JPMorgan Funds Audited Annual Report - JP Morgan Asset ...

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JPMorgan Funds Notes to the Financial Statements (continued) As at 30 June 2013 Other Information Shareholders should note that, where the dividend rate is in excess of the investment income of the Share Class, dividends will be paid out of the capital attributed to the Share Class, as well as from realised and unrealised capital gains. This may be tax inefficient for investors in certain countries. Investors should consult their local tax adviser about their own position. Share Classes with the suffix “(div)”, “(fix)”, “(inc)” and “(mth)” do not distribute the reportable income in accordance with the United Kingdom tax legislation relating to offshore funds. 5. Taxation Under current law and practice, the SICAV is not subject to any taxes in Luxembourg on income or capital gains, nor are dividends distributed by the SICAV liable to any withholding tax. The only tax to which the SICAV in Luxembourg is subject is the subscription tax, (“Taxe d’abonnement”) up to a rate of 0.05% per annum based on the net asset value attributed to each Share Class at the end of the relevant quarter, calculated and paid quarterly. A reduced tax rateof 0.01% per annum of the net assets will be applicable to Share Classes as indentified in the Appendix. The 0.01% and 0.05% rates described above, as appropriate, are not applicable for the portion of the assets of the SICAV invested in other Luxembourg collective investment undertakings which are themselves already subject to the Taxe d’abonnement. No stamp duty or other tax is payable on the issue of shares in the SICAV in the Grand Duchy of Luxembourg. No tax is payable on realised or unrealised capital appreciation of the assets of the SICAV in the Grand Duchy of Luxembourg. Although the SICAV’s realised capital gains, whether short or long-term, are not expected to become taxable in another country, the shareholders must be aware and recognise that such a possibility is not totally excluded. The regular income of the SICAV from some of its securities, as well as interest earned on its cash deposits in certain countries, may be subject to withholding taxes at varying rates, which normally cannot be recovered. The SICAV has instigated proceedings to reclaim tax withheld by certain Member States of the European Union on dividend payments it has received. The decision to initiate proceedings against any particular Member State is the result of an analysis of the likely costs and potential benefits of doing so. The likelihood of successfully reclaiming such amounts together with the estimated time to complete proceedings varies across Member States. Any costs associated with this decision have been charged to the relevant Sub-Funds and have been included within total costs for the purposes of determining the relevant expense cap or TER and no amount has been recorded in the SICAV for any possible amounts to be received under this action. Certain Sub-Funds of the SICAV may have invested into Norwegian, Finnish and Polish stocks for which tax reclaim has been successful. As such, amounts have been recorded, where applicable, on a cash basis under Other Income. Certain Sub-Funds of the SICAV may invest on the Brazilian markets and are consequently subject to a local tax upon purchase of Brazilian Real, the BRL IOF Tax. On 5 June 2013, the BRL IOFtax on foreign exchange inflows relating to the purchase of fixed income instruments was reduced from 6% to 0% on inflows with a trade date of 5 June 2013 and onwards. This tax has been recorded, where applicable, under Sundry Fees. 6. Statement of Changes in Investments A list, specifying for each investment within each Sub-Fund the total purchases and sales which occurred during the year under review, may be obtained free of charge upon request at the registered office of the SICAV. Additional information on investments within each Sub-Fund’s portfolio is available to shareholders at the registered office of the SICAV. 7. Fees and Expenses a) All Sub-Funds - Share Classes A, B, C, D, J and T The fees and expenses charged to these Classes of shares are set at a fixed percentage of the total net assets of each Class of shares. This fixed percentage covers all fees and expenses connected with the management of these Classes of shares, including Investment Management Fees, Shareholder Servicing Fees and Other Operating and Administrative Expenses, which include but are not limited to Custody, Registrar and Transfer Agent Fees; it does not cover taxes paid on investments, brokerage’s expense, the taxe d’abonnement, the interest, extraordinary costs or performance fees, if any. No other costs are charged to these Classes of shares, and the Management Company absorbs any difference that may arise between the actual costs of the operations of these Classes of shares and the fixed percentage. To the extent that the actual operating costs are less than the fixed percentage, the excess is paid to the Management Company and included within “Management and Advisory Fees”. To the extent that actual operating costs exceed the fixed percentage, the amount borne by the Management Company will be separately disclosed as a “Fee Waiver’’ in the Combined Statement of Net Assets and the Combined Statement of Operations and Changes in Net Assets. This fixed annual rate of fees and expenses is categorised as a Total Expense Ratio. The fixed annual rates of fees for each Class of shares are shown in the Appendix. b) All Sub-Funds - Share Classes I and P The maximum total fees and expenses to be borne by shareholders on these Classes of shares of any Sub-Fund will not exceed a capped percentage of the total net assets attributable to that Class. These capped fees and expenses comprise Investment Management Fees plus other Operating and Administrative Expenses including but not limited to Custody, Fiduciary, Accounting, Transfer Agency Fees and Taxes; it does not cover performance fees, if any. This capped annual rate of fees and expenses is categorised as a Capped Expense Ratio. The capped annual rates of fees for each Class of shares are shown in the Appendix. c) All Sub-Funds - Share Classes X and Y The Annual Management Fee that would normally be payable in respect of the X Share Classes and Y Share Classes are administratively levied and collected by the Global Distributor directly from the shareholder or through the relevant J.P.Morgan Chase & Co entity. The maximum Operating and Administrative Expenses to be borne by the Class X and Class Y shareholders of any Sub-Fund will not exceed a capped percentage of the total net assets attributable to that Class, as set out in the Appendix. Sub-Funds may invest in UCITS and other UCIs managed by the Management Company, the Investment Manager or any other member of JPMorgan Chase & Co. The avoidance of a double-charge of the Annual Management and Advisory Fee on such assets is achieved by either a) excluding the assets from the net assets on which the Annual Management and Advisory Fee is calculated; or b) investing in UCITS or UCIs via classes that do not accrue an Annual Management and Advisory Fee or other equivalent fees payable to the relevant Investment Manager’s group; or c) the Annual Management and Advisory Fee being netted off by a rebate to the SICAV or Sub-Fund of the Annual Management and Advisory Fee (or equivalent) charged to the underlying UCITS or UCIs; or d) charging only the difference between the Annual Management and Advisory Fee of the SICAV or Sub-Fund and the Annual Management and Advisory Fee (or equivalent) charged to the underlying UCITS or UCIs. The Management Company may decide from time to time, in order to protect the interests of the Fund’s shareholders, to reduce the fees payable to the Management Company. Refer to Note 14g regarding changes in the Structure of the Share Classes’ Operating and Administrative Expenses. d) Performance Fees Pursuant to the Investment Management Agreement, as set out in the Appendix to the Prospectus, the Investment Manager is entitled to receive from the net assets of certain Sub-Funds or Classes, an annual performance-based incentive fee (the “Performance Fee”) if the performance of the Sub-Fund exceeds the return from the benchmark, subject to the operation of a Claw-Back Mechanism or of a High Water Mark as defined in Appendix V and as specified in Appendix III for each Sub-Fund. On each Valuation Day, an accrual for the previous Valuation Day’s Performance Fee is made, when appropriate, and the final Performance Fee is payable annually. Pursuant to the provisions of the relevant Investment Management Agreement, the Investment Manager may be entitled to receive the performance Fee from the Management Company. 53
JPMorgan Funds Notes to the Financial Statements (continued) As at 30 June 2013 On each Valuation Day, the net asset value of each Class of each Sub-Fund for which a Performance Fee applies, which includes an accrual for all fees and expenses (including the Annual Management and Advisory Fee, and the Operating and Administrative Expenses to be borne by the relevant Class at the rate set out in the Appendix to the Prospectus), is adjusted for any dividend distributions and for subscriptions and redemptions dealt with on that Valuation Day, if any, and any Performance Fee accrued through that day in respect of such Class is added back (the “Adjusted net asset value”). For purposes of calculating the Performance Fee, the “Share Class Return” is computed on each Valuation Day, as the difference between the net asset value (adjusted by adding back any accrued Performance Fee) on such day and the Adjusted net asset value on the previous Valuation Day, expressed as a return based on the previous Valuation Day’s Adjusted net asset value for that Class. High Water Mark Method If the Share Class Return exceeds the Benchmark Return and the cumulative Share Class Return exceeds the High Water Mark Return (as set out in the Appendix to the Prospectus), the Performance Fee accrual is increased by the Performance Fee Rate multiplied by the Excess Return multiplied by the previous Valuation Day’s Adjusted net asset value for that Class. If the Share Class Return does not exceed the Benchmark Return, the Performance Fee accrual is reduced (but not below zero) by the Performance Fee Rate multiplied by the negative Excess Return multiplied by the previous Valuation Day’s Adjusted net asset value for that Class. Following a period of negative Excess Return whereby the Performance Fee accrual has been reduced to zero, no new Performance Fee is accrued until such time as the cumulative Share Class Return exceeds the greater of the High Water Mark Return and the cumulative Benchmark Return since the beginning of the Company accounting year. The Performance Fee accrued on any Valuation Day is reflected in the Net Asset Value per Share on the basis of which subscriptions and redemptions may be accepted. Claw-Back mechanism The purpose of the Claw-Back Mechanism is to ensure that the Management Company will only become entitled to a Performance Fee when it outperforms the cumulative Benchmark Return (as defined in Appendix V of the prospectus) accrued since the last Valuation Day of the last period in which a Performance Fee was paid. As at 30 June 2013, the Performance Fee rate and the benchmarks are as follows: High Water Mark method Sub-Fund Applicable Performance Performance Benchmark Share Classes Fee Rate JPMorgan Funds - Emerging Markets Local Currency Debt Fund All, except hedged and Share Class Y 10% J.P. Morgan Government Bond Index - Emerging Markets Global, Diversified (Total Return Gross) JPMorgan Funds - Emerging Markets Local Currency Debt Fund EUR hedged 10% J.P. Morgan Government Bond Index – Emerging Markets Global, Diversified (Total Return Gross) hedged to EUR 8. Transactions with Connected Parties All transactions with connected parties were carried out on an arm’s length basis. JPMorgan Chase & Co. and its affiliates are counterparties for all securities lending activity and for certain forward foreign exchange contracts and financial futures contracts. The Management Company, Registrar, Global Distributor, Transfer and Domiciliary Agent, Advisory Company, Investment Managers, Custodian, Corporate, Administrative and Paying Agent and other related Agents of the SICAV are considered as connected parties as they are affiliated entities of JPMorgan Chase & Co. In addition Elvinger, Hoss & Prussen (of which Mr Jacques Elvinger who is on the Board of the Directors of the SICAV, is a partner) is compensated for legal services to the SICAV. The following is a summary of transactions entered into during the year between the Fund and the Manager and its Connected Persons. Connected Persons of the Manager are those as defined in the Code on Unit Trusts and Mutual Funds established by the Securities & Futures Commission of Hong Kong. All such transactions were entered into in the ordinary course of business and on normal commercial terms. Investment transactions with Connected Persons of the Manager Authorised Fund Total purchases and sales Currency of the Sub-Fund Percentage of Fund’s total transactions* for the year Total brokerage commission paid Average rate of commission paid JPMorgan Funds - America Equity Fund 9,770,825 USD 1.13 2,886 0.03 JPMorgan Funds - Asia Local Currency Debt Fund 6,536,015 USD 8.25 - - JPMorgan Funds - Asia Pacific Income Fund 1,134,686,589 USD 19.76 637,967 0.06 JPMorgan Funds - Brazil Equity Fund 55,953,107 USD 6.77 109,499 0.20 JPMorgan Funds - China Fund 136,843,845 USD 2.27 184,329 0.13 JPMorgan Funds - Eastern Europe Equity Fund 45,591,972 EUR 10.28 80,767 0.18 JPMorgan Funds - Emerging Europe, Middle East and Africa Equity Fund 44,060,328 USD 7.86 62,790 0.14 JPMorgan Funds - Emerging Markets Bond Fund 5,131,157 USD 0.56 - - JPMorgan Funds - Emerging Markets Debt Fund 21,572,913 USD 0.51 - - JPMorgan Funds - Emerging Markets Equity Fund 528,172,705 USD 15.94 459,734 0.09 JPMorgan Funds - Emerging Markets Local Currency Debt Fund 169,039,308 USD 2.47 - - JPMorgan Funds - Emerging Markets Opportunities Fund 336,978,453 USD 11.78 312,956 0.09 JPMorgan Funds - Emerging Middle East Equity Fund 16,054,301 USD 4.53 10,659 0.07 JPMorgan Funds - Euroland Equity Fund 55,071,610 EUR 13.52 75,407 0.14 JPMorgan Funds - Euroland Select Equity Fund 4,855,278 EUR 4.19 2,656 0.05 JPMorgan Funds - Europe Dynamic Fund 41,586,481 EUR 4.09 26,537 0.06 JPMorgan Funds - Europe Dynamic Mega Cap Fund 3,243,336 EUR 2.50 1,688 0.05 JPMorgan Funds - Europe Equity Fund 14,025,394 EUR 2.00 8,343 0.06 JPMorgan Funds - Europe Small Cap Fund 71,500,782 EUR 10.26 64,390 0.09 JPMorgan Funds - Europe Technology Fund 20,538,566 EUR 6.08 13,258 0.06 JPMorgan Funds - Germany Equity Fund 40,983,364 EUR 8.59 23,389 0.06 JPMorgan Funds - Global Consumer Trends Fund 50,998,671 EUR 20.77 52,795 0.10 JPMorgan Funds - Global Convertibles Fund (EUR) 204,795,418 EUR 9.50 - - JPMorgan Funds - Global Dynamic Fund 51,776,460 USD 2.34 28,552 0.06 54
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www.jpmorganam.com.hk
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