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JPMorgan Elect plcAnnual Report & Accounts for the year ended 31st August 2012

Annual Report2012

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Features

Contents

1 Chairman’s Statement

Managed Growth Share Class4 Financial Results 5 Investment Managers’ Report 8 Financial Record 9 Ten Largest Investments 10 Geographical Analysis11 List of Investments 12 Income Statement 13 Balance Sheet

Managed Income Share Class14 Financial Results 15 Investment Managers’ Report 19 Financial Record 20 Ten Largest Investments 21 Sector Analysis 22 List of Investments 23 Income Statement 24 Balance Sheet

Managed Cash Share Class25 Financial Results 26 Investment Managers’ Report 27 Financial Record 28 List of Investments 28 Portfolio Analysis 29 Income Statement 30 Balance Sheet

The Company31 Board of Directors 33 Directors’ Report 33 Business Review 41 Corporate Governance Statement 46 Directors’ Remuneration Report 48 Statement of Directors’

Responsibilities49 Independent Auditor’s Report 50 Income Statement 51 Reconciliation of Movements in

Shareholders’ Funds 52 Balance Sheet 53 Cash Flow Statement 54 Notes to the Accounts 77 Notice of Annual General Meeting 81 Glossary of Terms and Definitions82 Capital Structure and Conversion

between Share Classes85 Information about the Company

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

Objectives

Managed Growth – Long term capital growth from investing in a range ofinvestment trusts and open-ended funds managed principally by JPMorgan AssetManagement Limited (the ‘Manager’).

Managed Income – Growth of income with potential for long term capital growth byinvesting in equities, investment companies and fixed income securities.

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

More information on investment policies and risk management is given in theDirectors’ Report on pages 33 and 34.

Benchmarks

Managed Growth – The benchmark is a composite comprising 50% FTSE All-ShareIndex and 50% FTSE World Index (ex-UK).

Managed Income – The benchmark is a composite comprising 85% FTSE All-ShareIndex and 15% Barclays Capital Global Corporate Bond Index (hedged) in sterlingterms.

Managed Cash – There is no benchmark for this portfolio.

Capital Structure

At 31st August 2012, the following shares were in issue.

Managed Growth: 38,344,436 (2011: 40,920,311) ordinary shares.

Managed Income: 53,274,946 (2011: 50,446,078) ordinary shares.

Managed Cash: 13,781,140 (2011: 14,075,774) ordinary shares.

Management Company

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

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JPMorgan Elect plc. Annual Report & Accounts 2012 1

Chairman’s Statement

I encourage shareholders to read the full Investment Managers’ Report for eachshare class which gives a detailed analysis of the position over the last financial year,a period which has continued to be a difficult environment for ‘active’ managers.The background has remained markedly similar to last year with markets showingpromising signs of recovery in the first half of the Company’s financial year, only forprogress to be reversed in the second half; such an environment has led to mixedbut positive performance from the Company’s portfolios.

Managed Growth

Performance

The Managed Growth portfolio delivered a total return on net assets of 5.2%,compared with an equivalent figure of 9.8% for the portfolio’s composite benchmarkindex, (comprised equally of the FTSE All-Share and FTSE World (ex-UK) indices).The share price total return was 3.3%. This disappointing and unusual relativeunderperformance reflected our being underweight in the UK and overweight inemerging markets, together with below-average performance from many of the keyunderlying funds in the portfolio. The Board is satisfied that this volatility relative tothe benchmark does not represent any structural inadequacies in the investmentmethodology but results from specific decisions made against the background ofunpredictable market conditions during the period. It is worth reporting that the pastyear has been equally difficult for a number of the portfolio’s peers, reflecting thenegative nature of trading conditions faced by ‘active’ fund managers.

Dividends

Shareholders will remember that there is no specific income objective for theManaged Growth class, the dividend simply reflecting the payments received fromthe underlying investments. Dividends are paid quarterly and four interim dividendstotalling 5.95 pence were payable in respect of the Company’s financial year to theend of August 2012, compared with 5.00 pence last year.

Share Capital

In the year to 31st August 2012, 1,532,722 Managed Growth shares were repurchasedfor cancellation. As is the case for all three share classes, the shares wererepurchased at a discount to net asset value, thereby benefiting all continuingshareholders. Since the year end, the portfolio has repurchased a further 290,365shares for cancellation.

Managed Income

Performance

The Managed Income portfolio produced a total return on net assets of 10.6% overthe year to 31st August 2012, marginally above last year’s return. This represents a0.4 percentage point outperformance of the composite benchmark (comprised of85% FTSE All-Share Index and 15% Barclays Capital Global Corporate Bond Index(hedged) in sterling terms). The share price total return was 9.5%, reflecting awidening of the discount over the period.

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JPMorgan Elect plc. Annual Report & Accounts 20122

Dividends

Dividends on Managed Income shares are paid quarterly in March, June, Septemberand December each year. As the level and timing of dividend receipts from theunderlying investments varies throughout the year, the quarterly dividends are notnecessarily of equal amounts. Total dividends for the year amounted to 3.40 penceper share compared with 3.35 pence last year which had included a minimal transferfrom revenue reserves.

Share Capital

In the year to 31st August 2012, 1,378,027 Managed Income shares were repurchasedfor cancellation. Since the year end, the portfolio has repurchased a further 163,595shares.

Managed Cash

Performance

The portfolio’s primary objective remains capital preservation through investment inhigh quality liquidity funds. The Bank of England base rate has remained at 0.5% andthe returns generated by the portfolio’s underlying money market funds thereforecontinue to be low, generating a total return on net assets of 0.4% with a 0.5% returnto shareholders.

Dividends

Income received continues to be very modest, which is reflected in the payment oftwo dividends totalling 0.50 pence per share.

Dividends will always be dependent on the level of interest rates and shareholdersshould not expect any more than minimal distributions from this portfolio untilinterest rates return to more conventional levels.

Share Capital

In the year to 31st August 2012, 945,688 Managed Cash shares were repurchasedfor cancellation. Since the year end, the portfolio has repurchased a further173,089 shares.

Underlying Investments in the Managed Cash Portfolio

The Managed Cash portfolio is invested in liquidity funds with AAA ratings asmeasured by Standard & Poor’s, or an equivalent rating agency. Although the moneymarket funds within the portfolio are subject to the Institutional Money MarketsFunds Association’s (‘IMMFA’) Code of Practice and to scrutiny by rating agencies,shareholders should be aware that such investments are not classified as completelyrisk free. However, the IMMFA, the industry’s trade association, continues to workwith its members to tighten regulation and our Investment Managers ensure theportfolio is invested in a diversified selection of funds in an effort to mitigate someof the risk.

Directors

Nigel Sidebottom retired from the Board in July and I would like to place on recordour very deep appreciation of his service to the Company; he had been a Directorsince inception, latterly as Chairman of the Audit Committee, in which role

Chairman’s Statement continued

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particularly shareholders owe a considerable debt to his knowledge, insight anddedication to the Company’s affairs.

Mr Sidebottomwas succeeded as Audit Committee Chairman by James Robinsonwho together with Alan Hodson joined the Board during the year. The Company’scurrent Board succession plan will shortly be completed, following my retirement atthe conclusion of the Company’s forthcoming Annual General Meeting and, as agreedby the Nomination Committee, I shall be succeeded by Robert Ottley, now DeputyChairman.

The Board has decided that, in accordance with corporate governance best practice, allDirectors will seek re-election at each Annual General Meeting, commencing this year.

As I step down from the Board, I would like to thank my fellow Directors, shareholdersand JPMAM for their individual and collective support during my tenure and wish allsuccess for the future. I am confident that the new Board, led byMr Ottley, willrepresent a welcome range and quality of experience to ensure the vigorousprotection of shareholders’ interests.

Conversion Opportunities Between Share Classes

Shareholders are able to convert all or part of any class of holding into any other classat the end of February, May, August and November each year. Details on how toconvert can be found in the Company’s Annual Report & Accounts and on theCompany’s website.

Outlook

Since the Company’s year end, markets have remained reasonably firm and both theManaged Growth and Managed Income portfolios have benefited from this. Theeconomic headwinds are still stubbornly strong and it is by no means clear when theywill subside, but, encouragingly, investors are starting to show, for the first time inyears, some willingness to look beyond the immediate crisis.

Annual General Meeting

The Company’s Annual General Meeting will be held at 200 Aldersgate, St Paul’s,London EC1A 4HD on Thursday, 13th December 2012 at 12.00 noon. In addition to theformal part of the meeting, there will be presentations from the Investment Managersof each share class and a question and answer session. Please submit in writing, anydetailed questions that you wish to raise at the AGM to the Company Secretary,JPMorgan Elect plc, Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ.

Shareholders who are unable to attend the AGM in person are encouraged to raiseany concerns or comments by writing to me at the Company’s registered addressabove, or via the Company’s website by following the ‘Ask the Chairman’ link atwww.jpmelect.co.uk.

Simon MillerChairman 7th November 2012

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Managed Growth Share ClassFinancial ResultsTotal returns (includes dividends reinvested)

+3.3%Return to shareholders1

(2011: +11.1%)

5.95pDividend(2011: 5.00p)

+5.2%Return on net assets2

(2011: +10.9%)

+9.8%Benchmark return3

(2011: +7.7%)

A glossary of terms and definitions is provided on page 81.

1Source: Morningstar.2Source: J.P. Morgan.3Source: FTSE. The benchmark is a composite comprising 50% FTSE All-Share Index and 50% FTSE World Index (ex-UK).4Management fee and all other operating expenses excluding interest, expressed as a percentage of the average ofthe daily net assets during the year (2011: Total Expense Ratio: Management fee and all other operating expensesexcluding interest, expressed as a percentage of the average of the month end net assets during the year). TheOngoing Charges are calculated in accordance with guidance issued by the Association of Investment Companies inMay 2012.

Financial Data31st August 31st August %

2012 2011 change

Shareholders’ funds (£’000) 154,833 159,358 –2.8

Number of shares in issue 38,344,436 40,920,311 –6.3

Net asset value per share 403.8p 389.4p +3.7

Share price 388.5p 382.0p +1.7

Share price discount to net asset value per share 3.8% 1.9%

Ongoing Charges4 0.51% 0.51%

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Review

There has been an unfortunate tendency over the past few years for equity marketsto perform strongly in the early part of the year, only for those gains to be eroded –sometimes significantly – in the second half. Market returns over the past 12 monthshave once again conformed to this pattern. In our Half Year Report six months ago wenoted the improvement in investment sentiment after the declines at the back-endof 2011; little did we know at the time that this improvement would soon be reversed.Thus, after making reasonable progress during the first half of the financial year, mostequity indices have moved sideways at best since March, with some encounteringsignificant declines.

What has brought about this renewed risk aversion? The proximate causes are thesame as those which have been overshadowing sentiment since mid 2010 – debtproblems in the Eurozone, the faltering pace of the US recovery and the fear of asharper than expected slowdown in China. Specifically it was the fragility of Spain’sbanks which catalyzed the mid year sell-off, setting off a chain of consequences fromthe deteriorating credit worthiness of Italy and Spain to the lack of specificmechanisms to defend the integrity of the Euro. At the same time confidence was alsoimpacted by the loss of momentum in the US economy and by the deceleratinggrowth profile in China. Had the global economy been growing more vigorously, it ispossible that Spain’s banking problems would have had less impact. But with growthslowing globally and in a seemingly synchronized fashion, investors have not beenprepared to give equities the benefit of the doubt.

Within equity markets there has been a marked divergence in performances asdeveloped world equities have substantially outperformed their emergingcounterparts. A 4% gain in the US index since the end of February and flat returnsin the UK compare favourably with returns of –9% (in Sterling terms) for the emergingmarkets’ index. In the case of the US this resilience is understandable thanks to apro-active Central Bank and a moderate but still expanding economy; and the UKhas benefited from the international make up of its market as an offset to domesticausterity. But for emerging markets, a combination of slowing growth expectations,disappointing earnings announcements and intensifying risk aversion hascompressed valuations to the extent that these economies’ superior long termprospects have now been fully priced out. Given their better demographic profiles,higher secular growth rates and stronger fiscal positions, this de-rating seemsanomalous to us.

The performance of Sterling during the year was unhelpful rather than a majorsource of negative return. Sterling’s strength was a bigger drag on performance in thethree months to the end of August (because of the weakness of the US Dollar) than itwas over the full 12 months. It was strong against the Euro and against a number ofemerging markets currencies, but over the full 12 month period, it was the US Dollarwhich was the strongest of the major currencies, and so in absolute terms provided aboost to overall returns. Relative to other performance effects currency was only arelatively modest source of underperformance.

Performance

It has been a disappointing 12 months for the portfolio. Over the 12 months to the endof August, the Managed Growth portfolio delivered a total return on net assetsof 5.2% as against a benchmark return of 9.8%. Unfortunately shareholder returnswere further eroded as a result of some modest discount expansion. The table belowshows the impact of the past 12 months on longer term absolute and relative returns:

Katy Thorneycroft

Jonathan Lowe

Investment Managers’ Report

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Total returns to 31st August 2012Six One Two Three Five Ten

Managed Growth months year years years years years

NAV Return (%) –3.2 5.2 16.4 26.9 8.9 126.8Benchmark Return (%) –0.3 9.8 18.3 29.8 14.8 105.9FTSE All-Share Index (%) –0.1 10.2 18.2 30.7 9.5 105.8FTSE World Index (ex-UK) (%) –0.1 10.1 19.4 30.2 22.0 102.2

Source: Bloomberg/J.P. Morgan.

We should acknowledge that there is a pro-cyclical bias to the Managed Growthportfolio, which is in part a function of its investment opportunity set, and in part dueto its ‘growth’ mandate. We perform best in circumstances where growth marketsoutperform, where small cap equities outperform large cap counterparts and whereinvestment trusts benefit from narrowing fund discounts; we perform relativelypoorly when all these factors move into reverse. Suffice it to say that over the past12 months, we have been impacted by the underperformance of emerging markets,by the poor relative performance of small cap companies and by the effect ofwidening investment trust discounts.

However, we also made some poor investment decisions, which exacerbated theseheadwinds. Chief among these was the large allocation to Asian and emergingmarkets, which we have long considered a structural overweight. Funding thisoverweight position out of the UK, which has been one of the better marketperformers over the past 12 months, was costly in relative terms. In addition, weshould have had a higher exposure to US equities.

It has also been a challenging period for underlying fund performances. Among ourlarger holdings, JPMorgan Claverhouse, JPMorgan UK Dynamic and JPMorganAmerican all underperformed their respective benchmarks as their managers foundit difficult to navigate the frequent changes of market direction. We did benefit frompositive performances from a number of our smaller holdings (JPMorgan SmallerCompanies, JPMorgan Emerging Markets and JPMorgan European Growth among ourin-house holdings; Biotech Growth, Finsbury Growth and Income and JupiterEuropean Opportunities among our third party holdings), but this was not enough tocompensate for underperformance elsewhere.

Finally, we were impacted by some sizeable movements in investment trustdiscounts. In aggregate investment trust discounts only widened out by about apercentage point or so (7% to 8%) over the year but this masks some significantintra-sectoral movements. North American investment trust discounts narrowed byapproximately two percentage points while UK Growth and Income investment trustswere also well bid over the period. Conversely, we saw some significant wideningamong Asian and emerging market investment trust holdings and some smallercompany investment trusts. Although we feel this is cyclical and will be reversed asrisk appetite improves, this proved to be another headwind on the portfolio.

Portfolio Review

At the end of the financial year, 53% of the portfolio was invested in JPMorganinvestment trusts, 22% in JPMorgan open ended funds and 23% in investment trustsmanaged by third party managers. The balance was in cash. Over the past 12 months,

Investment Managers’ Reportcontinued

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we have reduced the allocation to investment trusts and raised weightings toholdings in open ended funds. This decision has partly been dictated by the relativelack of opportunity open to us in US equity orientated investment trusts.

Geographically we did take some action over the past 12 months to reduce ourexposure to developing markets in favour of the US and UK. But as noted above,this action was insufficient to offset the relative performance drag from theunderperformance of emerging markets over the period. Key purchases includedadditions to existing holdings in JPMorgan UK Dynamic, JPMorgan US Growth (bothopen ended companies) and JPMorgan Claverhouse Investment Trust. Key salesincluded Blackrock World Mining, JPMorgan Asian and Biotech Growth Fundinvestment trusts – the latter after its significant re-rating since the end of 2011. Newnames added to the portfolio over the period include JPMorgan Overseas and FidelityEuropean Values investment trusts, while we disposed entirely of our holding in UtilicoInvestments after a rebound in performance in the early part of the financial year.

Outlook

We continue to live with many legacies of the Global Financial Crisis – debt deflationand extreme austerity in the Eurozone, the continued fragility of financial institutions,dysfunctional policy making, and high levels of public debt. This potent mix willcontinue to produce strong headwinds which will keep the pace of global activity lowand lead to periodic bouts of market instability – a likely pattern of two steps forward,one step back.

More recently investor sentiment has begun to improve thanks to Central Bankpolicies aimed at stabilizing systemic concerns and encouraging a greater tolerancefor risk. Although the effects of recent measures may take time to be felt on realactivity, they should help reduce some tail-risk concerns (eg Eurozone break-up fears,increased deflationary pressures) that have periodically served to boost risk premiaand depress market valuations. Indeed one perverse side effect of recent CentralBank actions is the way they are helping to dampen realised price volatility, byremoving some of the uncertainties of long term economic and interest rate policymanagement. The intended effect is to draw capital into higher risk (but higherreturning) assets at a time when returns elsewhere are exceptionally low.The ongoing search for yield is the most obvious manifestation of this, but it ishelping to raise risk appetites across the full spectrum of opportunity, despite the stillchallenging economic backdrop.

Interestingly for us, the investment trust universe showcases many of these trendsand illustrates where potentially profitable opportunities may still be found.The hunt for yield has been a key driver of return in many sectors, such thatpreviously existing discounts have now been entirely eliminated. Most incomeorientated investment trusts, for example, now trade at premiums to NAV and newinvestment trusts are being launched to satisfy this ongoing demand. Conversely anumber of specialist growth orientated investment trusts (both regional andspecialists) have fallen out of favour and are languishing on high discounts. This iswhere we continue to find value and where the prospects for re-rating are highest.

Katy ThorneycroftJonathan LoweInvestment Managers 7th November 2012

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As at 31st August 2002 2003 2004 20051 2006 2007 2008 2009 2010 2011 2012

Net asset value per share (p) 211.5 221.6 230.2 301.5 362.0 404.2 356.0 332.0 356.3 389.4 403.8

Share price (p) 210.5 215.0 226.0 293.8 353.5 389.5 346.5 321.0 349.0 382.0 388.5

Year ended 31st August

Revenue return per share (p) 3.78 3.85 3.63 3.82 5.23 5.06 5.65 7.25 5.02 5.31 6.25

Dividends per share (p) 3.50 3.50 3.50 3.72 5.20 5.25 5.65 7.15 5.05 5.00 5.95

Discount (%) (0.5) (3.0) (1.8) (1.8) (2.3) (3.6) (2.7) (3.3) (2.0) (1.9) (3.8)

Gearing factor (%) 95.2 95.2 95.2 97.2 95.0 97.4 94.9 97.4 98.9 98.1 98.7

Ongoing charges (%)2 0.60 0.51 0.52 0.50 0.41 0.44 0.43 0.63 0.49 0.51 0.51


1Restated for the change in accounting policy regarding dividends payable, which are included in the accounts in the year in which they are approved by shareholders. Years prior to2005 have not been restated.2Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during the year (2011 to 2009: Total ExpenseRatio: Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the month end net assets during the year; 2008 and prioryears: expressed as the average of the opening and closing net assets).

Financial Record

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31st August 2012 31st August 2011Valuation Valuation

Company £’000 %1 £’000 %2

JPMorgan Claverhouse Investment Trust plc 17,664 11.4 16,977 10.6

JPMorgan UK Dynamic (‘A’ shares)3 14,041 9.1 12,382 7.8

JPMorgan American Investment Trust plc 12,239 7.9 13,276 8.3

JPMorgan US Select Equity (‘C’ shares)3, 5 10,743 6.9 — —

JPMorgan US Growth (‘C’ shares)3, 5 10,006 6.5 — —

The Mercantile Investment Trust plc 8,262 5.3 7,726 4.9

JPMorgan Smaller Companies Investment Trust plc 6,437 4.2 6,231 3.9

JPMorgan Emerging Markets Investment Trust plc4 6,099 3.9 6,443 4.0

JPMorgan Asian Investment Trust plc4 6,009 3.9 8,726 5.5

JPMorgan Japanese Investment Trust plc 5,783 3.7 6,156 3.9

Total6 97,283 62.8

1Based on total assets less current liabilities of £154.8m.2Based on total assets less current liabilities of £159.4m.3Represents holdings in an Open Ended Investment Company (‘OEIC’) or a Société d’investissements à Capital Variable (‘SICAV’).4Both ordinary shares and subscription shares held.5Not included in the ten largest investments at 31st August 2011.6At 31st August 2011, the value of the ten largest investments amounted to £94.1m, representing 59.0% of total assets less current liabilities.

Ten Largest Investments

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31st August 2012 31st August 2011Portfolio Benchmark Portfolio Benchmark

Region % % % %

UK 40.6 50.0 41.3 50.0

North America 28.6 28.8 27.0 26.9

Continental Europe 9.2 9.2 8.8 9.8

Asia (excluding Japan) 8.1 3.9 6.0 3.4

Emerging Markets and others 7.4 4.1 9.8 5.4

Japan 4.8 4.0 5.2 4.5

Net Current Assets 1.3 — 1.9 —

Total 100.0 100.0 100.0 100.0

Based on total assets less current liabilities of £154.8m (2011: £159.4m).

Geographical Analysis(on a look through basis)

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Valuation£’000

JPMorgan Managed Investment TrustsJPMorgan Claverhouse 17,664JPMorgan American 12,238The Mercantile 8,262JPMorgan Smaller Companies 6,437JPMorgan Emerging Markets1 6,099JPMorgan Asian1 6,009JPMorgan Japanese 5,783JPMorgan European (Growth shares) 4,934JPMorgan European Smaller Companies 3,060JPMorgan US Smaller Companies 2,852JPMorgan Income & Capital (Ordinary shares) 2,204JPMorgan Japan Smaller Companies1 1,238JPMorgan Chinese1 1,096JPMorgan Indian 1,018JPMorgan Overseas 943JPMorgan Brazil1 908JPMorgan Russian Securities 631JPMorgan Income & Growth (Capital shares) 375JPMorgan Income & Growth (Units) 340

82,091

Externally Managed Investment TrustsFinsbury Growth & Income 4,489RCM Technology 4,243Hansa Trust (‘A’ non-voting shares) 3,791Artemis Alpha1 3,157Biotech Growth 3,108Schroder UK Growth 2,539Fidelity European Values 2,322Edinburgh Worldwide 2,201Fidelity Special Values 1,904Jupiter European Opportunities 1,786Impax Environmental Markets 1,763BlackRock Frontier 1,219Ecofin Water & Power Opportunities 1,189Edinburgh Dragon 1,165BlackRock World Mining 1,097

35,973

Valuation£’000

JPMorgan Managed Open Ended Investment CompaniesJPMorgan UK Dynamic (‘A’ shares)2 14,041JPMorgan US Select Equity (‘C’ shares)2,3 10,743JPMorgan US Growth (‘C’ shares)2 10,006

34,790

Total Portfolio 152,854

1Both ordinary and subscription shares held.2Unlisted. 3Société d’Investissements à Capital Variable (‘SICAV’).

List of Investmentsat 31st August 2012

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2012 2011Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss — 5,500 5,500 — 14,297 14,297

Net foreign currency gains — 8 8 — — —Income from investments 2,988 — 2,988 2,747 — 2,747Other interest receivable and similar income 8 — 8 10 — 10

Gross return 2,996 5,508 8,504 2,757 14,297 17,054Management fee (95) (284) (379) (110) (329) (439)Other administrative expenses (416) — (416) (440) — (440)

Net return on ordinary activities before finance costs and taxation 2,485 5,224 7,709 2,207 13,968 16,175

Finance costs (1) (2) (3) — — —

Net return on ordinary activities before taxation 2,484 5,222 7,706 2,207 13,968 16,175Taxation credit 8 — 8 3 — 3

Net return on ordinary activities after taxation 2,492 5,222 7,714 2,210 13,968 16,178

Return per Managed Growth share 6.25p 13.10p 19.35p 5.31p 33.55p 38.86p

Income Statementfor the year ended 31st August 2012

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2012 2011£’000 £’000

Fixed assets Investments held at fair value through profit or loss 152,854 156,306

Current assets Debtors 490 376Cash and short term deposits 1,586 2,768

2,076 3,144Creditors: amounts falling due within one year (97) (92)

Net current assets 1,979 3,052

Total assets less current liabilities 154,833 159,358

Net assets 154,833 159,358

Net asset value per Managed Growth share 403.8p 389.4p

Balance Sheetat 31st August 2012

MANAGED INCOME


(2011: +12.0%)

3.40pDividend(2011: 3.35p)


(2011: +10.5%)

+10.2%Benchmark return3

(2011: +6.6%)


1Source: Morningstar.2Source: J.P. Morgan.3Source: WM (World Markets)/Bloomberg. The benchmark is a composite comprising 85% FTSE All-Share Index and15% Barclays Capital Global Corporate Bond Index (hedged) in sterling terms.4Management fee and all other operating expenses excluding interest, expressed as a percentage of the average ofthe daily net assets during the year (2011: Total Expense Ratio: Management fee and all other operating expensesexcluding interest, expressed as a percentage of the average of the month end net assets during the year). TheOngoing Charges are calculated in accordance with guidance issued by the Association of Investment Companies inMay 2012.


2012 2011 change

Shareholders’ funds (£’000) 43,385 38,795 +11.8

Number of shares in issue 53,274,946 50,446,078 +5.6

Net asset value per share 81.4p 76.9p +5.9

Share price 78.5p 75.0p +4.7


Net yield per share 4.3% 4.5%


Managed Income Share ClassFinancial ResultsTotal returns (includes dividends reinvested)

14 JPMorgan Elect plc. Annual Report & Accounts 2012

MANAGED INCOME


Review

The UK market delivered strong returns in the year to 31st August 2012, boosted by arally in the summer months on the back of global central bank action to stimulate aglobal economic recovery. The FTSE All-Share Index rose 10.2% over the 12 monthperiod. Large and mid cap stocks performed particularly strongly in the year – theFTSE 100 and the FTSE Mid 250 indices were up 10.0% and 11.7% respectively. Smallcap stocks, which typically underperform their larger counterparts in an environmentof declining economic growth, lagged behind – the FTSE Small Cap Index rose 6.4%.

Corporate debt continued to produce impressive returns over the period, boosted bya search for yield among investors in the low interest rate environment. Corporatebonds were also helped by the general improvement in credit quality across sectorsas companies continued to strengthen their balance sheets, resulting in a contractionin spreads. The Barclays Capital Global Corporate Bond Index was up 8.9% in the year.

Economic activity in the UK economy and the wider global economy continued toslow in the year under review. However, UK stocks responded well to the variousmeasures to stimulate growth introduced by the world’s major central banks.

Despite the uncertain economic background, many UK companies continued todeliver both earnings and dividend growth over our financial year. Although theoutlook for earnings progress is clearly impacted by the prevailing economicoutlook, dividends have been much more stable. Many UK companies havestrengthened their balance sheets and focused on cash generation since thefinancial crisis and consequently they are able to continue to pay dividends to theirshareholders. During the year, some companies delivered very modest dividendgrowth, whilst others were able to deliver strong growth and, indeed, a number ofcompanies returned to the dividend list, an encouraging sign. The outlook for UKdividends remains encouraging, with high single digit percentage dividend growthfor the UK market as a whole possible in 2013.

Once again, issues in Europe had a significant impact on the UK equity market inthe period as the European authorities took steps towards containing the debtcrisis. The European Central Bank (ECB) came to the aid of the region’s weakestbanks in December and February with its long term refinancing operations, andlater cut interest rates to a new low of 0.75% in an effort to stimulate regionalgrowth. A promise in July from ECB president, Mario Draghi, that policymakerswould do ‘whatever it takes to preserve the euro’ triggered a rally in globalmarkets.

Investors also reacted positively to steps by Europe’s leaders towards greater fiscaland political union. The fiscal compact agreed in December 2011 goes a long waytowards controlling budget deficits for euro member countries, while the agreementin principle in June 2012 to move towards banking union is another important steptowards an eventual resolution to the crisis.

Meanwhile, measures introduced over the summer to boost growth in the US andChina provided crucial support to sentiment in the UK. In the US, the Federal Reservetook further action through an extension to its Operation Twist programme in June,and towards the end of the period markets rose on increasing hopes for a third round

Sarah Emly

John Baker



MANAGED INCOME


of quantitative easing. In China, second-quarter growth was the slowest in threeyears, prompting two interest rate cuts in as many months by the People’s Bank ofChina and further fiscal stimulus from the government, including significantinfrastructure investment.

At home, the Bank of England (BoE) provided continued support to the UK economy.Measures included a further GBP 175 billion of Gilt purchases and a GBP 100 billionpackage to provide UK banks with cheap funding in return for commitments to lendto businesses. These measures, along with holding base rates at a record low of 0.5%,were designed to help stimulate spending and investment by driving downborrowing costs, and were well received by the market.

While UK stocks performed well in response to these measures, the UK economicbackdrop darkened. In the first quarter of 2012 the UK economy returned torecession – defined as two quarters of negative growth – and it contracted further inthe second quarter, shrinking by 0.4% quarter on quarter. A sharp decline inconstruction appeared to be the main reason for the contraction. Falling demand forthe UK’s exports, particularly from Europe, also contributed to negative growth. UKmanufacturing data was similarly disappointing, with the purchasing managers’index, a measure of activity in the sector, remaining below the level that separatesexpansion from contraction for much of the period.

However, while national output declined, unemployment fell, particularly towards theend of the period, having reached a 17-year high in November 2011. This data raisedhopes that the economy may be stronger than official statistics suggest. Inflationfigures were also encouraging, with the consumer price index nearing the BoE’s 2%target, falling to 2.5% year on year in August from 5.2% a year earlier.

Performance Review

The table below summarises the performance of the Managed Income portfolio overthe past 10 years.

Total returns to 31st August 2012Six One Two Three Five Ten

Managed Income months year years years years years

NAV Return (%) 0.8 10.6 22.2 32.1 –7.3 82.0Benchmark Return1 (%) 0.7 10.2 17.5 30.4 9.3 91.9FTSE All-Share Index (%) –0.1 10.2 18.2 30.7 9.5 105.8Barclays Capital Global

Corporate Bond Index (hedged)in sterling terms1 (%) 4.7 9.8 12.4 25.9 39.4 90.1

Source: Bloomberg/J.P. Morgan.

1Prior 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.

In the 12 months to the 31st August 2012, the Managed Income portfolio delivered areturn on net assets of +10.6% against the total return of the composite benchmark

MANAGED INCOME


of +10.2%. Over the 12 month period the FTSE All-Share index rose by 10.2% whilstthe Barclays Capital Global Corporate Bond Index rose by 9.8%. The portfolio hasmodestly outperformed its benchmark over this period, benefiting from furtherpositive stock selection within the UK equity portfolio. During the first half of thefinancial year, the six months to 29th February 2012, the portfolio benefited fromboth favourable stock selection and from the asset allocation decision to remainunderweight in corporate bonds. During the second half of the year, to the end ofAugust 2012, UK stock selection remained positive, but the portfolio’s asset allocationwas less helpful.

In terms of the underlying direct UK equity holdings, the overall performance wasahead of the market, both in the first half and in the second half of the year. For theyear as a whole, the most significant contributor to performance was an underweightposition (a zero holding) in Anglo American, a major global mining stock. The shareprice of Anglo American has been very weak over the year, as have other miningstocks, due to falling commodity prices and lower demand for metals from China.Managed Income has benefited from being underweight in the mining sector overthe period. The portfolio also benefited from not owning Tesco, the major foodretailer which announced a disappointing trading update in January 2012 in which itlowered its future profit guidance. Food retailers generally have been disappointingshare price performers over the year andManaged Income has benefited from beingunderweight in this sector.

The portfolio continued to benefit from its overweight positions in some of thelong-held industrial stocks such as the industrial engineer, Melrose, the plasticsmanufacturer, RPC and the two chemicals stocks, Elementis and Johnson Matthey,both of which have delivered strong dividend growth to shareholders. Some of ourvalue stocks within the financial sectors have also performed strongly, including thehigh dividend yielding Aberdeen Asset Management, the life insurer, Legal andGeneral and the speciality non-life insurer, Lancashire Holdings. The holding inJPMorgan Income & Growth Investment Trust was also a strong performer overthe 12 month period.

By contrast, our holding in Man Group, the hedge fund manager, was a negativecontributor to returns, as it fell significantly over the period (we sold the holdingin January 2012), as did the emerging market asset manager, Ashmore Group.Although we had bought a position in Diageo, the global alcoholic beveragemanufacturer, we were underweight in this large stock for much of the year whichwas unhelpful as it outperformed the market. Not owning SAB Miller, anothermajor drinks manufacturer, was also detrimental to performance as the beveragesector was a strong performer over the year as a whole. Overall the portfolio’sperformance was encouraging over our financial year, with the underlying stockselection outperforming the positive returns from the UK equity market.

Portfolio Review

We maintained an overweight position in equities relative to the portfolio’s compositebenchmark throughout the year. This decision was predicated on reasonablevaluations – particularly dividend yield. In addition, we felt that the impact ofquantitative easing would be positive for equity prices. We remained invested in boththe JPMorgan Global High Yield Bond Fund and the JPMorgan Global Corporate Bond

MANAGED INCOME


Fund. These funds are a diversified way of enhancing the income yield of the overallportfolio. However, the allocation to corporate bonds stayed consistentlyunderweight relative to the composite benchmark. We also continue to hold aposition in JPMorgan European Investment Trust and in JPMorgan Income & GrowthInvestment Trust.

Our investment process remains focused on identifying companies whose earningsforecasts are being revised upwards, whose valuation is attractive and whose balancesheet strength allows for dividend stability. As such, portfolio construction isdetermined by bottom-up stock selection. For instance, we bought aerospace anddefence contractor, BAE Systems, whose earnings delivery has been resilient despiteweakness in the economy. Management remains committed to returning cash toshareholders, possibly through a buy-back and the dividend yield is very attractive at6%. We also bought Rexam which is the world’s largest producer of beverage cans.Underlying can volumes are positive as demand for specialised cans is growing fromcustomers such as Red Bull. The dividend yield of 3.7% is well supported by cashflows and the proceeds of potential disposals may be returned to shareholders.

On the other hand we sold our position in the media group, Pearson. The companycontinued to enjoy good trading in international education and the Financial Timesbut underlying revenue growth in North America fell as did returns at Penguin booksresulting in downgrades to consensus earnings forecasts. We also sold our holding inlife insurance company Resolution. Prior promises on returning capital were entirelyabandoned with the cancellation of a £250 million cash return to shareholdersoriginally promised for the first half of 2012. Despite the low valuation we felt that therisk of further negative news flow was high. Other sales included Stagecoach andRestaurant Group.

Outlook

The recent fall in UK unemployment should help support the domestic economy inthe second half of 2012. The rising number of people receiving wages, coupled withlower inflation, could spur an increase in household spending, which would helpstimulate growth.

However, UK fiscal austerity looks set to bite deeper. In particular, weak activity in theconstruction sector may continue to drag on the economy, with the governmentholding back on infrastructure spending as it struggles to meet its deficit reductiontargets.

In Europe, while the ECB’s new unlimited bond-buying scheme has boostedconfidence, its effectiveness lies with the governments of highly indebted eurozonecountries, which must now commit to necessary programmes of reform in order toresolve the crisis. Any further progress in the region would clearly have a positiveimpact on the UK economy.

Against this backdrop of continued weakness in the domestic and eurozoneeconomies, UK corporate profits are likely to remain under pressure. However,dividend yields and valuations remain attractive, both compared to bonds andcompared to history.

John BakerSarah EmlyInvestment Managers 7th November 2012


MANAGED INCOME


As at 31st August 2002 2003 20041 20052 2006 2007 2008 2009 2010 2011 2012

Net asset value per share (p) 73.7 77.4 79.1 97.2 108.7 113.8 86.4 69.6 72.9 76.9 81.4

Share price (p) 74.5 79.0 77.0 95.0 106.5 109.0 84.5 69.5 70.0 75.0 78.5

Year ended 31st August

Revenue return per share (p) 4.47 4.00 3.31 4.35 4.23 5.12 5.52 3.55 2.68 3.32 3.48

Dividends per share (p) 4.36 4.36 2.85 3.50 3.75 4.12 4.30 4.30 3.30 3.35 3.40

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

Premium/(discount) (%) 1.1 2.1 (2.7) (2.3) (2.0) (4.2) (2.2) (0.1) (4.0) (2.5) (3.6)

Net yield per share (%) 5.9 5.5 3.7 3.7 3.5 4.73 6.43 6.2 4.7 4.5 4.3

Gearing factor (%) 100.4 100.7 99.8 97.8 98.8 97.4 98.9 98.2 98.9 94.1 96.5

Ongoing Charges (%)4 1.17 1.16 0.50 0.71 0.79 0.79 0.74 0.92 0.66 0.69 0.71


1Represents the period from commencement of operations on 14th January 2004, which is the date when the investments of JPMorgan Fleming Managed Income were transferred tothe Company, to 31st August 2004. The financial records for the years ended 31st August 2001 to 2003 are those of JPMorgan Managed Income plc, prior to its liquidation andreconstruction in January 2004.2Restated for the change in accounting policy regarding dividends payable, which are now included in the accounts in the year in which they are approved by shareholders. The periodended 31st August 2004 and prior years have not been restated. 3Includes special dividends.4Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during the year (2011 to 2009: Total ExpenseRatio: Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the month end net assets during the year; 2008 and prioryears: expressed as the average of the opening and closing net assets).

Financial Record

MANAGED INCOME


31st August 2012 31st August 2011Valuation Valuation

Company £’000 %1 £’000 %2

Royal Dutch Shell 3,026 7.0 2,785 7.2

JPMorgan Global Corporate Bond Fund (‘A’ Distribution shares) 2,557 5.9 2,418 6.2

JPMorgan Global High Yield Fund (‘A’ Income shares)3 2,052 4.7 948 2.4

JPMorgan Income & Growth Investment Trust plc (Income shares) 1,951 4.5 2,476 6.4

Vodafone 1,944 4.5 1,731 4.5

BP3 1,721 4.0 881 2.3

British American Tobacco 1,650 3.8 1,170 3.0

GlaxoSmithKline 1,634 3.7 1,373 3.5

HSBC 1,597 3.7 1,813 4.7

AstraZeneca 1,208 2.8 1,008 2.6

Total4 19,340 44.6

1Based on total assets less current liabilities of £43.4m.2Based on total assets less current liabilities of £38.8m.3Not included in the ten largest investments at 31st August 2011.4At 31st August 2011, the value of the ten largest investments amounted to £17.0m, representing 43.7% of total assets less current liabilities.

Ten Largest Investments

MANAGED INCOME


31st August 2012 31st August 2011Portfolio Benchmark Portfolio Benchmark

% % % %

Financials 13.8 15.1 16.9 15.0

Consumer Goods 12.4 12.0 7.1 10.9

Industrials 11.6 7.6 8.8 6.3

Oil & Gas 10.9 15.1 11.7 14.5

Telecommunications 7.1 5.6 6.8 5.2

Basic Materials 6.7 8.3 9.3 10.7

Health Care 6.6 6.5 6.9 6.6

Investment Trusts 6.1 2.2 8.4 2.7

Consumer Services 5.6 8.0 4.4 8.0

Utilities 3.7 3.4 4.6 3.5

Technology 1.4 1.2 0.5 1.6

Bond Funds 10.6 15.0 8.7 15.0

Net Current Assets 3.5 — 5.9 —

Total 100.0 100.0 100.0 100.0

Based on total assets less current liabilities of £43.4m (2011: £38.8m).

Sector Analysis

MANAGED INCOME


Valuation£’000

UK EquitiesRoyal Dutch Shell 3,026 Vodafone 1,944 BP 1,721 British American Tobacco 1,650 GlaxoSmithKline 1,634 HSBC 1,597 AstraZeneca 1,208 Diageo 1,145 Imperial Tobacco 1,015 BHP Billiton 886 Rio Tinto 769 BT 714 Xstrata 657 BAE Systems 630 Prudential 616 Barclays 561 Melrose 551 Legal & General 521 Scottish & Southern Energy 501 WPP 476 Wolseley 470 De La Rue 442 Aberdeen Asset Management 417 Kcom 409 Smith (DS) 403 Berkeley 392 Rolls-Royce 392 Lancashire 380 Standard Life 378 Filtrona 368 Johnson Matthey 367 John Menzies 363 Centrica 352 GKN 344 Tate & Lyle 343 Diploma 340 Severn Trent 337 Easyjet 324 Compass 323 Aviva 314 British Land 312 Laird 308 RPC 308 ITV 295 Micro Focus International 295 Provident Financial 295

Valuation£’000

Taylor Wimpey 295 Catlin 275 Intercontinental Hotels 267 Rexam 264 Interserve 261 WH Smith 261 Morrison (Wm.) Supermarkets 251 Senior 236 Elementis 233 Pennon 231 Informa 224 Burberry 221 Hammerson 201 Drax 186 Standard Chartered 123

34,622

JPMorgan Managed Bond FundsJPMorgan Global Corporate Bond (‘A’ Distribution shares)1 2,557JPMorgan Global High Yield Bond (‘A’ Income shares)1 2,052

4,609

JPMorgan Managed Investment TrustsJPMorgan Income & Growth (Income shares) 1,951JPMorgan European (Income shares) 631JPMorgan Income & Growth (Capital shares) 63

2,645

Externally Managed Investment TrustsACP Mezzanine —

—

Total Portfolio 41,876

Derivative Instruments

OptionsBAT 3600 Call Option Dec 20121 (2)Severn Trent 1500 Put Option Dec 20121 (2)Prudential 880 Call Option Oct 20121 (1)SSE 1200 Put Option Dec 20121 (1)ITG 2800 Call Option Dec 20121 (1)

Total Derivative Instruments (7)

Total Portfolio and Derivatives 41,869

1Unlisted.


MANAGED INCOME



Gains on investments held at fair value throughprofit or loss — 2,465 2,465 — 2,226 2,226

Income from investments 1,931 — 1,931 1,817 — 1,817Other interest receivable and similar income 26 — 26 49 — 49

Gross return 1,957 2,465 4,422 1,866 2,226 4,092Management fee (78) (96) (174) (80) (93) (173)Other administrative expenses (110) — (110) (101) — (101)

Net return on ordinary activities before financecosts and taxation 1,769 2,369 4,138 1,685 2,133 3,818

Taxation (charge)/credit (1) — (1) (51) 44 (7)


Return per Managed Income share 3.48p 4.65p 8.13p 3.32p 4.42p 7.74p


MANAGED INCOME


2012 2011£’000 £’000


Current assets Debtors 367 301Cash and short term deposits 1,186 2,145

1,553 2,446Creditors: amounts falling due within one year (37) (160)Financial liability: Derivative financial instruments (7) —

Net current assets 1,509 2,286


Net assets 43,385 38,795

Net asset value per Managed Income share 81.4p 76.9p


MANAGED CASH



(2011: +0.6%)

0.50pDividend(2011: 0.35p)


(2011: +0.7%)


1Source: Morningstar.2Source: J.P. Morgan.3Operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during theyear (2011: Total Expense Ratio: Management fee and all other operating expenses excluding interest, expressed asa percentage of the average of the month end net assets during the year). The Ongoing Charges are calculated inaccordance with guidance issued by the Association of Investment Companies in May 2012.


2012 2011 change

Shareholders’ funds (£’000) 13,931 14,241 –2.2

Number of shares in issue 13,781,140 14,075,774 –2.1

Net asset value per share 101.1p 101.2p –0.1

Share price 100.5p 100.5p 0.0



Managed Cash Share ClassFinancial Results

MANAGED CASH


Review

The net asset value of the Managed Cash portfolio returned 0.4% over the 12 monthsto the 31st August 2012. The total return to shareholders was 0.5%.

The returns for the portfolio were low over the period as the Bank of England’s baserate remained unchanged at 0.5% pa. This rate has not moved since March 2009 –the longest period of stability since the early 1950s.

We are currently invested in six AAA-rated stable value money market funds,managed by Fidelity, Insight, JPMorgan, Deutsche Bank, Blackrock and ScottishWidows. The weighted average maturity for these funds in aggregate is just over41 days. Our managers are focused on capital preservation and security as theirprimary objective, but at the margin they have recently extended the maturity oftheir portfolios to take advantage of slightly higher deposit rates.

Outlook

UK retail price index inflation currently stands at 2.9% (end August), while thegovernment’s preferred measure – the consumer price index – stands at 2.5%. Bothhave fallen significantly over the past 12 months (from 5.2% and 4.5% respectively).The consumer price index is now back to levels last seen in November 2009 and isslowly moving towards the Monetary Policy Committee’s target of 2%.

Recent headlines throughout the developed world suggest that interest rate rises arestill a long way off. The US Federal Reserve, for example, has recently extended itsguidance for interest rates to remain unchanged until mid 2015. Assuming theseforecasts are accurate, it is likely that the returns to shareholders from the ManagedCash portfolio will remain extremely low.

Katy ThorneycroftJonathan LoweInvestment Managers 7th November 2012

Katy Thorneycroft

Jonathan Lowe


MANAGED CASH


At 31st August 20041 20052 2006 2007 2008 2009 2010 2011 2012

Net asset value per share (p) 100.1 101.2 101.1 101.4 101.5 100.3 100.7 101.2 101.1

Share price (p) 100.0 99.5 99.0 100.0 100.5 100.0 100.0 100.5 100.5

Year to 31st August

Revenue return per share (p) 2.08 3.97 3.65 3.98 4.17 1.56 0.22 0.43 0.39

Dividends per share (p) 2.00 3.96 3.73 3.93 4.07 1.70 0.00 0.35 0.50

Discount (%) 0.1 1.7 2.1 1.4 1.0 0.3 0.7 0.7 0.3

Gearing factor (%) nil nil nil nil nil nil nil nil nil

Ongoing Charges (%)3 0.10 0.08 0.15 0.12 0.16 0.21 0.20 0.19 0.24


1Represents the period from commencement of operations on 14th January 2004 to 31st August 2004. 2Restated for change in accounting policy regarding dividends payable, which are now included in the accounts in the year in which they are approved by shareholders. The periodended 31st August 2004 has not been restated.3Operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during the year (2011 to 2009: Total Expense Ratio: Operating expensesexcluding interest, expressed as a percentage of the average of the month end net assets during the year: 2008 and prior years: the average of the opening and closing net assets).

Financial Record

MANAGED CASH


31st August 2012 31st August 2011Yield Valuation Valuation

Company %1 Rating2 £’000 %3 £’000 %4

Deutsche Global Liquidity Fund 0.81 AAA 2,694 19.4 2,725 19.1

JPMorgan Sterling Liquidity Fund 0.80 AAA 2,694 19.4 2,362 16.6

Insight Sterling Liquidity Fund 0.83 AAA 2,607 18.7 2,663 18.7

Scottish Widows Investment Partnership Liquidity Fund 0.77 AAA 2,379 17.0 2,519 17.7

Blackrock ICS Institutional Sterling Liquidity Fund 0.77 AAA 2,144 15.4 2,154 15.1

Fidelity Institutional Sterling Liquidity Fund 0.73 AAA 1,184 8.5 1,828 12.8

Total Portfolio 13,702 98.4

1Annual yield to 31st August 2012. Source: IMMFA Money Fund Report, iMoneyNet.2Ratings given by recognised credit agencies as at 31st August 2012.3Based on total assets less current liabilities of £13.9m.4Based on total assets less current liabilities of £14.2m.


31st August 31st August2012 2011%1 %1

Sterling Liquidity Funds and Cash Funds 98.4 100.1Net Current Assets/(Liabilities) 1.6 (0.1)

Total 100.0 100.0

1Based on total assets less current liabilities of £13.9m (2011: £14.2m).

Portfolio Analysis

MANAGED CASH



Losses on investments held at fair value through profit or loss — — — — (1) (1)

Income from investments 97 — 97 115 — 115

Gross return/(loss) 97 — 97 115 (1) 114Other administrative expenses (34) — (34) (33) — (33)

Net return/(loss) on ordinary activities before taxation 63 — 63 82 (1) 81

Taxation (8) — (8) (5) — (5)

Net return/(loss) on ordinary activities after taxation 55 — 55 77 (1) 76

Return/(loss) per Managed Cash share 0.39p 0.00p 0.39p 0.43p (0.01)p 0.42p


MANAGED CASH


2012 2011£’000 £’000


Current assets Debtors 7 8Cash and short term deposits 239 6

246 14Creditors: amounts falling due within one year (17) (24)

Net current assets/(liabilities) 229 (10)


Net assets 13,931 14,241

Net asset value per Managed Cash share 101.1p 101.2p


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Board of Directors

Simon Miller (Chairman)

A Director since January 2004

Last reappointed to the Board: December 2010.

Remuneration: £32,000.

Chairman of Dunedin LLP. Mr Miller is also Chairman of Artemis Alpha Trust plc,Blackrock North American Income Trust plc and Amati VCT plc and a Non-ExecutiveDirector of Scottish Friendly Assurance Society Limited and Brewin Dolphin HoldingsPLC. Previously Chairman of JPMorgan Fleming Managed Income plc.

Connections with Manager: None.

Shared directorships with other Directors: None.

Shareholding in Company: 5,755 Managed Growth Shares.27,016 Managed Income Shares.

Alan Hodson


Last reappointed to the Board: Standing for initial election at this year’s AGM.

Remuneration: £22,000

Chairman of Blackrock Commodities Income Investment Trust plc, Great Ormond StreetHospital Children’s Charity special trustees and Triodos New Horizons Ltd. Mr Hodsonjoined SGWarburg (subsequently UBS) in 1984, rising to Global Head of Equities, amember of the Executive Committee of UBS Investment Bank and of the UBS AG GroupManaging Board until his retirement in June 2005.



Shareholding in Company: 10,000 Managed Growth Shares.25,000 Managed Income Shares.

Angus Macpherson

A Director since March 2008



Chief Executive of ES Noble & Company Limited and a director of Espirito SantoInvestment Holdings Ltd. Mr Macpherson spent much of his career working overseas forMerrill Lynch, latterly as head of Capital Markets and Financing for Asia. He also servesas a member of the Scottish Government’s Financial Services Advisory Board.



Shareholding in Company: 5,568Managed Growth Shares.

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

Robert Ottley (Deputy Chairman)




Successively a partner or director of private client stockbroking firms W Greenwell,James Capel, and HSBC Investment Management, with a particular interest in investmenttrusts and other collective schemes, Mr Ottley has latterly been a non-executive directorof a variety of trusts and companies investing in the US, Japan, Asia and the UKrespectively. His former directorships include JPMorgan Fleming Managed Income plc.



Shareholding in Company: 31,709Managed Growth Shares.39,128 Managed Income Shares.

Roger Yates

A Director since August 2009



A director of Pioneer Investments and Electra Private Equity Trust plc. Former chiefexecutive of Henderson Group plc, a position that he held from 1999 to 2008. He iscurrently an independent non-executive director of IG Group Holdings plc. He has31 years’ experience in the fund management industry having begun his career withGTManagement Limited in 1981. He was previously chief investment officer of InvescoGlobal and Morgan Grenfell Investment Management Limited.



Shareholding in Company: 25,000Managed Income Shares.

James Robinson (Chairman of the Audit Committee)

A Director since April 2012

Last reappointed to the Board: Standing for initial election at this year’s AGM.

Remuneration: £24,000

Chairman of Polar Capital Global Healthcare Growth and Income Trust plc and a directorof Aberdeen New Thai Investment Trust PLC, Fidelity European Values PLC and InvescoAsia Trust plc. He is also a Council Member and chairman of the Investment Committeeof the British Heart Foundation. Mr Robinson was chief investment officer, investmenttrusts and director of hedge funds at Henderson Global Investors prior to his retirementin 2005. A chartered accountant, Mr Robinson has 31 years’ investment experience.



Shareholding in Company: 5,000 Managed Growth Shares.

Board of Directors continued

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The Directors present their report and the audited financialstatements for the year ended 31st August 2012.

Business ReviewBusiness of the CompanyThe Company carries on business as an investment trust andwas approved by HM Revenue & Customs as an investmenttrust in accordance with Section 1158 of the Corporation TaxAct 2010 for the year ended 31st August 2011. In the opinion ofthe Directors, the Company has subsequently conducted itsaffairs so that it should continue to qualify as an investmenttrust under the HM Revenue and Customs’ Qualifying rules.

Approval for the year ended 31st August 2011 is subject toreview should there be any subsequent enquiry underCorporation Tax Self Assessment.

The Company is an investment company within the meaning ofSection 833 of the Companies Act 2006. The Company is not aclose company for taxation purposes.

A review of the Company’s activities and prospects is given inthe Chairman’s Statement on pages 1 to 3, and in theInvestment Managers’ Reports on pages 5 to 7, 15 to 18 and 26.

Managed Growth

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

Investment Policies and Risk Management In order to achieve its stated investment policy and manageinvestment risks, the Managed Growth portfolio is invested ina diversified range of investment trusts and open-ended funds,which themselves invest in the UK and overseas. The numberof investments in the portfolio will normally range between30 and 50.

Investment Limits and Restrictions • The investment manager must obtain Board approval for

any new investment in excess of 10% of the portfolio’sgross assets.

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

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

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

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

• The Board does not intend to utilise borrowings to increasethe funds available for investment. The Board monitorsclosely the level of indirect gearing through the underlyinginvestments. The underlying portfolio should be invested95-120%.

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

Managed Income

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

Investment Policies and Risk Management In order to achieve its stated investment policy and manageinvestment risks, the Managed Income portfolio is investedin a diversified portfolio of UK equities (including investmentcompanies) and open ended funds. Please see the InvestmentManagers’ report for more details on portfolio activity. Thenumber of investments in the portfolio will normally rangebetween 50 and 80.

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

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

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

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

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

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

Directors’ Report

Directors’ Report continued

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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, selectedfor their yield and credit rating and short dated AAA-rated UKgovernment securities or G7 government securities hedgedinto sterling.

Investment Policies and Risk Management In order to achieve its stated investment policy and managerisks, the Managed Cash portfolio invests no more than 20%of the value of the portfolio in any one liquidity fund or shortdated (i.e. with a maturity of less than 2 years) UK governmentsecurities or G7 government securities hedged into sterling. Allliquidity funds or government securities shall have a AAA creditrating (as measured by Standard & Poor’s) or equivalent ratingfrom a recognised credit rating agency.

Investment Limits and Restrictions • 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 UKlisted companies (including investment companies).

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

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

Performance

Managed Growth: In the year to 31st August 2012, the Managed Growthportfolio produced a total return to shareholders of 3.3%and a total return on net assets of 5.2%. This compares withthe return on the composite benchmark of 9.8%. As at31st August 2012, the value of the Managed Growthinvestment portfolio was £152.9 million. The InvestmentManagers’ Report on pages 5 to 7 includes a review ofdevelopments during the year as well as information oninvestment activity within the portfolio.

Managed Income: In the year to 31st August 2012, the Managed Income portfolioproduced a total return to shareholders of 9.5% and a totalreturn on net assets of 10.6%. This compares with the return onthe composite benchmark of 10.2%. As at 31st August 2012, the

value of the Managed Income investment portfolio was£41.9million. The Investment Managers’ Report onpages 15 to 18 includes a review of developments during theyear as well as information on investment activity within theportfolio.

Managed Cash: In the year to 31st August 2012, the Managed Cash portfolioproduced a total return to shareholders of 0.5% and a totalreturn on net assets of 0.4%. There is no benchmark indexfor this share class. As at 31st August 2012, the value of theinvestment portfolio was £13.7 million. The InvestmentManagers’ Report on page 26 includes a review ofdevelopments during the year.

Total Return, Revenue and Dividends

The Company’s gross total return for the year amounted to£13.0million (2011: £21.3 million) and net total return afterdeducting the management fee, other administrative expenses,finance costs and taxation amounted to £11.9 million (2011:£20.1 million).

Managed Growth: Net revenue return for the year available for distribution byway of dividend amounted to £2,492,000 (2011: £2,210,000).Total dividends paid and proposed in respect of the year are5.95p per share (2011: 5.00p per share), costing £2,369,000(2011: £2,069,000). The balance on the revenue reserve at theyear end was £1,500,000 (2011: £1,264,000) and after allowingfor the 4th interim dividend was £1,078,000 (2011: £957,000).

Managed Income: Net revenue return for the year available for distribution byway of dividend amounted to £1,768,000 (2011: £1,634,000).Total dividends paid and proposed in respect of the year were3.40p per share (2011: 3.35p per share), costing £1,729,000(2011: £1,659,000). The balance on the revenue reserve at theyear end was £680,000 (2011: £577,000) and after allowing forthe fourth quarterly dividend was £227,000 (2011: £173,000).

Managed Cash: Net revenue return for the year available for distribution byway of dividend amounted to £55,000 (2011: £77,000). Totaldividends paid and proposed in respect of the year were0.50p (2011: 0.35p), costing £69,000 (2011: £55,000). Thebalance on the revenue reserve at the year end was£102,000 (2011: £115,000) and after allowing for the fourthquarterly dividend was £68,000 (2011: £87,000).

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Full details of the dividends paid and proposed on theManaged Growth, Managed Income and Managed Cash shareclasses during the year are given in note 8 on pages 60 and 61.

Key Performance Indicators (‘KPIs’) The Board uses a number of financial KPIs to monitor andassess the performance of the Company. The principal KPIs are:

• Performance against the benchmark index: This is the most important KPI by which performance isjudged.

Managed Growth:

Performance Relative to Benchmark IndexFigures have been rebased to 100 at 31st August 2002

JPMorgan Elect Managed Growth – share price total return.JPMorgan Elect Managed Growth – net asset value total return.The benchmark is represented by the horizontal grey line.Source: Morningstar/FTSE.

Ten Year PerformanceFigures have been rebased to 100 as at 31st August 2002

JPMorgan Elect Managed Growth – share price total return.JPMorgan Elect Managed Growth – net asset value total return.Benchmark.Source: Morningstar/FTSE.

Managed Income:

Performance Relative to Benchmark IndexFigures have been rebased to 100 as at 31st August 2002

JPMorgan Elect Managed Income – share price total return.JPMorgan Elect Managed Income – net asset value total return.The benchmark is represented by the horizontal grey line.Source: Morningstar/FTSE.

Ten Year PerformanceFigures have been rebased to 100 as at 31st August 2002

JPMorgan Elect Managed Income – share price total return.JPMorgan Elect Managed Income – net asset value total return.Benchmark.Source: Morningstar/FTSE.

Managed Cash:

There is no benchmark for the Managed Cash share class.

• Performance against the Company’s peersThe principal objective of the Managed Growth share classis to achieve capital growth. The principal objective of theManaged Income share class is to achieve growing incomewith the potential for long term capital growth. However,the Board also monitors the performance of the ManagedGrowth and Managed Income share classes relative to theirrespective benchmarks and a broad range of competitorfunds.

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• Performance attributionThe purpose of performance attribution analysis is toassess how each share class achieved its performancerelative to its benchmark index, i.e. to understand theimpact on the Managed Growth and Managed Incomeportfolios’ relative performance of the various components,such as asset allocation and stock selection. However, giventhat the Managed Growth (and a proportion of the ManagedIncome portfolio) is invested in other funds, rather thanentirely in conventional equities, it is difficult to produceprecise, verifiable performance attribution data. Thereforethe Investment Managers comment on the factors that havesignificantly impacted on performance in their reports.

• Discount to net asset value (‘NAV’)The Board has for several years operated share issue andrepurchase programmes which seek to address imbalancesin supply and demand of the Company’s shares within themarket and thereby seek to reduce the volatility andabsolute level of the discount/premium to NAV at which theCompany’s shares trade.

Managed Growth:

Discount Performance

JPMorgan Managed Growth – premium/(discount).Source: Datastream.

In the year to 31st August 2012, the Managed Growth sharestraded between a discount of 1.9% and 3.8%.

Managed Income:


JPMorgan Managed Income – premium/(discount).Source: Datastream.

In the year to 31st August 2012, the Managed Income sharestraded between a discount of 2.5% and 3.6%.

Managed Cash:


JPMorgan Managed Cash – premium/(discount).Source: Datastream.

In the year to 31st August 2012, the Managed Cash sharestraded between a discount of 0.3% and 0.7%.

• Ongoing ChargesTheOngoing Charges represent the Company’s managementfee and all other operating expenses, excluding interest,expressed as a percentage of the average of the daily netassets during the year. The Managed GrowthOngoingCharges for the year ended 31st August 2012 was 0.51% (2011:0.51%), the Managed IncomeOngoing Chargeswas 0.71%(2011: 0.69%) and the Managed CashOngoing Chargeswas0.24% (2011: 0.19%). The Board reviews each year an analysiswhich shows a comparison of the Managed Growth andManaged IncomeOngoing Charges and itsmain expenseswith those of its peers.

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

• Share issuesDuring the year and since the year end, as at the date ofthis report, the Company had not issued any shares.

• Share repurchases The Company repurchased 1,532,722 Managed Growthshares for cancellation during the year, representing 3.7%of the shares in issue at the beginning of the year, for atotal consideration of £5,978,000. Since the year end, afurther 290,365 Managed Growth shares have beenpurchased for cancellation, for a total consideration of£1,171,000.

The Company repurchased 1,378,027 Managed Incomeshares for cancellation during the year, representing 2.73%of the shares in issue at the beginning of the year, for atotal consideration of £1,047,000. Since the year end afurther 163,595 Managed Income shares have beenrepurchased for cancellation, for a total consideration of£128,000.

The Company repurchased 945,688Managed Cash sharesfor cancellation during the year, representing 6.7% of theshares in issue at the beginning of the year, for a totalconsideration of £956,000. Since the year end, a further173,089Managed Cash shares have been repurchased forcancellation for a total consideration of £172,000.

Resolutions to renew the authority to issue new shares andrepurchase Managed Growth, Managed Income andManaged Cash shares will be put to shareholders at theforthcoming Annual General Meeting. The full text of theseresolutions are set out in the Notice of Annual GeneralMeeting on pages 77 and 78.

• Conversions The Company’s capital structure allows shareholders theopportunity, four times each year, to convert part or all oftheir share holdings into shares of the Company’s othershare classes without such conversions being treated,under current law, as a disposal for UK capital gains taxpurposes. More details are given on page 82.

During the year four conversions took place on30th November 2011, 29th February 2012, 31st May 2012and 31st August 2012. The net result of these conversionswas a reduction in the Managed Growth share capital of1,043,153 shares, an increase in the Managed Income share

capital of 4,206,895 shares and an increase in the ManagedCash share capital of 830,810 shares. The holders of179,756 Managed Cash shares elected to have thoseholdings repurchased by the Company in these conversionopportunities for a total consideration of £181,000.

Principal RisksWith the assistance of the Manager, the Board has drawn up arisk matrix, which identifies the key risks to the Company.These key risks fall broadly under the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example asset allocation or the level ofgearingmay lead to under-performance against therelevant benchmark index and peer companies, resultingin the Company’s shares trading on a wider discount. TheBoard tries to limit these risks by diversification ofinvestments through its investment restrictions andguidelines which are monitored and reported on by theManager. JPMAM provides the Directors with timely andaccurate management information, including performancedata and attribution analyses, revenue estimates,transaction reports and shareholder analyses. The Boardmonitors the implementation and results of the investmentprocess with the Investment Managers, who attend allBoard meetings, and review data which show statisticalmeasures of the Company’s risk profile. The Board does notintend that any of the Company’s portfolios will useborrowings to increase the funds available for investmentand it monitors closely the level of indirect gearing throughthe underlying investments. The Board holds a separatemeeting devoted to strategy each year.

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

• Accounting, Legal and Regulatory: In order to qualify asan investment trust, the Company must comply withSection 1158 of the Corporation Tax Act 2010(‘Section 1158’). Details of the Company’s approval statusare given under ‘Business of the Company’ above. Werethe Company to breach Section 1158, it might lose itsinvestment trust status and as a consequence gains


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within the Company’s portfolios could be subject toCapital Gains Tax. The Section 1158 qualification criteriaare continually monitored by JPMAM and the resultsreported to the Board each month. The Company mustalso comply with the provisions of the Companies Act2006 and, since its shares are listed on the London StockExchange, the UKLA Listing Rules. A breach of theCompanies Act could result in the Company and/or theDirectors being fined or the subject of criminalproceedings. Breach of the UKLA Listing Rules couldresult in the Company’s shares being suspended fromlisting which in turn would breach Section 1158. TheBoard relies on the services of its Company Secretary,JPMAM, and its professional advisers to ensurecompliance with the Companies Act and the UKLA ListingRules.

• Corporate Governance and Shareholder Relations: Detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out in the Corporate Governancestatement on pages 41 to 45.

• Operational: Loss of key staff by JPMAM, such as theInvestment Managers, could affect the performance of theCompany. Disruption to, or failure of, JPMAM’s accounting,dealing or payments systems or the custodian’s recordscould prevent accurate reporting and monitoring of theCompany’s financial position. Details of how the Boardmonitors the services provided by JPMAM and itsassociates and the key elements designed to provideeffective internal control are included with the RiskManagement and Internal Control section of the CorporateGovernance report on pages 44 and 45.

• Financial: The financial risks faced by the Companyincludemarket price risk, interest rate risk, liquidity riskand credit risk. Further details are disclosed in note 21on pages 71 to 76.

Future Developments Clearly the future development of the Company is muchdependent upon the success of the Company’s investmentstrategies in the light of economic and equity marketdevelopments. The Board holds a separate meeting each yeardevoted to the strategy of the Company and its investmentportfolios. The Investment Managers discuss the outlook intheir reports.

Management of the Company

The Manager and Company Secretary is JPMorgan AssetManagement (UK) Limited (‘JPMAM’). JPMAM is employed

under separate contracts for each portfolio of assets, eachcontract being terminable on one year’s notice, withoutpenalty. If the Company wishes to terminate any of thecontracts on less than one year’s notice, the balance of theyear’s remuneration is payable by way of compensation.

JPMAM is a wholly-owned subsidiary of JPMorgan Chase Bankwhich, through other subsidiaries, also provides banking,marketing, dealing and custodian services to the Company.

The Board has evaluated the performance of the Manager andconfirms that it is satisfied that the continuing appointment ofthe Manager is in the interests of shareholders as a whole. Inarriving at this view, the Board has considered the investmentstrategy and process of the Manager, noting performanceagainst the portfolios’ respective benchmarks and peers overthe long-term and the quality of the support that the Companyreceives from JPMAM.

Management Fee

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

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

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

• Managed Cash assets: no management fee charged.

Going Concern

The Directors believe that having considered the Company’sinvestment objectives (see pages 33 and 34); risk managementpolicies (see pages 33 and 34); liquidity risk (see note 21(b) onpage 75); capital management policies and procedures (seepage 76); the nature of the portfolios and expenditureprojections, that the Company has adequate resources, anappropriate financial structure and suitable managementarrangements in place to continue in operational existence forthe foreseeable future. For these reasons, they consider thatthere is reasonable evidence to continue to adopt the goingconcern basis in preparing the accounts.

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Payment Policy

It is the Company’s policy to obtain the best terms for allbusiness and therefore there are no standard payment terms.In general the Company agrees with its suppliers the terms onwhich business will take place and it is the Company’s policy toabide by those terms. As at 31st August 2012, the Company hadno outstanding trade creditors (2011: none).

Directors

The Directors of the Company who held office at the end of theyear, together with their beneficial interests in the Company’sshares, are given below:

31st August 2012Managed Managed ManagedGrowth Income Cash

Directors Shares Shares Shares

Alan Hodson 10,000 25,000 —Simon Miller 5,755 27,016 —Angus Macpherson 5,569 — —Robert Ottley 31,709 39,128 —James Robinson 5,000 — —Roger Yates — 25,000 —

Since the year end, Mr Miller’s and Mr Ottley’s beneficialholdings have increased by 15 Managed Growth Shares and274Managed Income Shares and 54 Managed Growth Sharesand 394Managed Income Shares respectively.

The Directors who held office as at 1st September 2011,together with their beneficial interests in the Company’s sharesare given below:

1st September 2011Managed Managed ManagedGrowth Income Cash

Directors Shares Shares Shares

Simon Miller 5,677 25,887 —Angus Macpherson 5,568 — —Robert Ottley 31,436 37,532 —Nigel Sidebottom 9,379 13,500 —Roger Yates — 25,000 —

In accordance with Article 91 of the Company’s Articles ofAssociation, all Directors who held office at the time of thetwo preceding Annual General Meetings and who did notstand for re-election shall retire from office by rotation. The

Board has adopted corporate governance best practiceand all Directors stand for annual re-election. AccordinglyMessrs Macpherson, Ottley and Yates will retire at theforthcoming Annual General Meeting and, being eligible,offer themselves for re-election. Having been appointedduring the year, Messrs Hodson and Robinson will bestanding for initial election.

The Nomination Committee, having considered thequalifications, performance and contribution to the Boardand its Committees, confirms that Messrs Macpherson, Ottleyand Yates continue to be effective and demonstratecommitment to the role and recommends their re-election toshareholders. If re-elected Mr Ottley will succeed Mr Miller asChairman. As reported in his statement, the Chairman will beretiring from the Board at the conclusion of the 2012 AnnualGeneral Meeting. Messrs Hodson and Robinson have alreadydemonstrated that they are able to fulfill their roles in aneffective manner and accordingly their election to the Boardis recommended to shareholders.

Director Indemnification and Insurance

As permitted by the Company’s Articles of Association, theDirectors have the benefit of a deed of indemnity which is aqualifying third party indemnity, as defined by Section 234 ofthe Companies Act 2006. The deeds of indemnity wereexecuted on 1st July 2010 and are currently in force.

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

Disclosure of information to the Auditor

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

(a) so far as each of the Directors is aware, there is no relevantaudit information (as defined in the Companies Act 2006) ofwhich the Company’s auditor is unaware, and

(b) each of the Directors has taken all the steps that he oughtto have taken as a Director in order to make himself awareof any relevant audit information and to establish that theCompany’s auditor is aware of that information.

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


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Section 992 Companies Act 2006

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

Capital StructureThe Company’s capital structure is summarised on the featurespage at the front of this report.

Voting Rights in the Company’s sharesDetails of the voting rights in the Company’s shares as at thedate of this report are given in note 16 to the Notice of AGM onpage 80 and below.

Environmental Matters, Social and Community IssuesInformation on environmental matters, social and communityissues is set out on page 45. The Company has no employees.

Notifiable Interests in the Company’s Voting RightsAt 31st August 2012, the following had declared a notifiableinterest in the Company’s voting rights:

% TotalShares Voting voting

Shareholders/Class held rights rights

Chase Nominees1,2

Growth 23,328,485 94,247,079 44.5Income 27,355,620 22,158,052 10.4Cash 4,032,089 4,072,410 1.9

54,716,194 120,477,541 56.8

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

There have been no changes to these disclosures since the yearend to the date of this report.

The percentage of total voting rights is calculated by referenceto the share voting numbers which, as at 31st August 2012 wereas follows:

Managed Growth Shares: 4.04Managed Income Shares: 0.81Managed Cash Shares: 1.01

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

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

Independent Auditor

Ernst & Young LLP has expressed its willingness to continue inoffice as the Auditor and a resolution to reappoint Ernst &Young LLP and authorise the Directors to determine theirremuneration for the ensuing year, will be proposed at theAnnual General Meeting.

Annual General Meeting

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

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

(i) Authority to issue the Company’s shares for cash and disapplypre-emption rights (resolutions 9 and 10)

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

Resolutions 9 and 10 in the Notice of Meeting on page 77 willgive the Directors specific authority to allot new shares,otherwise than by a pro rata issue to existing shareholders,up to 3,805,407 Managed Growth shares, 5,311,135 ManagedIncome shares and 1,360,805Managed Cash shares, suchamounts being approximately equivalent to 10% of the presentissued share capital of each share class.

The Board believes that, should the Company’s shares move toa premium to net asset value, it would be in the interests ofexisting shareholders for the Company to be able to issue new

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shares to investors. As such issues would only be made atprices greater than net asset value, they would increase theassets underlying each share and spread the administrativeexpenses, other than those fees charged as a percentage ofassets, over a greater number of shares. The issue proceedswould be available for investment in line with the Company’sinvestment objectives. No issue of shares will be made whichwould effectively alter the control of the Company without theprior approval of shareholders in general meeting.

(ii) Authority to repurchase the Company’s shares (resolution 11) At the Annual General Meeting of the Company held on14th December 2011 shareholders gave authority to theBoard to repurchase up to 14.99% of the shares of any classof the Company’s then issued share capital. The Board willseek shareholder approval at the AGM to renew thisauthority, which will last until 12th June 2014 or until thewhole of the 14.99% has been acquired, whichever is theearlier. The full text of the resolution is set out in the Notice ofMeeting on pages 77 and 78. Repurchases will be made at thediscretion of the Board and will only be made in the market atprices below the prevailing net asset value per share as andwhen market conditions are appropriate.

(iii) Approval of the proposed Contingent Purchase Contract(resolution 12)

This resolution gives the Company authority to buy itsManaged Cash shares and Deferred shares arising onconversion of any of the Growth, Income or Cash shares intoother classes of share. This resolution follows the requirementsof Section 694 of the UK Companies Act 2006. The purchasecontract is part of the mechanism by which shareholders areentitled to require the Company to repurchase Managed Cashshares. The Deferred shares are repurchased for nominalconsideration (as they have no economic value) in order tokeep the balance sheet manageable. By law the Company canonly purchase these shares off-market if such purchase ispursuant to a contract in the form approved at a generalmeeting of the Company.

Recommendation

The Board considers that resolutions 9 to 12 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole.The Directors unanimously recommend that you vote in favourof the resolutions as they intend to do, where voting rights areexercisable, in respect of their own beneficial holdings whichamount in aggregate to 174,914 shares representingapproximately 0.2% of the voting rights of the Company.

Corporate Governance StatementCompliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 48, indicates how theCompany has applied the principles of good governance of theFinancial Reporting Council UK Corporate Governance Code2010 (the ‘UK Corporate Governance Code’) and the AIC’s Codeof Corporate Governance, (the ‘AIC Code’), which complementsthe UK Corporate Governance Code and provides a frameworkof best practice for investment trusts.

The Board is responsible for ensuring the appropriate level ofcorporate governance and considers that the Company hascomplied with the best practice provisions of the UK CorporateGovernance Code and the AIC Code, other than in respect ofthe provision relating to the appointment of a seniorindependent director and in so far as they are relevant to theCompany’s business throughout the year.

Role of the Board

Management agreements between the Company and JPMAMset out the matters over which the Manager has authority. Thisincludes management of the Company’s assets and theprovision of accounting, company secretarial, administration,and some marketing services. All other matters are reservedfor the approval of the Board. A formal schedule of mattersreserved to the Board for decision has been approved. Thisincludes determination and monitoring of the Company’sinvestment objectives and policies and its future strategicdirection, gearing policy, management of the capital structure,appointment and removal of third party service providers,review of key investment and financial data and the Company’scorporate governance and risk control arrangements.

The Board meets at least quarterly 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 theirresponsibilities.

There is an agreed procedure for Directors to take independentprofessional advice if necessary and at the Company’s expense.This is in addition to the access that every Director has to theadvice and services of the Company Secretary, JPMAM, which isresponsible to the Board for ensuring that Board proceduresare followed and that applicable rules and regulations arecomplied with.


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Board Composition

The Board, chaired by Mr Miller, consists of six non-executiveDirectors, all of whom are regarded by the Board asindependent of the Company’s Manager, including theChairman. Mr Ottley is Deputy Chairman. The Directors havea breadth of investment, business and financial skills andexperience relevant to the Company’s business and briefbiographical details of each Director are set out onpages 31 and 32. Mr Sidebottom retired from the Board on5th July 2012. Messrs Hodson and Robinson were appointedto the Board on 1st January and 1st April 2012 respectively.

A review of Board composition and balance is included as partof the annual performance evaluation of the Board, details ofwhich may be found below. The Board has considered whethera senior independent director should be appointed and hasconcluded that, as the Board comprises entirely ofnon-executive directors, this is unnecessary.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be elected by shareholders.Thereafter, a Director’s appointment will run for a term ofthree years. Subject to the performance evaluation carried outeach year, the Board will agree whether it is appropriate for theDirector to seek an additional term. The Board does notbelieve that the length of service in itself necessarilydisqualifies a Director from seeking re-election but whenmaking a recommendation, the Board will take into accountthe requirements of the UK Corporate Governance Code,including the need to refresh the Board and its committees.The Company’s Articles of Association require that Directorsstand for re-election at least every three years. However, theBoard has taken a decision to adopt corporate governancebest practice, resulting in annual re-election for all Directors.

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

Meetings and Committees

The Board delegates certain responsibilities and functions toCommittees. All Directors are members of each Committee.

The table below details the number of Board, Audit Committeeand Nomination Committee meetings attended by eachDirector. During the year there were five Board meetings, twoAudit Committee meetings and two Nomination Committeemeetings.

Audit NominationBoard Committee Committee

meetings meetings meetings Directors attended attended attended

Alan Hodson1 3 1 1Simon Miller2 4 2 1Angus Macpherson 5 2 2Robert Ottley2 5 2 1James Robinson1 2 1 1Nigel Sidebottom3 4 2 2Roger Yates 5 2 2

1Appointed during the year ended 31st August 2012.2Only one Nomination Committee meeting attended due to the other concerning theretirement and replacement of the Chairman. 3Retired from the Board on 5th July 2012.

Training and Appraisal

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

Regular reviews of the Directors’ training needs are carried outby the Chairman by means of the evaluation process describedbelow.

The Board conducts a formal evaluation of the Manager, itsown performance and that of its Committees and individualDirectors. Questionnaires, devised by an independent industryconsultant, are completed by each Director. The responses arecollated and then discussed at a private meeting.

The evaluation of individual Directors is led by the Chairmanwho meets with each Director; the other Directors evaluate theChairman’s performance; and the Board as a whole evaluatesthe Manager, its own performance and that of its Committees.The Chairman of the Audit Committee leads the evaluation ofthe Chairman.

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Board Committees

Nomination Committee The Nomination Committee, chaired by Mr Miller, consists of allof the Directors and meets at least annually to ensure that theBoard has an appropriate balance of skills to carry out itsfiduciary duties and to select and propose suitable candidatesfor appointment when necessary. The appointment processtakes account of the benefits of diversity, including gender. Avariety of sources, including the use of external recruitmentconsultants may be used to ensure that a wide range ofcandidates is considered. The Committee engaged the servicesof a recruitment consultancy with regard to the appointment ofMessrs Hodson and Robinson.

The Nomination Committee undertakes an annualperformance evaluation, to ensure that all members of theBoard have devoted sufficient time and contributed adequatelyto the work of the Board. The Committee also reviewsDirectors’ fees and makes recommendations to the Board asand when required.

At each Board meeting Directors’ interests are considered.These are reviewed carefully, taking into account thecircumstances surrounding them, and, if consideredappropriate, are approved. The Nomination Committeeresolved that there were no actual or indirect interests of aDirector which conflicted with the interests of the Company,which arose during the year. Following the introduction of TheBribery Act 2010, the Board has adopted appropriateprocedures designed to prevent bribery. It confirms that theprocedures have operated effectively during the year underreview.

Audit Committee The Audit Committee, chaired by Mr Robinson, consists of all ofthe Directors and meets at least twice each year. Themembersof the Committee consider that they have the requisite skillsand experience to fulfil the responsibilities of the AuditCommittee. At least one member of the Committee has recentand relevant financial experience.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the UK Corporate GovernanceCode. It reviews the terms of the management agreement andexamines the effectiveness of the Company’s internal controlsystems, receives information from the Manager’s Compliancedepartment and reviews the scope and results of the external

audit, its cost effectiveness and the independence andobjectivity of the external auditors. Representatives of theCompany’s Auditor attend the committee meeting at which thedraft annual report and accounts are considered. The AuditCommittee has reviewed the independence and objectivity ofthe Auditor of the Company and are satisfied that the Auditor isindependent. The Audit Committee also has the primaryresponsibility for making recommendations to the Board onthe reappointment and the removal of external auditors.Representatives of the Company’s Auditor attend the AuditCommittee meeting at which the draft annual report andaccounts are considered. Having reviewed the performance ofthe external Auditor, the Committee considered it appropriateto recommend their reappointment. The Board supported thisrecommendation which will be put to shareholders at theforthcoming Annual General Meeting. The Board reviews andapproves any non-audit services provided by the independentauditors and assesses the impact of any non-audit work on theability of the auditor to remain independent. No such work wasundertaken during the year apart from the audit of thequarterly conversions. Details of the Auditor’s fees charged forboth audit and other services are disclosed in note 5 onpage 58.

The Directors’ statement on the Company’s system of internalcontrol is set out on pages 44 and 45.

Terms of ReferenceBoth the Nomination Committee and the Audit Committee havewritten terms of reference which define clearly their respectiveresponsibilities, copies of which are available on the Company’swebsite, on request at the Company’s registered office and atthe Company’s Annual General Meeting.

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performanceand reports formally to shareholders quarterly each year byway of the annual report and accounts, the half year financialreport and two interim management statements. This issupplemented by the daily publication, through the LondonStock Exchange, of the net asset values of the Company’sshares.

All shareholders are encouraged to attend the Company’sAnnual General Meeting at which the Directors andrepresentatives of the Manager are available in person to meet


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shareholders and answer shareholders’ questions. In addition,presentations are given by the Investment Managers whoreview the Company’s performance. During the year theCompany’s brokers, the Investment Managers and JPMAM holdregular discussions with larger shareholders. The Directors aremade fully aware of their views. The Chairman and Directorsmake themselves available as and when required to addressshareholder queries. The Directors may be contacted throughthe Company Secretary whose details are shown on page 85.The Chairman can also be contacted via the Company’s websiteby following the ‘Ask the Chairman’ link at wwwjpmelect.co.uk.

The Company’s Annual Report and Accounts is published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders wishing to raisequestions in advance of the meeting are encouraged to submitquestions via the Company’s website or write to the CompanySecretary at the address shown on page 85.

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

Risk Management and Internal Control

The UK Corporate Governance Code requires the Directors, atleast annually, to review the effectiveness of the Company’ssystem of risk management and internal control and to reportto shareholders that they have done so. This encompasses areview of all controls, which the Board has identified asincluding business, financial, operational, compliance and riskmanagement.

The Directors are responsible for the Company’s system of riskmanagement and internal control, which is designed tosafeguard the Company’s assets, maintain proper accountingrecords and ensure that financial information used within thebusiness, or published, is reliable. However, such a system canonly be designed to manage rather than eliminate the risk offailure to achieve business objectives and therefore can onlyprovide reasonable, but not absolute, assurance against fraud,material misstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMAM and its associates, the Company’s system of riskmanagement and internal control mainly comprisesmonitoring the services provided by JPMAM and its associates,including the operating controls established by them, to ensurethey meet the Company’s business objectives. There is an

ongoing process for identifying, evaluating and managing thesignificant risks faced by the Company (see Principal Risks onpages 37 and 38). This process has been in place for the yearunder review and up to the date of the approval of the annualreport and accounts, and it accords with the Turnbull guidance.The Company does not have an internal audit function of itsown, but relies on the internal audit department of JPMAMwhich reports any material failings or weaknesses. Thisarrangement is kept under review.

The key elements designed to provide effective internal controlare as follows:

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

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

Management Systems – The Manager’s system of internalcontrol includes organisational agreements which clearlydefine the lines of responsibility, delegated authority, controlprocedures and systems. These are monitored by JPMAM’sCompliance department which regularly monitors compliancewith FSA rules.

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

The Board, either directly or through the Audit Committee,keeps under review the effectiveness of the Company’s systemof risk management and internal control by monitoring theoperation of the key operating controls of the Manager and itsassociates as follows:

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

• reviews reports on the internal controls and the operationsof its custodian, JPMorgan Chase Bank, which is itselfindependently reviewed; and

• reviews every six months an independent report on the riskmanagement and internal controls and the operations ofJPMAM.

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By means of the procedures set out above, the Board confirmsthat it has reviewed the effectiveness of the Company’s systemof risk management and internal control for the year ended31st August 2012 and to the date of approval of this AnnualReport and Accounts.

During the course of its review of the system of riskmanagement and internal control, the Board has not identifiedor been advised of any failings or weaknesses which it hasdetermined to be significant.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to JPMAM.The following is a summary of JPMAM’s policy statements oncorporate governance, voting policy and social andenvironmental issues, which has been reviewed and noted bythe Board.

Corporate Governance JPMAM believes that corporate governance is integral to our investmentprocess. As part of our commitment to delivering superior investmentperformance to our clients, we expect and encourage the companies inwhich we invest to demonstrate the highest standards of corporategovernance and best business practice. We examine the share structureand voting structure of the companies in which we invest, as well as theboard balance, oversight functions and remuneration policy. Theseanalyses then form the basis of our proxy voting and engagementactivity.

Proxy Voting JPMAM manages the voting rights of the shares entrusted to it as it wouldmanage any other asset. It is the policy of JPMAM to vote in a prudent anddiligent manner, based exclusively on our reasonable judgement of whatwill best serve the financial interests of our clients. So far as is practicable,we will vote at all of the meetings called by companies in which we areinvested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clients as amajor asset owner. To this end, we support the introduction of the FRCStewardship Code, which sets out the responsibilities of institutionalshareholders in respect of investee companies. Under the Code,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 and complies with the Stewardship Code for its UKinvestments and supports the principles as best practice elsewhere.We believe that regular contact with the companies in which we invest iscentral to our investment process and we also recognise the importanceof being an ‘active’ owner on behalf of our clients.

Social & EnvironmentalJPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interestsof our clients, we recognise that, increasingly, non-financial issues suchas social and environmental factors have the potential to impact theshare price, as well as the reputation of companies. Specialists withinJPMAM’s environmental, social and governance (‘ESG’) team are taskedwith assessing how companies deal with and report on social andenvironmental risks and issues specific to their industry.

JPMAM is also a signatory to the United Nations Principles of ResponsibleInvestment, which commits participants to six principles, with the aim ofincorporating ESG criteria into their processes when making stockselection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request. JPMAM is alsoa signatory to Carbon Disclosure Project. JPMorgan Chase is a signatoryto the Equator Principles on managing social and environmental risk inproject finance.

JPMAM’s Voting Policy and Corporate Governance Guidelines areavailable on request from the Company Secretary or can be downloadedfrom JPMAM’s website: www.jpmorganassetmanagement.co.uk/institutional/CommentaryAndAnalysis/CorporateGovernance. This alsosets out its approach to the seven principles of the FRC Stewardship Code,its policy relating to conflicts of interest and its detailed voting record.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 7th November 2012

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

The law requires the Company’s Auditor to audit certain of thedisclosures provided. Where disclosures have been auditedthey are indicated as such. The Auditor’s opinion is included intheir report on page 49.

Directors’ Remuneration1

2012 2011Directors’ Name £ £

Simon Miller 32,000 30,333Alan Hodson 14,666 —Angus Macpherson 22,000 20,333Nigel Sidebottom 20,000 22,333Robert Ottley 22,000 20,333James Robinson 9,166 —Roger Yates 22,000 20,333

Total 141,832 113,665

1Audited information.

For the year under review Directors’ fees were paid at the fixedrate of £32,000 for the chairman, £24,000 for the Chairman ofthe Audit Committee and £22,000 for the other Directors.Directors have not increased fees this year.

The total Directors’ fees of £141,832 (2011: £113,665) comprises£119,832 (2011: £93,332) in respect of aggregate emolumentspaid to Directors and £22,000 paid to third parties for makingavailable the services of one Director (2011: £20,333, oneDirector).

The Board’s policy for this and subsequent years is thatDirectors’ fees should properly reflect the time spent by theDirectors on the Company’s business and should be at a levelto ensure that candidates of a high calibre are recruited to theBoard. The Chairman of the Board and the Chairman of theAudit Committee are paid higher fees than the other Directors,reflecting the greater time commitment involved in fulfillingthese roles.

As all of the Directors are non-executive, the Board has notestablished a Remuneration Committee. Instead, theNomination Committee reviews Directors’ fees on a regularbasis and makes recommendations to the Board as and whenappropriate. Reviews are based on information provided by theManager, JPMAM, and industry research carried out by thirdparties on the level of fees paid to the directors of theCompany’s peers and within the investment trust industrygenerally. The Directors’ fees are not performance-related. TheArticles stipulate that aggregate fees must not exceed£200,000 per annum. Any increase in the maximum aggregateamount requires both Board and shareholder approval.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment. Details of the Board’spolicy on tenure are set out on page 42.

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

Line graphs showing the share price total returns compared totheir benchmark indices for the Managed Growth and ManagedIncome share classes over the last five years are shown below.There is no benchmark index for the Managed Cash share class.

Managed Growth:

Five Year Share Price and Benchmark TotalReturn to 31st August 2012

Share price total return.Benchmark total return.Source: Morningstar.

80

90

100

110

120

201220112010200920082007

Directors’ Remuneration Report

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Managed Income:

Five Year Share Price and Benchmark TotalReturn to 31st August 2012

Share price total return.Benchmark total return.Source: Morningstar.

Managed Cash:

The price of the Managed Cash shares traded in the range of98.0p to 101.0p in the five year period ended 31st August 2012,which is relative to the benchmark of 100.0p.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 7th November 2012

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90

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110

201220112010200920082007

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

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, the Directorshave elected to prepare the financial statements in accordancewith United Kingdom Generally Accepted Accounting Practice(United Kingdom Accounting Standards) and applicable law.Under Company law the Directors must not approve thefinancial statements unless they are satisfied that they give atrue and fair view of the state of affairs of the Company and ofthe profit or loss of the Company for that period. 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 havebeen followed, subject to any material departures disclosedand explained in the financial statements; and

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business.

The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any timethe financial position of the Company and to enable them toensure that the financial statements comply with theCompanies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for takingreasonable steps for the prevention and detection of fraud andother irregularities.

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

The accounts are published on the www.jpmelect.co.ukwebsite, which is maintained by the Company’s Manager,JPMorgan Asset Management (UK) Limited (‘JPMAM’). Themaintenance and integrity of the website maintained byJPMAM is, so far as it relates to the Company, the responsibilityof JPMAM. The work carried out by the auditor does not involveconsideration of the maintenance and integrity of this websiteand, accordingly, the auditor accepts no responsibility for anychanges that have occurred to the accounts since they wereinitially presented on the website. The accounts are prepared inaccordance with UK legislation, which may differ fromlegislation in other jurisdictions.

Each of the Directors, whose names and functions are listed inthe Directors’ Report confirm that, to the best of theirknowledge:

• the financial statements, which have been prepared inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom AccountingStandards and applicable law), give a true and fair view ofthe assets, liabilities, financial position and return or loss ofthe Company; and

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

For and on behalf of the BoardSimon Miller Chairman 7th November 2012

Statement of Directors’Responsibilities

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Independent Auditor’s Report to the members of JPMorgan Elect plc. We have audited the financial statements of JPMorgan Elect plcfor the year ended 31st August 2012 which comprise the IncomeStatement, Reconciliation of Movements in Shareholders’ Funds,Balance Sheet, Cash Flow Statement, and the related notes 1to 22. The financial reporting framework that had been applied intheir preparation is applicable law and United KingdomAccounting Standards (United Kingdom Generally AcceptedAccounting Practice).

This report is made solely to the Company’s members, as a body,in accordance with Chapter 3 of Part 16 of the Companies Act2006. Our audit work has been undertaken so that we mightstate to the Company’s members those matters we are requiredto state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company and theCompany’s members as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective Responsibilities of Directors and Auditors As explained more fully in the Directors’ ResponsibilitiesStatement set out on page 48, the Directors are responsible forthe preparation of the financial statements and for beingsatisfied that they give a true and fair view. Our responsibility isto audit the financial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing PracticesBoard’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts anddisclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud or error.This includes an assessment of: whether the accountingpolicies are appropriate to the Company’s circumstances andhave been consistently applied and adequately disclosed: thereasonableness of significant accounting estimates made bythe Directors; and the overall presentation of the financialstatements. In addition, we read all the financial andnon-financial information in the Annual Report and Accountsto identify material inconsistencies with the audited financialstatements. If we become aware of any apparent materialmisstatements or inconsistencies, we consider the implicationsfor our report.

Opinion on financial statements In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairsas at 31st August 2012 and of its net return for the year thenended;

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

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

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

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

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

Matters on which we are required to report by exception We have nothing to report in respect of the following:

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

• adequate accounting records have not been kept, or returnsadequate for our audit have not been received frombranches visited by us; or

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

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

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

Under the Listing Rules we are required to review:• the Directors’ statement, set out on page 38, in relation to

going concern;

• the part of the Corporate Governance Statement relating tothe Company’s compliance with the nine provisions of theUK Corporate Governance Code specified for our review; and

• certain elements of the report to shareholders by the Boardon Directors’ remuneration.

Michael-John Albert (Senior statutory auditor)for and on behalf ofErnst & Young LLP, Statutory AuditorLondon7th November 2012

Independent Auditor’s Report

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2012 2011Revenue Capital Total Revenue Capital Total

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

Gains on investments held at fair value through profit or loss 2 — 7,965 7,965 — 16,522 16,522

Net foreign currency gains 14 — 8 8 — — —Income from investments 3 5,016 — 5,016 4,679 — 4,679Other interest receivable and

similar income 3 34 — 34 59 — 59

Gross return 5,050 7,973 13,023 4,738 16,522 21,260Management fee 4 (173) (380) (553) (190) (422) (612)Other administrative expenses 5 (560) — (560) (574) — (574)

Net return on ordinary activitiesbefore finance costs and taxation 4,317 7,593 11,910 3,974 16,100 20,074

Finance costs 6 (1) (2) (3) — — —

Net return on ordinary activitiesbefore taxation 4,316 7,591 11,907 3,974 16,100 20,074

Taxation 7 (1) — (1) (53) 44 (9)


Return/(loss) per share: 9Managed Growth 6.25p 13.10p 19.35p 5.31p 33.55p 38.86pManaged Income 3.48p 4.65p 8.13p 3.32p 4.42p 7.74pManaged Cash 0.39p 0.00p 0.39p 0.43p (0.01)p 0.42p

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

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

The notes on pages 54 to 76 form an integral part of these accounts.

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Called upshare Share Other Capital Revenuecapital premium reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000

At 31st August 2010 24 68,244 117,009 19,141 1,888 206,306Repurchase and cancellation of the

Company’s own shares — — (10,629) — — (10,629)Shares issued — 505 — — — 505Share conversions during the year — 4,036 (4,036) — — —Net return on ordinary activities — — — 16,144 3,921 20,065Dividends appropriated in the year — — — — (3,853) (3,853)

At 31st August 2011 24 72,785 102,344 35,285 1,956 212,394Repurchase and cancellation of the

Company’s own shares — — (8,162) — — (8,162)Share conversions during the year — 4,412 (4,412) — — —Net return on ordinary activities — — — 7,591 4,315 11,906Dividends appropriated in the year — — — — (3,989) (3,989)

At 31st August 2012 24 77,197 89,770 42,876 2,282 212,149


Reconciliation of Movements inShareholders’ Funds for the year ended 31st August 2012

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2012 2011Growth Income Cash Total Total

Notes £’000 £’000 £’000 £’000 £’000

Fixed assets Investments held at fair value through

profit or loss 10 152,854 41,876 13,702 208,432 207,066

Current assets 11Debtors 490 367 7 864 685Cash and short term deposits 1,586 1,186 239 3,011 4,919

2,076 1,553 246 3,875 5,604Creditors: amounts falling due within one year 12 (97) (44) (17) (158) (276)

Net current assets 1,979 1,509 229 3,717 5,328

Total assets less current liabilities 154,833 43,385 13,931 212,149 212,394

Net assets 154,833 43,385 13,931 212,149 212,394

Capital and reserves Called up share capital 13 18 4 2 24 24Share premium 14 25,498 34,207 17,492 77,197 72,785Other reserve 14 83,799 9,625 (3,654) 89,770 102,344Capital reserves 14 44,018 (1,131) (11) 42,876 35,285Revenue reserve 14 1,500 680 102 2,282 1,956

Total equity shareholders’ funds 154,833 43,385 13,931 212,149 212,394

31st August 2012 31st August 2011Net asset value Net assets Net asset value Net assets

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

Managed Growth 15 403.8 154,833 389.4 159,358Managed Income 15 81.4 43,385 76.9 38,795Managed Cash 15 101.1 13,931 101.2 14,241

The accounts on pages 50 to 76 were approved and authorised for issue by the Directors on 7th November 2012 and are signed ontheir behalf by:

James RobinsonDirector


Company registration number: 3845060.


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2012 2011Notes £’000 £’000

Net cash inflow from operating activities 16 3,842 3,299

Returns on investments and servicing of financeInterest paid (2) —

Net cash outflow from returns on investments and servicing of finance (2) —

Taxation paid — (49)

Capital expenditure and financial investment Purchases of investments (51,214) (31,150)Sales of investments 57,608 45,087Equalisation received from holdings in unit trusts — 1Settlement of futures contracts 5 —Other capital charges (4) (7)

Net cash inflow from capital expenditure and financial investment 6,395 13,931

Dividends paid (3,989) (3,853)

Net cash inflow before financing 6,246 13,328

Financing Issue of shares — 505Repurchase and cancellation of the Company’s own shares (8,162) (10,629)

Net cash outflow from financing (8,162) (10,124)

(Decrease)/increase in cash for the year 17 (1,916) 3,204


Cash Flow Statementfor the year ended 31st August 2012

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1. Accounting policies(a) Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companiesand Venture Capital Trusts’ (the ‘SORP’) issued by the AIC in January 2009.

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

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

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

The accounts have been prepared on a going concern basis.

The policies applied in these accounts are consistent with those applied in the preceding year.

(b) Valuation of investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of incomeand capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis inaccordance with a documented investment strategy and information is provided internally on that basis to the Company’sBoard of Directors. Accordingly, upon initial recognition, the investments are designated by the Company as ‘held at fair valuethrough profit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental topurchase which are written off in the capital column of the income statement at the time of acquisition. Subsequently theinvestments are valued at fair value which are quoted bid prices for investments traded in active markets.

Gains and losses on sales of investments are included in the Income Statement and are dealt with in capital reserves within‘Gains and losses on sales of investments’ and represent the excess of sales proceeds over the carrying value at the previousbalance sheet date. Increases and decreases in the valuation of investments held at the year end are included in the IncomeStatement and are accounted for in capital reserves within ‘Holding gains and losses on investments’.

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

(c) IncomeDividends receivable are included in revenue on an ex dividend basis except where, in the opinion of the Board, the dividendis capital in nature, in which case it is included in capital.

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

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

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

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

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

Notes to the Accountsfor the year ended 31st August 2012

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(d) ExpensesAll 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 withthe Board’s expected split of the revenue and capital return from the Managed Income investment portfolio. Amountsrebated to the Managed Income pool of assets by the Manager in respect of assets invested in J.P. Morgan retail openended pooled funds are credited to the revenue column of the Income Statement.

(iii) Expenses incidental to the purchase of an investment are charged to capital and those incidental to the sale are deductedfrom the sales proceeds. These expenses are commonly referred to as transaction costs and include items such as stampduty and brokerage commissions.

Expenses charged to the Company, common to all pools (Managed Growth, Managed Income and Managed Cash) areapportioned to the revenue account of each pool in the same proportion as their net assets at the month end immediatelypreceding the date on which the cost is to be accounted for.

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

(e) Finance costsFinance costs are accounted for on an accruals basis using the effective interest rate method and in accordance with theprovisions of FRS 25 ‘Financial Instruments: Presentation’ and FRS 26 ‘Financial Instruments: Measurement’.

(f) Financial instrumentsCash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount ofcash and are subject to insignificant risk of changes in value. Other debtors and creditors do not carry any interest, are shortterm in nature and are accordingly stated at carrying value as reduced by appropriate allowances for estimated irrecoverableamounts.

In accordance with FRS 26: ‘Financial instruments: Measurement’, written options are classified as assets or liabilities held atfair value through profit or loss and are included in current assets or current liabilities.

(g) TaxationTax expense represents the sum of tax currently payable and deferred tax. Any tax payable is based on taxable profit for theperiod. Taxable profit differs from profit before tax as reported in the income statement because it excludes items of incomeor 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 thebalance sheet date.

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

As an investment trust which has received approval under the appropriate tax regulations, the Company is not liable fortaxation on capital gains.

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

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

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Notes to the Accounts continued

1. Accounting policies continued(h) Functional currency

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

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

Any gain or loss arising on monetary assets from a change in exchange rates subsequent to the date of the transaction isincluded as an exchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capitalnature. Gains and losses on investments held at the year end arising from changes in foreign exchange rates are included incapital reserves within ‘Holding gains and losses on investments’.

(i) DividendsIn accordance with FRS 21: ‘Events after the Balance Sheet Date’, dividends are included in the accounts in the year in whichthey are payable.

(j) Value Added Tax (‘VAT’)Irrecoverable VAT is included in the expense on which it has been suffered. Recoverable VAT is calculated using the partialexemption method based on the proportion of zero rated supplies to total supplies.

(k) Share capital transactionsShare capital transactions resulting from conversions are accounted for on the first working day following the quarterlyconversion dates. Deferred shares, which have no economic value, are allotted as part of the conversion process to ensurethat the conversions do not result in a reduction of the par value of the Company’s share capital.

The consideration paid for shares repurchased for cancellation, and the consideration paid for Managed Cash sharesredeemed, is charged to ‘Other reserve’.

2012 2011£’000 £’000

2. Gains on investments held at fair value through profit or loss Realised gains on sales of investments held at fair value through profit or loss based on historical cost 9,824 4,714

Amounts recognised in investment holding gains and losses in the previous year in respect of investments sold during the year (6,241) 776

Gains on sales of investments based on the carrying value at the previous balance sheet date 3,583 5,490

Net movement in investment holding gains and losses 4,388 11,035Unrealised (losses)/gains on options (5) 6Other capital charges (1) (9)

Total capital gains on investments held at fair value throughprofit or loss 7,965 16,522

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Managed Managed ManagedGrowth Income Cash Total Total 2012 2012 2012 2012 2011£’000 £’000 £’000 £’000 £’000

3. Income Income from investmentsUK dividend income 2,660 1,618 — 4,278 3,964Income from OEICs 242 68 — 310 372Income from liquidity stocks — — 97 97 —Overseas dividends1 37 214 — 251 264Property income distribution from UK REITS — 22 — 22 24Scrip dividends 49 9 — 58 55

2,988 1,931 97 5,016 4,679

Other interest receivable and similar incomeDeposit interest 8 3 — 11 12Underwriting commission — 4 — 4 —Option income — 19 — 19 47

8 26 — 34 59

Total income 2,996 1,957 97 5,050 4,738

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


4. Management fee Charged to revenue 95 78 — 173 190

Charged to capital 284 96 — 380 422

379 174 — 553 612

Details of the management fee of each share class are given in the Directors’ Report on page 38.

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5. Other administrative expenses Other administration expenses 171 48 15 234 195Directors’ fees1 104 28 10 142 114Savings scheme costs2 116 27 7 150 231Auditors’ remuneration for audit services3 20 5 1 26 26Auditors’ remuneration for other services 5 2 1 8 8

Total charged to revenue 416 110 34 560 574

1Full disclosure is given in the Directors’ Remuneration Report on pages 46 and 47.2These costs were paid to JPMAM for the marketing and administration of savings scheme products.3Includes £3,000 (2011: £4,000) of irrecoverable VAT.

Further details on how expenses are apportioned between each portfolio are given in note 1(d) on page 55.


6. Finance costs Charged to revenue 1 — — 1 —

Charged to capital 2 — — 2 —

3 — — 3 —

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


UK corporation tax at 25.16% (2011: 27.17%) — — — — — —Prior year adjustment — — — 8 — 8Overseas withholding tax 1 — 1 1 — 1Tax relief allocated to capital — — — 44 (44) —

Current tax charge for the year 1 — 1 53 (44) 9

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(b) Factors affecting current tax charge for the yearThe tax assessed for the year is lower (2011: lower) than the Company’s applicable rate of corporation tax for the year of25.16% (2011: 27.17%). The factors affecting the current tax charge for the year are as follows:


Net return on ordinary activities before taxation 4,316 7,591 11,907 3,974 16,100 20,074

Net return on ordinary activities before taxation multiplied by the applicable rate of corporation tax of 25.16% (2011: 27.17%) 1,086 1,910 2,996 1,080 4,374 5,454

Effects of:Non taxable capital gains — (2,006) (2,006) — (4,489) (4,489)Non taxable UK dividends (1,133) — (1,133) (1,105) — (1,105)Non taxable overseas dividends (63) — (63) (41) — (41)Unrelieved expenses 221 — 221 81 115 196Overseas withholding tax 1 — 1 1 — 1Non taxable scrip dividends (15) — (15) (15) — (15)Prior year adjustment — — — 8 — 8Tax relief allocated to capital (96) 96 — 44 (44) —Income tax — — — — — —

Current tax charge for the year 1 — 1 53 (44) 9

The Company has an unrecognised deferred tax asset of £580,000 (2011: £384,000) based on a prospective corporation taxrate of 24% (2011: 26%). The reduction in the standard rate of corporation tax was substantively enacted on 5th July 2011 andis effective from 1st April 2012. The Government has also indicated that it intends to enact future reductions in the main rate ofcorporation tax of 1% each year down to 20% by 1st April 2016. The deferred tax asset has arisen due to the cumulative excessof deductible expenses over taxable income. Given the composition of the Company’s portfolio, it is not likely that this assetwill be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

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

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8. Dividends(a) Dividends paid

2012 2011£’000 £’000

Managed Growth shares 2011 4th interim dividend of 0.75p (2010: 0.75p) 309 314Managed Growth shares 1st interim dividend of 1.35p (2011: 1.80p) 550 754Managed Growth shares 2nd interim dividend of 2.10p (2011: 1.00p) 845 411Managed Growth shares 3rd interim dividend of 1.40p (2011: 1.45p) 552 597Managed Income shares 2011 4th interim dividend of 0.80p (2010: 1.00p) 389 495Managed Income shares 1st interim dividend of 1.15p (2011: 1.15p) 576 566Managed Income shares 2nd interim dividend of 0.70p (2011: 0.70p) 351 346Managed Income shares 3rd interim dividend of 0.70p (2011: 0.70p) 349 343Managed Cash shares 2011 4th interim dividend of 0.20p (2010: £nil) 33 —Managed Cash shares 1st interim dividend of £nil (2011: £nil) — —Managed Cash shares 2nd interim dividend of 0.25p (2011: 0.15p) 35 27Managed Cash shares 3rd interim dividend of £nil (2011: £nil) — —

Total dividends paid in the year 3,989 3,853

(b) Dividends proposed2012 2011£’000 £’000

Managed Growth shares 4th interim dividend of 1.10p (2011: 0.75p) 422 309Managed Income shares 4th interim dividend of 0.85p (2011: 0.80p) 453 389Managed Cash shares 4th interim dividend of 0.25p (2011: 0.20p) 34 33

Total dividends proposed 909 731

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(c) Dividend for the purposes of Section 1158 of the Corporation TaxAct 2010 (‘Section 1158’)The requirements of Section 1158 are considered on the basis of dividends paid and proposed in respect of the financial year,as follows:

2012 2011£’000 £’000

Managed Growth shares 1st interim dividend of 1.35p (2011: 1.80p) 550 754Managed Growth shares 2nd interim dividend of 2.10p (2011: 1.00p) 845 411Managed Growth shares 3rd interim dividend of 1.40p (2011: 1.45p) 552 597Managed Growth shares 4th interim dividend of 1.10p (2011: 0.75p) 422 307Managed Income shares 1st interim dividend of 1.15p (2011: 1.15p) 576 566Managed Income shares 2nd interim dividend of 0.70p (2011: 0.70p) 351 346Managed Income shares 3rd interim dividend of 0.70p (2011: 0.70p) 349 343Managed Income shares 4th interim dividend of 0.85p (2011: 0.80p) 453 404Managed Cash shares 1st interim dividend of £nil (2011: £nil) — —Managed Cash shares 2nd interim dividend of 0.25p (2011: 0.15p) 35 27Managed Cash shares 3rd interim dividend of £nil (2011: £nil) — —Managed Cash shares 4th interim dividend of 0.25p (2011: 0.20p) 34 33

Total dividends for Section 1158 purposes 4,167 3,788

The revenue available for distribution by way of dividend for the year is £4,315,000 (2011: £3,921,000).

9. Return/(loss) per share

Managed Growth2012 2011 £’000 £’000

Return per Managed Growth share is based on the following:Revenue return 2,492 2,210Capital return 5,222 13,968

Total return 7,714 16,178

Weighted average number of shares in issue 39,869,106 41,635,684Revenue return per share 6.25p 5.31pCapital return per share 13.10p 33.55p

Total return per share 19.35p 38.86p

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9. Return/(loss) per share continued

Managed Income2012 2011 £’000 £’000

Return per Managed Income share is based on the following:Revenue return 1,768 1,634Capital return 2,369 2,177

Total return 4,137 3,811

Weighted average number of shares in issue 50,868,899 49,228,434Revenue return per share 3.48p 3.32pCapital return per share 4.65p 4.42p


Managed Cash2012 2011 £’000 £’000

Return/(loss) per Managed Cash share is based on the following:Revenue return 55 77Capital loss — (1)

Total return 55 76

Weighted average number of shares in issue 13,951,016 17,872,598Revenue return per share 0.39p 0.43pCapital loss per share 0.00p (0.01)p


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10. Investments

2012 2011£’000 £’000

Investments listed on a recognised stock exchange 155,331 160,905Unlisted investments1 53,101 46,161

Total investments held at fair value 208,432 207,066

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

2012Listed Unlisted Total£’000 £’000 £’000

Opening book cost 141,821 40,033 181,854Opening investment holding gains 19,084 6,128 25,212

Opening valuation 160,905 46,161 207,066Movement in the year:Purchases at cost 21,080 30,053 51,133Sales – proceeds (30,522) (27,216) (57,738)Gains on sales of investments based on the carrying value at the previous balance sheet date 229 3,354 3,583

Net movement in investment holding gains and losses 3,639 749 4,388

Closing valuation 155,331 53,101 208,432

Closing book cost 137,230 47,843 185,073Closing investment holding gains 18,101 5,258 23,359

Total investments held at fair value 155,331 53,101 208,432

During the year, prior year investment holding gains amounting to £6,241,700 were transferred to gains on sales ofinvestments as disclosed in note 14.

Transaction costs on purchases during the year amounted to £120,000 (2011: £125,000) and on sales during the yearamounted to £44,000 (2011: £34,000). These costs comprise mainly brokerage commission.

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2012 2011£’000 £’000

11. Current assetsDebtors Securities sold awaiting settlement 172 49Overseas tax recoverable 2 —Dividends and interest receivable 630 514Taxation recoverable 31 17Other debtors 29 105

Total 864 685

The Directors consider that the carrying amount of debtors approximates to their fair value. No amounts are considered to bepast due or impaired (2011: £nil).

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

2012 2011£’000 £’000

12. Creditors: amounts falling due within one yearSecurities purchased awaiting settlement — 139Other creditors and accruals 151 135Derivative instruments held at fair value through profit or loss – written options 7 2

158 276

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

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13. Called up share capital2012 2011£’000 £’000

Managed Growth40,920,311 (2011: 42,217,296) shares in issue at the beginning of the year 5 5Issue of nil (2011: 125,000) shares — —Net share conversion increase of 1,043,153 (2011: increase of 16,773) shares — —Repurchase of 1,532,722 (2011: 1,438,758) shares for cancellation — —

Total 38,344,436 (2011: 40,920,311) shares in issue at the end of the year 5 5

Founder Shares50,000 Founder shares of £1 each 25p partly paid in issue at the beginning and end of the year 13 13

Managed Income50,446,078 (2011: 49,392,316) shares in issue at the beginning of the year 4 4Net share conversion increase of 4,206,895 (2011: increase of 2,233,541) shares — —Repurchase of 1,378,027 (2011: 1,179,779) shares for cancellation — —


Managed Cash14,075,774 (2011: 19,753,573) shares in issue at the beginning of the year 2 2Net share conversion reduction of 830,810 (2011: reduction of 1,872,876) shares — —Redemption of 179,756 (2011: 3,005,277) shares — —Repurchase of 945,688 (2011: 799,646) shares for cancellation — —


Total 24 24

During the year, 1,532,722 Managed Growth shares, 1,378,027 Managed Income shares and 1,125,444 Managed Cash shareswere repurchased for cancellation for an aggregate consideration of £7,981,000. The reason for these purchases is to addressimbalances in supply of and demand for the Company’s shares within the market and thereby reduce the volatility andabsolute level of the discount to net asset value per share at which those shares trade.

Shareholders of Managed Growth, Managed Income and Managed Cash shares are entitled to convert some or all of theirholdings in any of these share classes into one or more of the other two share classes on 28th February, 31st May, 31st Augustand 30th November 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 forcash at the net asset value on each conversion date. During the year, the holders of 179,756 Managed Cash shares elected tohave those holdings repurchased by the Company in these conversion opportunities for a total consideration of £181,000.

Full details of transactions in share capital during the year are given in the Directors’ Report on page 37.

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 the holders have waived the right to receive such dividends.

Further details of the Company’s capital structure are given on page 82.

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13. Called up share capital continuedDeferred SharesThe Company’s Articles allow for Deferred shares to be allotted as part of the quarterly share conversion to ensure that theconversion does not result in a reduction of the par value of the Company’s issued share capital (in contravention of theCompanies Act). The Deferred shares do not confer any rights to the shareholder to receive capital or dividends and will berepurchased by the Company from time to time for a nominal sum. The issue and repurchase of these Deferred shares has noeffect on the net asset value attributable to the holders of Managed Growth, Managed Income or Managed Cash shares. Theshares have no voting rights and no rights on a winding up or entitlement to dividends.

2012 2011£ £

Deferred Managed Growth shares:At the beginning of the year nil Deferred Managed Growth shares(2011: 42,192,376 shares of 0.005000p each) — 2,110

Cancellation of nil Deferred Managed Growth shares(2011: 42,192,376 shares of 0.005000p each) — (2,110)

Issue of nil Deferred Managed Growth shares(2011: 945,844 shares of 0.000286p each) — 3

Cancellation of nil Deferred Managed Growth shares(2011: 945,844 shares of 0.000286p each) — (3)

Closing balance — —

Deferred Managed Income shares:At the beginning of the year nil Deferred Managed Income shares(2011: 49,061,672 shares of 0.000214p each) — 105

Cancellation of nil Deferred Managed Income shares(2011: 49,061,672 shares of 0.000214p each) — (105)

Issue of nil Deferred Managed Income shares(2011: 48,932,301 shares of 0.001000p each) — 489

Cancellation of nil Deferred Managed Income shares(2011: 48,932,301 shares of 0.001000p each) — (489)


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2012 2011£ £

Deferred Managed Cash shares:At the beginning of the year nil Deferred Managed Cash shares(2011: 459,578 shares of 0.001000p each) — 5

Cancellation of nil Deferred Managed Cash shares(2011: 459,578 shares of 0.001000p each) — (5)

Issue of nil Deferred Managed Cash shares(2011: 7,617 shares of 0.000840p each) — —

Cancellation of nil Deferred Managed Cash shares(2011: 7,617 shares of 0.000840p each) — —


Capital reserves

Gains and HoldingCalled up losses on gains and

share Share Other sales of losses on Revenuecapital premium reserve investments investments reserve£’000 £’000 £’000 £’000 £’000 £’000

14. Reserves Opening balance 24 72,785 102,344 10,067 25,218 1,956 Realised foreign currency gains on cash and short term deposits — — — 8 — —

Realised gains on investments — — — 3,583 — —Unrealised gains on investments — — — — 4,388 —Transfer on disposal of investments — — — 6,241 (6,241) —Unrealised losses on options — — — — (5) —Repurchase of ordinary shares for cancellation — — (7,981) — — —Shares redeemed during the year (at conversion point) — — (181) — — —Issue proceeds arising from ordinary share conversion — 4,412 — — — —Repurchase of ordinary shares for cancellation arising from share conversion — — (4,412) — — —

Expenses charged to capital — — — (380) — —Overdraft interest charged to capital — — — (2) — —Other capital charges — — — (1) — —Dividends appropriated in the year — — — — — (3,989)Net gains for the year — — — — — 4,315

Closing balance 24 77,197 89,770 19,516 23,360 2,282

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14. Reserves continuedRepurchase and cancellation of the Company’s own sharesDuring the year a total of 1,532,722 Managed Growth shares, 1,378,027 Managed Income shares and 1,125,444 Managed Cashshares were repurchased by the Company and cancelled. In addition, the holders of 179,756 Managed Cash shares electedto have those holdings repurchased by the Company in the four conversion opportunities available to holders of those sharesin the year. The transfer from share capital to capital redemption reserve is not shown above as the total nominal value of theshares cancelled is less than £1,000. No capital redemption reserve is shown as the cumulative balance on the reserve at31st August 2012 is less than £1,000.

15. Net asset value per share

The net asset values per share are calculated as follows:

2012 2011Managed Managed Managed Managed Managed ManagedGrowth Income Cash Growth Income Cash

Net assets attributable (£’000) 154,833 43,385 13,931 159,358 38,795 14,241Shares in issue at the year end 38,344,436 53,274,946 13,781,140 40,920,311 50,446,078 14,075,774Net asset value per share (pence) 403.8 81.4 101.1 389.4 76.9 101.2

2012 2011£’000 £’000

16. Reconciliation of net return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

Total net return on ordinary activities before finance costs and taxation 11,910 20,074Less capital return before finance costs and taxation (7,593) (16,100)Increase in accrued income (108) (103)Decrease/(increase) in other debtors 77 (65)Increase/(decrease) in accrued expenses 13 (12)Scrip dividends received as income (58) (55)Management fee charged to capital (380) (422)Taxation on unfranked income (19) (18)

Net cash inflow from operating activities 3,842 3,299

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At At31st August Exchange 31st August

2011 Cash flow movement 2012£’000 £’000 £’000 £’000

17. Analysis of changes in net fundsCash and short term deposits 4,919 (1,916) 8 3,011

Total funds 4,919 (1,916) 8 3,011

18. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments at the balance sheet date (2011: none).

19. Transactions with the Manager

Details of the management contracts are set out in the Directors’ Report on page 38. The total amount payable to JPMAM forthe year in respect of these contracts was £553,000 (2011: £612,000), of which £nil (2011: £nil) was outstanding at the year end.A rebate amounting to £nil (2011; £80,000) was due from JPMAM at the year end relating to the Company’s investments inJPMorgan’s retail open-ended pooled funds. In addition £150,000 (2011: £195,000), excluding VAT, was payable to JPMAM forthe marketing and administration of savings scheme products of which £nil (2011: £nil) was outstanding at the year end.

Custody fees amounting to £3,000 (2011: £3,000) were payable to third party custodians by JPMorgan Chase on behalf of theCompany, of which £1,000 (2011: £nil) was outstanding at the year end.

JPMAM carries out some of its investment transactions through group subsidiaries. These transactions are carried out at arm’slength. The commission payable to JPMorgan Securities Limited for the year was £13,000 (2011: £10,000) of which £nil (2011:£nil) was outstanding at the year end. The Company has been informed that certain of its dealing transactions may be subjectto commission sharing arrangements.

The Company holds investments in funds managed by JPMAM. At 31st August 2012 these were valued at £126.8 million(2011: £125.5 million) and represented 60.8% (2011: 60.6%) of the Company’s investment portfolio. During the year theCompany made purchases of such investments with a total value of £32.0 million (2011: £13.7 million) and sales with a totalvalue of £35.6 million (2011: £17.4 million). Income amounting to £2.8 million (2011: £2.7 million) was receivable from theseinvestments during the year of which £334,000 (2011: £243,000) was outstanding at the year end.

At the year end, a bank balance of £3,011,000 (2011: £4,919,000) was held with JPMorgan Chase. Interest amounting to £11,000(2011: £12,000), was receivable by the Company during the year from JPMorgan Chase of which £1,000 (2011: £1,000) wasoutstanding at the year end. Further details regarding the management of credit risk in relation to the holding of cash are innote 21(c) on pages 75 and 76.

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20. Disclosures regarding financial instruments held at fair value

The Company’s financial instruments within the scope of FRS 29 that are held at fair value comprise its investment portfolioand derivative financial instruments comprising written options.

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

Level 1 – valued using quoted prices in active markets.

Level 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices includedwithin Level 1.

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset. Details of the valuation techniques used by the Company are given in note 1(b) onpage 54.

The following table sets out the fair value measurements using the FRS 29 hierarchy at 31st August:

2012Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss Equity investments 190,121 — — 190,121Investments in liquidity funds 13,702 — — 13,702Bond funds 4,609 — — 4,609Derivative financial instruments – written options — (7) — (7)

Total 208,432 (7) — 208,425

2011Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss Equity investments 189,449 — — 189,449Investments in liquidity funds 14,251 — — 14,251Bond funds 3,366 — — 3,366Derivative financial instruments – written options — (2) — (2)

Total 207,066 (2) — 207,064

There have been no transfers between Levels 1, 2 or 3 during the current or comparative year.

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

As an investment trust, the Company invests in equities and other securities for the long term so as to pursue the investmentobjectives stated on the ‘Features’ page of this report. In pursuing these objectives, the Company is exposed to a variety offinancial risks that could result in a reduction in the Company’s net assets or a reduction in the revenue available fordistribution. These risks include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk andcredit risk. The Directors’ policy for managing these risks is set out below. The Company Secretary, in close cooperation withthe Board and the Manager, coordinates the Company’s risk management policy.

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

The Company’s financial instruments may comprise the following:

– investments in equity shares with UK exposure;

– investments in investment trusts with UK and international exposure, open ended investment companies, bond funds, andsterling liquidity funds;

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

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

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

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

(i) Currency riskThe Company has no direct material exposure to foreign currencies. The Company’s investments and other financial assetsare almost entirely denominated in sterling (the Company’s functional currency and the currency in which it reports). As aresult, movements in exchange rates will have no direct material effect on the value of those items. The investments in theManaged Cash pool of assets comprise sterling liquidity funds and consequently there is no foreign currency exposure.The investments in the Managed Growth and Managed Income pools of assets are almost entirely priced in sterling.However, there is some indirect exposure to foreign currencies, particularly in the Managed Growth portfolio whichincludes holdings in investment trusts which invest in overseas markets.

(ii) Interest rate riskInterest rate movements may affect the level of income receivable on cash deposits and the yield on the liquidity fundsheld in the Managed Cash pool of assets. The Company had no borrowings at the year end (2011: none). Interest ratemovements may also affect the income receivable from and the fair value of investments in bond funds held by theCompany. However, it is not possible to assess the impact of interest rate movements on the value of these investmentsaccurately and therefore the exposure has been included in other price risk in part (iii) to this note. The Company has noother exposure to fair value interest rate risk.

Management of interest rate riskThe 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.

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21. Financial instruments’ exposure to risk and risk management policies continued

(a) Market risk continued(ii) Interest rate risk continued

Interest rate exposureAt the balance sheet date, the exposure of financial assets to floating interest rates, giving cash flow interest rate risk whenrates are reset, was as follows:

2012 2011Managed 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 1,586 1,186 239 3,011 2,768 2,145 6 4,919Investments in liquidity funds — — 13,702 13,702 — — 14,251 14,251

Total exposure 1,586 1,186 13,941 16,713 2,768 2,145 14,257 19,170

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

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


Maximum interest rate exposure to floating rates 5,371 3,711 14,732 23,814 6,072 2,146 19,898 28,116

Minimum interest rate exposure to floating rates 393 213 13,749 14,355 1,300 175 14,257 15,732

Interest rate sensitivityThe following tables illustrate the sensitivity of the return after taxation for the year and net assets to a 1.0% (2011: 1.0%)increase or decrease in interest rates in regards to the Company’s monetary financial assets. This level of change isconsidered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis isbased on the Company’s monetary financial instruments with a direct interest rate exposure held at the balance sheetdate, with all other variables held constant.

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


Income statement – return after taxationRevenue return 16 12 139 167 28 21 143 192

Net assets 16 12 139 167 28 21 143 192

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

In the event of a 1.0% decrease in interest rates, the interest receivable on cash balances and liquidity funds would fall tozero, as the interest earned on these balances is currently less than 1.0%.

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

Other price risk exposureThe Company’s exposure to changes in market prices at 31st August comprises its holdings in equity investments, bondfunds and options as follows. Holdings in liquidity funds are not deemed to be exposed to other price risk.


Equity investments held at fair value through profit or loss 152,854 37,267 — 190,121 156,306 33,143 — 189,449

Investments in bond funds held at fair value through profit or loss — 4,609 — 4,609 — 3,366 — 3,366

Derivative instruments – written options — (7) — (7) — (2) — (2)

152,854 41,869 — 194,723 156,306 36,507 — 192,813

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

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(a) Market risk continued(iii) Other price risk continued

Concentration of exposure to other price riskA list of investments in the Managed Growth and Managed Income portfolios is given on pages 11 and 22. This shows thatthe Managed 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. A substantial proportionof the Managed Income portfolio is invested in UK equities and accordingly there is a concentration of exposure. Howeverit should be noted that an investment may not necessarily be wholly exposed to the economic conditions in its country ofdomicile or of listing.

Other price risk sensitivityThe following table illustrates the sensitivity of revenue after taxation for the year and net assets to an increase ordecrease of 10% (2011: 10%) in the fair value of equity investments, options and bond funds held in the Managed Growthand Managed Income portfolios. This level of change is considered to be a reasonable illustration based on observation ofcurrent market conditions. The sensitivity analysis is based on the Company’s investments and adjusting for change in themanagement fee, but with all other variables held constant.

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


Income statement — return after taxation:

Revenue return (14) (10) — (24) (15) (9) — (24)Capital return 15,243 4,177 — 19,420 15,587 3,642 — 19,229

Total return after taxation and net assets 15,229 4,167 — 19,396 15,572 3,633 — 19,205

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


Income statement — return after taxation:

Revenue return 14 10 — 24 15 9 — 24Capital return (15,243) (4,177) — (19,420) (15,587) (3,642) — (19,229)

Total return after taxation and net assets (15,229) (4,167) — (19,396) (15,572) (3,633) — (19,205)

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(b) Liquidity riskThis is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that aresettled by delivering cash or another financial asset.

Management of the riskLiquidity risk is not significant as the Company’s assets comprise 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 retainsufficient cash balances to settle short term liabilities. The Company has no fixed term borrowings.

Liquidity risk exposureContractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be requiredare as follows:

2012 2011More 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: amounts falling due within one year Securities purchased awaiting settlement — — — 139 — 139Other creditors and accruals 151 — 151 135 — 135Derivative instruments held at fair value through profit or loss – written options — 7 7 — 2 2

151 7 158 274 2 276

(c) Credit riskCredit risk is the risk that the counterparty to a transaction fails to discharge its obligations under that transaction which couldresult in loss to the Company.

Management of credit riskPortfolio dealingThe Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates therisk of losing the principal of a trade during the settlement process. The Manager continuously monitors dealing activity toensure best execution, a process that involves measuring various indicators including the quality of trade settlement andincidence of failed trades. Counterparty lists are maintained and adjusted accordingly.

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

Exposure to JPMorgan ChaseJPMorgan Chase is the custodian of the Company’s assets. The custody agreement grants a general lien over the securitiescredited to the securities account. The Company’s assets are segregated from JPMorgan Chase’s own trading assets. Therefore,these assets are designed to be protected from creditors in the event that JPMorgan Chase were to cease trading. However, noabsolute guarantee can be given to investors on the protection of all the assets of the Company.

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(c) Credit risk continuedCredit risk exposureThe Company’s investments in liquidity funds and the amounts shown in the balance sheet under debtors and cash and shortterm deposits represent the maximum exposure to credit risk at the current and comparative year ends.

The liquidity funds held in the Company’s investment portfolio all have a AAA (2011: AAA) credit rating.

Cash and short term deposits comprise balances held at banks that have a minimum rating of A1/P1 (2011: A1/P1) fromStandard & Poor’s and Moody’s respectively.

(d) Fair values of financial assets and financial liabilitiesAll financial assets and liabilities are either included in the balance sheet at fair value or the carrying amount in the balancesheet is a reasonable approximation of fair value.

22. Capital management policies and procedures

The Company’s capital is divided into three share classes, each with distinct objectives and investment policies. The capital ofthe three share classes is as disclosed in the balance sheet and is managed on a basis consistent with the investmentobjectives and policies disclosed in the Directors’ Report on pages 33 and 34.

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Notice is hereby given that the twelfth Annual General Meetingof JPMorgan Elect plc will be held at 200 Aldersgate, St Paul’s,London EC1A 4HD on Thursday, 13th December 2012 at12.00 noon for the following purposes:

1. To receive the Directors’ Report, the Annual Accounts andthe Auditor’s Report for the year ended 31st August 2012.

2. To approve the Directors’ Remuneration Report for theyear ended 31st August 2012.

3. To elect Alan Hodson as a Director of the Company.

4. To elect James Robinson as a Director of the Company.

5. To re-elect Angus Macpherson as a Director of theCompany.

6. To re-elect Robert Ottley as a Director of the Company.

7. To re-elect Roger Yates as a Director of the Company.

8. To reappoint Ernst & Young LLP as the auditors of theCompany and to authorise the Directors to determine theirremuneration.

Special Business

To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution 9. THAT the Board be and is hereby generally and

unconditionally authorised (in substitution of anyauthorities previously granted to Directors) to exercise allpowers of the Company to allot relevant securities (withinthe meaning of Section 551 of the Companies Act 2006 (the‘Act’)) up to 3,805,407 Managed Growth Shares,5,311,135 Managed Income Shares and 1,360,805 ManagedCash Shares (being 10% of the issued share capital of theManaged Growth, Managed Income and Managed Cashshare classes of the Company as at 7th November 2012)provided that this authority shall expire at the conclusion ofthe Annual General Meeting of the Company to be held in2013 unless renewed at a general meeting prior to suchtime, save that the Company may before such expiry makeoffers, agreements or arrangements which would or mightrequire relevant securities to be allotted after such expiryand so that the Directors of the Company may allot relevantsecurities in pursuance of such offers, agreements orarrangements as if the authority conferred hereby had notexpired.

Authority to disapply pre-emptive rights on allotment of newshares – Special Resolution 10. THAT, subject to the passing of resolution 9 set out above,

the Directors of the Company be and are herebyempowered pursuant to Section 570 and 573 of the Act toallot equity securities (within the meaning of Section 560of the Act) pursuant to the authority conferred byResolution 9 as if Section 561(1) of the Act did not apply toany such allotment, provided that this power shall be limitedto:

(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 attributableto the interest of all Managed Growth shares, ManagedIncome shares and Managed Cash shares are proportionateto the respective numbers of Managed Growth shares,Managed Income shares and Managed Cash shares held bythem subject to such exclusions or other arrangements asthe Board may deem necessary or expedient in relation tofractional entitlements or local or practical problems underthe laws of, or the requirements of, any regulatory body orany stock exchange or any territory or otherwisehowsoever; and/or

(b) the allotment (otherwise than pursuant to sub paragraph (a)above) of equity securities up to 3,805,407 ManagedGrowth Shares, 5,311,135 Managed Income Shares and1,360,805Managed Cash Shares (being 10% of the totalissued share capital of the Managed Growth, ManagedIncome and Managed Cash share classes of the Company asat 7th November 2012) at a price not less than the net assetvalue per share; and shall expire upon the expiry of thegeneral authority conferred by Resolution 9 above, savethat the Company may before such expiry make offers oragreements which would or might require equity securitiesto be allotted after such expiry and the Board may allotequity securities in pursuance of such offers or agreementsas if the power conferred hereby had not expired.

Authority to repurchase the Company’s shares – Special Resolution 11. THAT the Company be generally and, subject as hereinafter

appears, unconditionally authorised in accordance withSection 701 of the Act to make market purchases (withinthe meaning of Section 693 of the Act) of its issuedManaged Growth shares, Managed Income shares andManaged Cash shares (all being classes of ordinary sharesin the capital of the Company).

Notice of Annual General Meeting

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Notice of Annual General Meetingcontinued

PROVIDED ALWAYS THAT:

(i) the maximum number of Managed Growth, ManagedIncome and Managed Cash shares hereby authorised tobe purchased shall be 5,704,305, 7,961,391 or 2,039,846respectively, or, if different, that number of ManagedGrowth, Managed Income and Managed Cash shareswhich is equal to 14.99% of the issued share capital ofthe relevant share class as at the date of the passing ofthis Resolution;

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

(iii) the maximum price which may be paid for a share shallbe an 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 businessdays immediately preceding the day on which the shareis purchased; or (b) the price of the last independenttrade; or (c) the highest current independent bid;

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

(v) the authority hereby conferred shall expire on 12th June2014 unless the authority is renewed at the Company’s

Annual General Meeting in 2013 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 beexecuted wholly or partly after the expiry of suchauthority and may make a purchase of shares pursuantto any such contract notwithstanding such expiry.

Authority to make off-market purchases – Special Resolution 12. THAT the proposed Contingent Purchase contract between

Winterflood Securities Limited and JPMorgan Elect plc toenable the Company to make off-market purchases of itsown securities pursuant to Section 694 of the Act in theform produced at the meeting and initialled by theChairman, be and is hereby approved and the Company beand is hereby authorised to enter into and perform suchcontract, but so that the approval and authority conferredby this resolution shall expire on the day immediatelypreceding the date which is 18 months after the passing ofthis resolution or, if earlier, the next Annual GeneralMeeting of the Company.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary. 7th November 2012

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Notes These notes should be read in conjunction with the notes on thereverse of the 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 tothe Meeting, provided that each proxy is appointed to exercise therights attaching 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 whohas agreed to attend to represent you. Details of how to appointthe Chairman or another person(s) as your proxy or proxies usingthe proxy form are set out in the notes to the proxy form. If a votingbox on the proxy form is left blank, the proxy or proxies willexercise his/their discretion both as to how to vote and whetherhe/they abstain(s) from voting. Your proxy must attend theMeeting for your vote to count. Appointing a proxy or proxies doesnot preclude you from attending the 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.

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 toterminate or amend a proxy appointment received after therelevant deadline will be disregarded. Where two or more validseparate appointments of proxy are received in respect of thesame share in respect of the same Meeting, the one which is lastreceived (regardless of its date or the date of its signature) shall betreated as replacing and revoking the other or others as regardsthat share; if the Company is unable to determine which was lastreceived (regardless of its date or the date of its signature) shall betreated as replacing and revoking the other or others as regardsthat share; if the Company is unable to determine which was lastreceived, none of them shall be treated as valid in respect of thatshare.

5. To be entitled to attend and vote at the Meeting (and for thepurpose of the determination by the Company of the number ofvotes they may cast), members must be entered on the Company’sregister of members as at 6.00 p.m. two business days prior to theMeeting (the ‘specified time’). If the Meeting is adjourned to a timenot more than 48 hours after the specified time applicable to theoriginal Meeting, that time will also apply for the purpose ofdetermining the entitlement of members to attend and vote (andfor the purpose of determining the number of votes they may cast)at the adjourned Meeting. If however the Meeting is adjourned fora longer period then, to be so entitled, members must be enteredon the Company’s register of members as at 6.00 p.m.two business days prior to the adjourned Meeting or, if theCompany gives notice of the adjourned Meeting, at the timespecified in that notice. Changes to entries on the register after thistime shall be disregarded in determining the rights of persons toattend or vote at the meeting or adjourned meeting.

6. Entry to the Meeting will be restricted to shareholders and theirproxy or proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s)to act as its representative(s) and to vote in person at the Meeting(see instructions given on the proxy form). In accordance with theprovisions of the Companies Act 2006, each such representative(s)may exercise (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 adesignated corporate representative. Representatives should bringto the meeting evidence of their appointment, including anyauthority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of theCompanies Act 2006 can require the Company to publish astatement on its website setting out any matter relating to: (a) theaudit of the Company’s accounts (including the Auditor’s reportand the conduct of the audit) that are to be laid before the AGM; or(b) any circumstances connected with an Auditor of the Companyceasing to hold office since the previous AGM; which the memberspropose to raise at the meeting. The Company cannot require themembers requesting the publication to pay its expenses. Anystatement placed on the website must also be sent to theCompany’s Auditors no later than the time it makes its statementavailable on the website. The business which may be dealt with atthe AGM includes any statement that the Company has beenrequired to publish on its website 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 ifit is undesirable in the interests of the Company or the good orderof the meeting or if it would involve the disclosure of confidentialinformation.

10. Under sections 338 and 338A of the 2006 Act, members meetingthe threshold requirements in those sections have the right torequire the Company: (i) to give, to members of the Companyentitled to receive notice of the Meeting, notice of a resolutionwhich those members intend to move (and which may properly bemoved) at the Meeting; and/or (ii) to include in the business to bedealt with at the Meeting any matter (other than a proposedresolution) which may properly be included in the business at theMeeting. A resolution may properly be moved, or a matter properlyincluded in the business unless: (a) (in the case of a resolution only)it would, if passed, be ineffective (whether by reason of anyinconsistency with any enactment or the Company’s constitution orotherwise); (b) it is defamatory of any person; or (c) it is frivolous orvexatious. A request made pursuant to this right may be in hardcopy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business,must be accompanied by a statement setting out the grounds forthe request, must be authenticated by the person(s) making it andmust be received by the Company not later than the date that is sixclear weeks before the Meeting, and (in the case of a matter to beincluded in the business only) must be accompanies by astatement setting out the grounds for the request.

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11. A copy of this notice has been sent for information only to personswho 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 anagreement between him and the member by whom he wasnominated to be appointed as a proxy for the Meeting or to havesomeone else so appointed. If a Nominated Person does not havesuch a right or does not wish to exercise it, he may have a rightunder such an agreement to give instructions to the member as tothe 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 ofshares in respect of which members are entitled to exercise votingrights at the AGM, the total voting rights members are entitled toexercise at the AGM and, if applicable, any members’ statements,members’ resolutions or members’ matters of business receivedby the Company after the date of this notice will be available onthe Company’s website www.jpmelect.co.uk.

13. The register of interests of the Directors and connected persons inthe share capital of the Company and the Directors’ letters ofappointment are available for inspection at the Company’sregistered office during usual business hours on any weekday(Saturdays, Sundays and public holidays excepted). It will also beavailable for inspection at the Annual General Meeting. NoDirector 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 purposesother than those expressly stated.

15. As an alternative to completing a hard copy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies electronicallyby visiting www.sharevote.co.uk. You will need your Voting ID,Task ID and Shareholder Reference Number (this is the series ofnumbers printed under your name on the Form of Proxy/VotingDirection Form). Alternatively, if you have already registered withEquiniti Limited’s online portfolio service, Shareview, you cansubmit your Form of Proxy at www.shareview.co.uk. Fullinstructions are given on both websites. To be valid, your proxyappointment(s) and instructions should reach Equiniti Limited nolater than 12.00 noon on Tuesday, 11th December 2012.

16. As at 7th November 2012 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capitalconsists of 38,054,071Managed Growth shares, 53,111,351 ManagedIncome shares and 13,608,051Managed Cash shares. Voting rightsare calculated by reference to the Share Voting numbers which, asat 31st August 2012, were 4.04 (Managed Growth), 0.81 (ManagedIncome) and 1.01 (Managed Cash). Therefore the total voting rightsin the Company are 210,502,771.

Electronic appointment – CREST members

CREST members who wish to appoint a proxy or proxies by utilisingthe CREST electronic proxy appointment service may do so for theMeeting and any adjournment(s) thereof by using the proceduresdescribed in the CREST Manual. See further instructions on the proxyform.

Notice of Annual General Meetingcontinued

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Return to Shareholders

Total return to the investor, on a mid-market price tomid-market price basis, assuming that all dividendsreceived were reinvested, without transaction costs, intothe relevant share class of the Company at the time theshares were quoted ex-dividend.

Return on Net Assets

Total return on net asset value (‘NAV’) per share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested into the relevant share class of theCompany at the NAV per share at the time the shares werequoted ex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the NAV per share when calculatingthe total return on net assets.

Benchmark Return

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe underlying companies at the time the shares were quotedex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the investmentuniverse. The investment strategy does not track this index andconsequently, there may be some divergence between theperformance of the relevant portfolio and that of thebenchmark.

Ongoing Charges

Management fees and all other operating expenses, excludinginterest, expressed as a percentage of the average of the dailynet assets during the year (2011 to 2009: the average of themonth end net assets; 2008 and prior years: the average of theopening and closing net assets).

Share Price Discount/Premium to Net Asset Value (‘NAV’)

If the share price of an investment trust is lower than the NAVper share, the shares are said to be trading at a discount. Thediscount 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 apremium.

Gearing Factor

Investments excluding holdings in liquidity funds, expressed asa percentage of shareholders’ funds. This shows the effect ofgearing on the NAV if the market value of the portfolio were toincrease by 100%.

Glossary of Terms and Definitions

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JPMorgan Elect plc adopted its present structure as a result ofthe combination of JPMorgan Fleming Managed Growth plcand JPMorgan Fleming Managed Income plc and thesubsequent capital reorganisation. The Company’s namereflects the capital structure and the investment flexibility itoffers to shareholders. There are three share classes, each withdistinct investment policies, objectives and underlyinginvestment portfolios. Each share class is listed separately andtraded on the London Stock Exchange. This capital structuremeans that shareholders may benefit from greater investmentflexibility in a tax-efficient manner.

Capital Structure

• Managed Growth Shares Designed to provide a return, predominantly in the form oflong term capital growth by investing in a range of closedand open-ended funds managed principally by JPMAM.

• Managed Income Shares Designed to provide a growing income together with thepotential for long term capital growth by investing in equitiesand shares of investment trusts and fixed income securities.

• Managed Cash Shares Designed to preserve capital with a yield based on shortterm interest rates by investing in a range of liquidity funds,selected for their yield and credit rating and short datedAAA-rated UK government securities/G7 governmentsecurities hedged into sterling.

Repurchase of Managed Cash Shares

In order to mitigate the impact of the market spread on theManaged Cash shares it is possible for holders of ManagedCash shares to elect to have all or part of their holding of suchshares repurchased by the Company for cash at a price close tonet asset value on each conversion date (see below).

Conversion Opportunities

Shareholders in any of the three share classes are able toconvert some or all of their shares into shares of the otherclasses on a quarterly basis without such conversion beingtreated, under current law, as a disposal for UK capital gains taxpurposes.

The conversion mechanism allows shareholders to alter theirinvestment profile to match their changing investment needsin a tax-efficient manner. Conversion dates arise every threemonths on 28th February (29th February in 2012), 31st May,31st August and 30th November (if such a date is not a

business day, then the conversion date will move to the nextbusiness day). The Company, or its Manager, will make noadministrative charge for any of the above conversions.

Conversion between the share classes

Those who hold shares through the J.P. Morgan InvestmentAccount, J.P. Morgan ISA or J.P. Morgan SIPP must completeand submit a conversion instruction form which can be foundat www.jpmelect.co.uk. Instructions for CREST holders can alsobe found at this address. Those who hold shares in certificatedform on the main register must complete the conversion noticeprinted on the reverse of their certificate and send it to theCompany’s registrars at the following address:

Equiniti LimitedRepayments TeamCorporate ActionsAspect HouseSpencer RoadLancingWest SussexBN99 6DA

Instructions must be received no earlier than 45 and no laterthan 14 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 conversionprocess. Conversion will not affect the net asset value per shareof those shares 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 beconverted is 1,000 shares (subject to a minimum value of£500). Conversion of fewer shares may only take place if thenumber to be converted constitutes the shareholder’s entireholding in that class.

Shareholders who hold shares in certificated form on the mainregister or those who hold their shares in electronic formthrough CREST may convert a minimum of 1,000 shares or,if lower, their entire holding.

More details concerning conversion dates and conversioninstruction forms can be found on the Company’s website:www.jpmelect.co.uk.

Capital Structure and Conversionbetween Share Classes

HistoryThe Company was incorporated on 16th September 1999 and launched asan investment trust on 24th November 1999 with assets of £28million.The Company changed its name to JPMorgan Fleming Managed Growthplc on 5th December 2002. The Company’s name was changed toJPMorgan Fleming Elect plc on 14th January 2004 following the capitalreorganisation and combination of JPMorgan Fleming Managed Growthplc and JPMorgan Fleming Managed Income plc. The Company adoptedits present name on 2nd February 2006.

Company NumbersCompany registration number: 3845060 London Stock Exchange Sedol numbers: Managed Growth: 0852814, Managed Income: 3408021, Managed Cash: 2408009

ISIN:Managed Growth: GB0008528142Managed Income: GB0034080217Managed Cash: GB0034080092

Bloomberg Codes: Managed Growth: JPE LNManaged Income: JPEI LNManaged Cash: JPEC LN

Market InformationThe Company’s net asset values (‘NAV’) are published daily via theLondon Stock Exchange. The Company’s shares are listed on the LondonStock Exchange. The market price is shown daily in the Financial Times,The Times, The Daily Telegraph, The Scotsman, The Independent and onthe JPMorgan internet site at www.jpmelect.co.uk, where the share pricesare updated every fifteen minutes during 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 bepurchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all available onthe online wealth manager service, J.P. Morgan WealthManager+ availableat www.jpmorganwealthmanagerplus.co.uk.

Manager and Company SecretaryJPMorgan Asset Management (UK) Limited

Company’s Registered OfficeFinsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone number: 020 7742 4000

For company secretarial and administrative matters, please contact Alison Vincent.

CustodianJPMorgan Chase Bank, N.A.25 Bank StreetCanary WharfLondon E14 5JP

RegistrarsEquiniti LimitedReference 2018 Aspect House Spencer RoadLancing West Sussex BN99 6DA Telephone number: 0871 384 2319

Calls to this number cost 8p per minute from a BT landline, otherproviders’ costs may vary. Lines open 8.30 a.m. to 5.30 p.m. Monday toFriday. The overseas helpline number is +44 (0)121 415 7047.

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrars quoting reference 2018.

Registered shareholders can obtain further details on their holdings on theinternet by visiting www.shareview.co.uk.

Independent AuditorErnst & Young LLP Chartered Accountants and Statutory Auditor1 More London Place London SE1 2AF

BrokersWinterflood Securities LimitedThe Atrium Building Cannon Bridge25 Dowgate HillLondon EC4R 2GA

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.

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Information about the Company

Financial CalendarFinancial year end 31st AugustFinal results announced NovemberHalf year end 28th FebruaryHalf year results announced AprilInterim Management Statements announced June/DecemberDividends payable (if any)

Managed Growth, Managed Income and Managed Cash March, June, September and DecemberAnnual General Meeting December

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