Notification of changes to the underlying funds of various JPMorgan Funds

20 December 2019

J32 JPMorgan Pacific Securities
J47 JPMorgan Thailand
J34 JPMorgan Asia Growth
J95 JPMorgan Pacific Technology
L36 JPMorgan Indonesia
R08 JPMorgan ASEAN
P66 JPMorgan Asian Smaller Companies Fund

We have been notified by JPMorgan Funds (“The Company”) of amendments to reflect requirements under the revised codes of the underlying funds of the above listed mirror funds. These changes will come into effect from 30 December 2019 (the “Effective Date”).

The key amendments to the investment restrictions of the underlying funds of the above named funds are as follows:

(a) The aggregate value of the underlying funds’ investments in, or exposure to, any single entity (other than Government and other public securities) through the following may not exceed 10% of its total net asset value:

(i) investments in securities issued by that entity;
(ii) exposure to that entity through underlying assets of financial derivative instruments; and
(iii) net counterparty exposure to that entity arising from transactions of over-the-counter financial derivative instruments.

(b) subject to the requirements under the revised Code, the aggregate value of the underlying funds' investments in, or exposure to, entities within the same group (i.e. generally, entities which are included in the same group for the purposes of consolidated financial statements prepared in accordance with internationally recognized accounting standards) through the following may not exceed 20% of its total net asset value:

(i) investments in securities issued by those entities;
(ii) exposure to those entities through underlying assets of financial derivative instruments; and
(iii) net counterparty exposure to those entities arising from transactions of over-the-counter financial derivative instruments.

(c) the value of the underlying funds’ cash deposits made with the same entity or entities within the same group may not exceed 20% of its total net asset value provided that the 20% limit may be exceeded in certain circumstances specified in the revised Code.

(d) the underlying funds may not invest in physical commodities unless otherwise approved by the SFC and disclosed in the investment policies of the underlying funds.

(e) subject to the requirements under the revised Code, the underlying funds may not lend, assume, guarantee, endorse or otherwise become directly or contingently liable for or in connection with any obligation or indebtedness of any person. For the avoidance of doubt, reverse repurchase transactions in compliance with the requirements under the revised Code are not subject to the limitations in this paragraph.

(f) in respect of the underlying funds whose current maximum borrowing may not exceed 25% of its net asset value, the maximum borrowing of such underlying funds will be reduced to 10% of its total net asset value. For the avoidance of doubt, sale and repurchase transactions in compliance with the requirements under the revised Code are not subject to the limitations in this paragraph.

(g) the underlying funds may acquire financial derivative instruments for hedging purposes.

(h) the underlying funds may also acquire financial derivative instruments for non-hedging purposes in accordance with its investment objective and policy subject to the limit that such underlying funds’ net exposure relating to these financial derivative instruments (“net derivative exposure”) does not exceed 50% of its total net asset value.

Net derivative exposure shall be calculated in accordance with the Code and the requirements and guidance issued by the SFC which may be updated from time to time. For the avoidance of doubt, financial derivative instruments acquired for hedging purposes will not be counted towards the 50% limit so long as there is no residual derivative exposure arising from such hedging arrangement.

(i) to limit the exposure to each counterparty, the underlying funds may receive collateral from such counterparty, provided that the collateral complies with the requirements in the revised Code.

Should you have any questions regarding these changes, please contact International Funds & Investments.