sAuditor no later than the time it makes its statement available on thewebsite. The business which may be dealt with at the AGM includes anystatement that the Company has been required to publish on itswebsite pursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Companymust cause to be answered at the AGM any question relating to thebusiness being dealt with at the AGM which is put by a memberattending the Meeting except in certain circumstances, including if it isundesirable in the interests of the Company or the good order of theMeeting or if it would involve the disclosure of confidential information.

10. Under Sections 338 and 338A of the Companies Act 2006, membersmeeting the threshold requirements in those sections have the right torequire the Company: (i) to give, to members of the Company entitledto receive notice of the Meeting, notice of a resolution which thosemembers intend to move (and which may properly be moved) at theMeeting; and/or (ii) to include in the business to be dealt with at theMeeting any matter (other than a proposed resolution) which mayproperly be included in the business at the Meeting. A resolution mayproperly be moved, or a matter properly included in the businessunless: (a) (in the case of a resolution only) it would, if passed, beineffective (whether by reason of any inconsistency with anyenactment or the Company’s constitution or otherwise); (b) it isdefamatory of any person; or (c) it is frivolous or vexatious. A requestmade pursuant to this right may be in hard copy or electronic form,must identify the resolution of which notice is to be given or the matterto be included in the business, must be accompanied by a statementsetting out the grounds for the request, must be authenticated by theperson(s) making it and must be received by the Company not later

Elect pp77-84 24/10/2016 16:45 Page 80

81

TH

E

CO

MP

AN

Y

than the date that is six clear weeks before the Meeting, and (in thecase of a matter to be included in the business only) must beaccompanied by a statement setting out the grounds for the request.

11. A copy of this Notice of Meeting has been sent for information only topersons who have been nominated by a member to enjoy informationrights under Section 146 of the Companies Act 2006 (a ‘NominatedPerson’). The rights to appoint a proxy can not be exercised by aNominated Person: they can only be exercised by the member.However, a Nominated Person may have a right under an agreementbetween him and the member by whom he was nominated to beappointed as a proxy for the Meeting or to have someone else soappointed. If a Nominated Person does not have such a right or doesnot wish to exercise it, he may have a right under such an agreementto give instructions to the member as to the exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this Notice of Meeting, details of the total number of sharesin respect of which members are entitled to exercise voting rights atthe AGM, the total voting rights members are entitled to exercise at theAGM and, if applicable, any members’ statements, members’resolutions or members’ matters of business received by the Companyafter the date of this Notice of Meeting will be available on theCompany’s website www.jpmelect.co.uk.

13. The register of interests of the Directors and connected persons in theshare capital of the Company and the Directors’ letters of appointmentare available for inspection at the Company’s registered office duringusual business hours on any weekday (Saturdays, Sundays and publicholidays excepted). It will also be available for inspection at the AGM.No Director has any contract of service with the Company.

14. You may not use any electronic address provided in this Notice ofMeeting to communicate with the Company for any purposes otherthan those expressly stated.

15. As an alternative to completing a hard copy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies electronically byvisiting www.sharevote.co.uk. You will need your Voting ID, Task ID andShareholder Reference Number (this is the series of numbers printedunder your name on the Form of Proxy/Voting Direction Form).Alternatively, if you have already registered with Equiniti Limited’sonline portfolio service, Shareview, you can submit your Form of Proxyat www.shareview.co.uk. Full instructions are given on both websites.

16. As at 21st October 2016 (being the latest business day prior to thepublication of this Notice of Meeting), the Company’s issued sharecapital consists of 33,674,617 Managed Growth shares, 51,434,324Managed Income shares and 3,731,318 Managed Cash shares. Votingrights are calculated by reference to the Share Voting numbers which,as at 31st August 2016, were 6.64 (Managed Growth), 1.06 (ManagedIncome) and 1.02 (Managed Cash). Therefore the total voting rights inthe Company are as at 21st October 2016 was 281,925,783.

Electronic appointment – CREST membersCREST members who wish to appoint a proxy or proxies by utilising theCREST electronic proxy appointment service may do so for the Meeting andany adjournment(s) thereof by using the procedures described in the CRESTManual. See further instructions on the proxy form.

Elect pp77-84 24/10/2016 16:45 Page 81


TH

E

CO

MP

AN

Y


GLOSSARY OF TERMS AND DEFINITIONS

Return to Shareholders Total return to the investor, on a mid-market price to mid-marketprice basis, assuming that all dividends received were reinvested,without transaction costs, into the relevant share class of theCompany at the time the shares were quoted ex-dividend.

Return on Net Assets Total return on net asset value (‘NAV’) per share, on a bid value tobid value basis, assuming that all dividends paid out by theCompany were reinvested, without transaction costs, into therelevant share class of the Company at the NAV per share at thetime the shares were quoted ex-dividend.

In accordance with industry practice, dividends payable which havebeen declared but which are unpaid at the balance sheet date arededucted from the NAV per share when calculating the total returnon net assets.

Benchmark Return Total return on the relevant benchmark, on a mid-market value tomid-market value basis, assuming that all dividends received werereinvested, without transaction costs, into the shares of theunderlying companies at the time the shares were quoted ex-dividend.

The benchmarks are composites of recognised indices of stockswhich should not be taken as wholly representative of theCompany’s investment universe. The Company’s investment strategydoes not track these indices and consequently, there may be somedivergence between the performance of the relevant portfolio andthat of its benchmark.

Gearing/Net CashGearing represents the excess amount above shareholders’ funds oftotal investments, expressed as a percentage of the shareholders’funds. Previously gearing represented the excess amount aboveshareholders’ funds of total assets expressed as a percentage ofshareholders’ funds. Total assets included total investments and netcurrent assets/liabilities less cash/cash equivalents and excludingbank loans of less than one year. If the amount calculated isnegative, this is shown as a ‘net cash’ position.

Ongoing Charges The ongoing charges represent the Company’s management fee andall other operating expenses, excluding finance costs, expressed asa percentage of the average daily net assets during the year and iscalculated in accordance with guidance issued by the Association ofInvestment Companies.

Share Price Discount/Premium to Net Asset Value(‘NAV’) Per ShareIf the share price of an investment trust is lower than the NAV pershare, the Company’s shares are said to be trading at a discount.The discount is shown as a percentage of the NAV per share. Theopposite of a discount is a premium. It is more common for aninvestment trust’s shares to trade at a discount than at a premium.

Elect pp77-84 24/10/2016 16:45 Page 82

83

TH

E

CO

MP

AN

YFraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

1 6

7

8

9

10

2

3

4

5

Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority

WHERE TO BUY J.P. MORGAN INVESTMENT TRUSTS

You can invest in a J.P. Morgan investment trust through the following;

1. Directly from J.P. MorganInvestment AccountThe Company’s shares are available in the J.P. Morgan InvestmentAccount, which facilitates both regular monthly investments andoccasional lump sum investments in the Company’s ordinary shares.Shareholders who would like information on the Investment Accountshould call J.P. Morgan Asset Management free on 0800 20 40 20 orvisit its website at am.jpmorgan.co.uk/investor

Stocks & Shares Individual Savings Accounts (ISA)The Company’s shares are eligible investments within a J.P. MorganISA. For the 2016/17 tax year, from 6th April 2016 and ending 5th April2017, the total ISA allowance is £15,240. The shares are also availablein a J.P. Morgan Junior ISA. Details are available from J.P. Morgan AssetManagement free on 0800 20 40 20 or via its website atam.jpmorgan.co.uk/investor

2. Via a third party provider Third party providers include;

Please note this list is not exhaustive and the availability of individualtrusts may vary depending on the provider. These websites are thirdparty sites and J.P. Morgan Asset Management does not endorse orrecommend any. Please observe each site's privacy and cookie policiesas well as their platform charges structure.

3. Through a professional adviserProfessional advisers are usually able to access the products of all thecompanies in the market and can help you find an investment thatsuits your individual circumstances. An adviser will let you know thefee for their service before you go ahead. You can find an adviser atunbiased.co.uk

You may also buy investment trusts through stockbrokers, wealthmanagers and banks.

To familiarise yourself with the Financial Conduct Authority (FCA)adviser charging and commission rules, visit fca.org.uk

AJ BellAlliance Trust SavingsBarclays StockbrokersBestinvestCharles Stanley DirectHargreaves Lansdown

Interactive InvestorJames BrearleyJames HaySelftradeThe Share Centre

Elect pp77-84 24/10/2016 16:45 Page 83


TH

E

CO

MP

AN

Y

Notes

Elect pp77-84 24/10/2016 16:45 Page 84

HistoryThe Company was incorporated on 16th September 1999 and launched as aninvestment trust on 24th November 1999 with assets of £28 million. The Companychanged its name to JPMorgan Fleming Managed Growth plc on 5th December2002. The Company’s name was changed to JPMorgan Fleming Elect plc on 14thJanuary 2004 following the capital reorganisation and combination of JPMorganFleming Managed Growth plc and JPMorgan Fleming Managed Income plc. TheCompany adopted its present name on 2nd February 2006.

There are three share classes, each with distinct investment policies, objectivesand underlying investment portfolios. Each share class is listed separately andtraded on the London Stock Exchange. This capital structure means thatshareholders may benefit from greater investment flexibility in a tax-efficientmanner.

Company NumbersCompany registration number: 3845060 London Stock Exchange Sedol numbers: Managed Growth: 0852814, Managed Income: 3408021, Managed Cash: 3408009

ISIN:Managed Growth: GB0008528142Managed Income: GB0034080217Managed Cash: GB0034080092 Bloomberg Codes: Managed Growth: JPE LNManaged Income: JPEI LNManaged Cash: JPEC LN

Market InformationNet asset values per share for each share class are published daily via the LondonStock Exchange. The Company’s shares are listed on the London Stock Exchange.The market price is shown daily in the Financial Times, The Times, The DailyTelegraph, The Scotsman and on the JPMorgan internet site atwww.jpmelect.co.uk, where the share prices are updated every fifteen minutesduring trading hours.

Websitewww.jpmelect.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbroker orprofessional adviser acting on an investor’s behalf. They may also be purchasedand held through the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan Junior ISA. These products are all available on the online service atjpmorgan.co.uk/online

Manager and Company SecretaryJPMorgan Funds Limited

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone number: 020 7742 4000

For company secretarial matters, please contact Rhys Williams.

DepositaryBNY Mellon Trust & Depositary (UK) LimitedBNY Mellon Centre160 Queen Victoria StreetLondon EC4V 4LA

The Depositary has appointed JPMorgan Chase Bank, N.A. as the Company’scustodian.

RegistrarsEquiniti LimitedReference 2018 Aspect House Spencer RoadLancing West Sussex BN99 6DA Telephone number: 0371 384 2530

Lines open 8.30 a.m. to 5.30 p.m. Monday to Friday. Calls to the helpline will costno more than a national rate call to a 01 or 02 number. Callers from overseasshould dial +44 121 415 0225.

Notifications of changes of address and enquiries regarding share certificates ordividend cheques should be made in writing to the Registrars quoting reference2018.

Registered shareholders can obtain further details on their holdings on theinternet by visiting www.shareview.co.uk.

Independent AuditorsErnst & Young LLP Chartered Accountants and Statutory Auditor1 More London Place London SE1 2AF

BrokersWinterflood Securities LimitedThe Atrium Building Cannon Bridge25 Dowgate HillLondon EC4R 2GATelephone number: 020 7621 0004

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP, see contact details on the back cover of this report.

Information about the Company

FINANCIAL CALENDAR

Financial year end 31st August

Final results announced November

Half year end 29th February

Half year results announced April

Dividends payable (if any) March, June, September and December

Annual General Meeting November 2016

A member of the AIC

85

Elect Cover A4 24/10/2016 16:53 Page IBC3

www.jpmelect.co.uk

Telephone calls may be recorded and monitored for security and training purposes.

J.P. Morgan Helpline

Freephone 0800 20 40 20 or +44 (0) 1268 444470.Telephone lines are open Monday to Friday, 9am to 5.30pm.

GB A106 10/16

Elect Cover A4 24/10/2016 16:53 Page BC2

Documents

Elect Cover A4 24/10/2016 16:53 Page FC1 JPMorgan Elect plc AR_… · 31st August 2016, supported by a recovering domestic economy, the devaluation of the pound and a continued low