Annual Report JPMorgan Smaller Companies Investment Trust plc · JPMorgan Smaller Companies...

Annual Report 2015JPMorgan Smaller Companies

Investment Trust plcAnnual Report & Accounts for the year ended 31st July 2015

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Features

Contents

1 Financial Results

Strategic Report

2 Chairman’s Statement5 Investment Managers’ Report8 Summary of Results9 Performance10 Ten Year Financial Record11 Ten Largest Equity Investments12 Portfolio Analysis13 List of Investments16 Business Review

Governance

21 Board of Directors23 Directors’ Report25 Corporate Governance Statement31 Directors’ Remuneration Report34 Statement of Directors’

Responsibilities

35 Independent Auditor’s Report

Financial Statements

39 Income Statement40 Reconciliation of Movements in

Shareholders’ Funds41 Balance Sheet42 Cash Flow Statement43 Notes to the Financial Statements

Shareholder Information

61 Notice of Annual General Meeting64 Subscription Shares66 Glossary of Terms and Definitions68 Where to buy J.P. Morgan Investment

Trusts69 Information about the Company

ObjectiveCapital growth from UK listed smaller companies.

Investment Policies - To provide capital appreciation for shareholders from a diversified portfolio of UK

listed small companies, emphasising capital rather than income growth. - Liquidity and borrowings are managed with the aim of increasing returns to

shareholders. - Further details on investment policy and risk management are contained in the

Business Review on page 16.

GearingA flexible low cost £24 million borrowing facility is in place and available for theinvestment manager to utilise. At 31st July 2015, £19 million was drawn down on thefacility with the gearing level being 8.4% at that date.

BenchmarkThe FTSE Small Cap Index (excluding investment trusts).

Capital Structure At 31st July 2015, the Company’s issued share capital comprised 17,283,355 Ordinaryshares of 25p each and 3,561,542 Subscription shares of 0.1p each.

The Company issued 3,567,532 Subscription shares of 0.1p each on 25th February2015. For further details, please refer to page 64.

Continuation VoteIn accordance with the Company’s Articles of Association, the Directors are requiredto propose an ordinary resolution that the Company shall continue in existence at theAnnual General Meeting in 2017 and in every third year thereafter.

Management Company and Company SecretaryThe Company employs JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’) as itsAlternative Investment Fund Manager and Company Secretary. JPMF is approved bythe Financial Conduct Authority and delegates the management of the Company’sportfolio to JPMorgan Asset Management (‘JPMAM’).

FCA regulation of ‘non-mainstream pooled investments’The Company currently conducts its affairs so that the shares issued by JPMorganSmaller Companies Investment Trust plc can be recommended by IndependentFinancial Advisers to ordinary retail investors in accordance with the FCA’s rules inrelation to non-mainstream investment products and intends to continue to do so forthe foreseeable future.

The shares are excluded from the FCA’s restrictions which apply to non-mainstreaminvestment products because they are shares in an investment trust.

AICThe Company is a member of the Association of Investment Companies.

WebsiteThe Company’s website, which can be found at www.jpmsmallercompanies.co.uk,includes useful information on the Company, such as daily prices, factsheets andcurrent and historic half year and annual reports.


JPMorgan Smaller Companies Investment Trust plc. Annual Report & Accounts 2015 1

Financial ResultsTotal returns (includes dividends reinvested)

+15.7%‘Unit’ return to shareholders1,3

(2014: N/A)

+14.6%Return to Ordinaryshareholders2

(2014: +9.4%)

+13.4%Diluted return on net assets3,4

(2014: N/A)

+15.7%Undiluted return on net assets3

(2014: +8.5%)

11.0p Ordinary

dividend(2014: 9.6p)

+10.5%Benchmark return5

(2014: +15.2%)

A glossary of terms and definitions is provided on page 66.

1A Unit comprises five Ordinary shares and one Subscription share. The Subscription shares were issued on25th February 2015.2Source: Morningstar.3Source: J.P. Morgan.4Calculated using the diluted net asset value, which assumes that all outstanding Subscription shares were convertedinto Ordinary shares at the year end.

5Source: Datastream. The Company’s benchmark is the FTSE Small Cap Index (excluding investment trusts).

Benchmark return5

JPMorgan Smaller Companies – diluted return on net assets3, 4

JPMorgan Smaller Companies – return to Ordinary shareholders2

%

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225

10 Year Performance5 Year Performance3 Year Performance1 Year Performance

14.6 13.4 10.5

96.9

79.989.1

149.2

211.5

195.3

130.6

114.9

91.0

Long Term Performancefor periods ended 31st July 2015

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JPMorgan Smaller Companies Investment Trust plc. Annual Report & Accounts 20152

Investment Performance

This is our first report to you following the bonus issue of Subscription shares inFebruary, and when referring to your Company’s progress, we will provideperformance statistics both before and after the diluting effect of the one for fivebonus issue of Subscription shares.

Your Company performed well during the year to 31st July 2015, despite periods ofconsiderable volatility in stock markets. The total return on net assets before dilutionwas +15.7% (+13.4% after dilution), which compares with +10.5% for the benchmarkindex. The return to Ordinary shareholders was +14.6% reflecting a slight narrowingof the share price discount to diluted net asset value from 17.8% to 17.0%.

This year’s results add to the Company’s long-term track record, and the table belowsets out the outperformance achieved over the last ten years. The Board is confidentthat our emphasis on strong, quality growing smaller companies will continue todeliver good returns, and serve shareholders well in the years to come.

10 Year Cumulative Returns – rebased to 100 at 31st July 2005

Excess Return.Return on Net Assets.Benchmark Return.

Since the year end, smaller company shares have continued their positive run, withthe net asset value per share (before dilution) increasing 1.3% to 1,052.7p, and theshare price 6.7% to 901p at 13th October 2015. By comparison, the Company’sbenchmark has fallen 0.05%. The current level of discount is 14.4%.

In their report, the Investment Managers have provided further detail on portfolioperformance and attribution, together with a commentary on markets.

Revenue and Dividends

Net revenue after taxation for the year was £2,168,000 (2014: £1,824,000) andrevenue return per share, calculated on the average number of shares in issue, was

–50%

0%

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200%

Jul-15

Jul-14

Jul-13

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Jul-10

Jul-09

Jul-08

Jul-07

Jul-06

–50

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Strategic ReportChairman’s Statement



12.20p (2014: 10.01p). The Directors are recommending a final dividend of 11.0p pershare (2014: 9.60p), costing £1,901,000 (2014: £1,747,000). If approved, the dividendwill be paid on 18th December 2015 to shareholders on the register at close ofbusiness on 13th November 2015.

The level of income received each year varies according to the Company’s gearing, itsinvestment stance and economic conditions. It is the Company’s policy to distributesubstantially all the available income each year, and shareholders should note thatthe Company’s dividends may vary accordingly.

Gearing

Gearing is regularly discussed between the Board and the Investment Managers. Aborrowing facility of £24 million with Scotiabank is in place until April 2016. This ishighly flexible and is used with the aim of enhancing long-term returns. There is afurther option to increase borrowings to £34 million subject to certain conditions. Atthe year end, £19 million was drawn on the facility representing a gearing level of 8.4%of net assets.

ShareRepurchases and Issuance

At last year’s Annual General Meeting, shareholders granted the Directors authorityto repurchase the Company’s shares for cancellation. During the financial year theCompany repurchased a total of 919,007 Ordinary shares for a total consideration of£7,053,000, representing 5.1% of the issued Ordinary share capital at the beginning ofthe year.

The Board’s objective remains to use this authority to manage imbalances betweenthe supply and demand of the Company’s shares, with the intention of reducing thevolatility of the discount. To date the Board believes this mechanism has been helpfuland therefore proposes and recommends that powers to repurchase up to 14.99% ofthe Company’s shares for cancellation be renewed.

During the year, 5,990 Ordinary shares were issued upon exercise of Subscriptionshares. A decision to convert Subscription shares should only be made after carefulconsideration of the prevailing market price of the Ordinary shares, particularly ifthey are trading below the exercise price of 915 pence. At the year end there were3,561,542 Subscription shares in issue. Details of how to exercise the Subscriptionshares are given on page 64 of this report.

Board of Directors

As noted in my half-year report, the Board appointed Andrew Impey as anon-executive director in March. As part of the Board’s long-term successionplanning, we have temporarily increased the total number of Directors. This will bereversed in due course on future retirements.

Directors’ fees will not be increased this year, but to accommodate the temporaryincrease in Board size and any future increases in fees, the Directors recommendthat, in accordance with Article 97 of the Company’s Articles of Association, thepermitted maximum aggregate of Directors’ fees payable be increased from£150,000 to £200,000 per annum at the forthcoming Annual General Meeting.



Corporate Governance

In accordance with corporate governance best practice, all Directors will retire andseek reappointment or appointment at this year’s Annual General Meeting.Shareholders who wish to contact the Chairman or other members of the Boarddirectly may do so through the Company Secretary or the Company’s website.

Annual General Meeting (‘AGM’)

The Company’s twenty fifth AGM will be held on Monday, 23rd November 2015 at3.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. In addition to the formalpart of the meeting, there will be a presentation from the Investment Managers whowill answer questions on the portfolio and performance. Shareholders who areunable to attend the AGM in person are encouraged to use their proxy votes.

Outlook

There are a wide range of economic and political uncertainties that continue toworry markets. Internationally, these include the timing and pace of US interest rateincreases, the slowdown of the Chinese economy and political deadlock in Europe.Domestically, the outcome of the forthcoming EU referendum is uncomfortablyuncertain.

However, against this background, the UK economy is making good progress. Forthe time being, domestic politics provide a reasonable environment for smallercompanies to prosper, although after a long period of stability, we expect wageinflation to become a greater concern in the future.

A good flow of companies coming to the market is providing our managers with newopportunities, and the recent increase in merger and acquisition activity reinforcesour view that smaller companies currently represent relatively good value. Thissupports the Board’s confidence that the Company is well placed to deliver goodperformance over the longer term.

Michael Quicke OBEChairman 15th October 2015

Strategic Report continuedChairman’s Statement continued



Performance attribution

12 months to 12 months to 12 months to31st July 2015 31st July 2014 31st July 2013

Contributions to total return % % % % % %

Benchmark return 10.5 15.2 48.5

Sector and stock selection 4.7 –6.9 –4.7Gearing/net cash 0.8 1.4 3.6

Investment Managers’ contribution 5.5 –5.5 –1.1

Portfolio total return 16.0 9.7 47.4Management fee/other expenses –1.1 –1.2 –1.2Repurchase of shares for cancellation 0.8 0.0 0.1

Other effects –0.3 –1.2 –1.1

Undiluted return on net assets 15.7 8.5 46.3

Dilution effect of potential exercise of remaining Subscription shares –2.3 — —

Diluted return on net assets 13.4 8.5 46.3

Impact of change in discount 1.2 0.9 10.7

Return to Ordinary shareholders 14.6 9.4 57.0

Source: JPMAM/Morningstar. All figures are on a total return basis.


Performance and Market Background

After a fairly flat first half, your Company enjoyed strong performance over the yearto July 2015. The benchmark index, the FTSE Small Cap Index excluding investmenttrusts, produced a total return of 10.5% for the 12 months, but your Companyoutperformed this, providing an undiluted total return on net assets of 15.7%. On afully diluted basis, which takes into account the Subscription shares in issue, and theminimal movement in the discount since July 2014, the ‘unit’ share price (ie the shareprice return of both the Ordinary shares and the Subscription shares) also produced atotal return for the year of 15.7%.

While the year contained periods of significant volatility, stock markets continuedto rise in the more domestically-focussed mid and smaller sized companies. Thisoutperformance of mid and small companies was aided by the on-going mergersand acquisitions (or ‘M&A’) activity that we have been predicting for some time. Therun up to the General Election in May 2015 caused some nervousness in markets, butthe outcome was a generally positive one for your Company, providing the certaintyof a pro-business Government for the next five years.

Portfolio

Both sector and stock selection were positive over the year. Two key sectorcontributors were our overweight position in Financial Services (OneSavings Bankand Mortgage Advice Bureau, among others) and in the Beverage sector where webenefitted from our large position in Fevertree Drinks, an IPO during the year. We alsocontinued to benefit from our significant underweight position in the Mining sector.

Investment Managers’ Report

Georgina Brittain

Katen Patel



In terms of stocks, several of our long term holdings again delivered very strongreturns; notable among these were 4Imprint, Staffline and Telit Communications.While there were inevitable disappointments during the year, the key one was ourholding in Trinity Mirror. We have retained our holding in the company, as we believethe price decline to be overdone and the shares to be very under-valued.

We have discussed for some time our view that M&A was likely to be a significantfeature in smaller companies, and this year bore out our thesis. Most notable foryour Company were the bids for Quintain Estates, a large and long-held position inthe portfolio, and HellermannTyton, a company which we have held since it floatedin 2013. We expect to see more of this in the coming year. Conversely, we have alsoseen a large influx of new companies floating in the small cap arena. We haveinvested in a significant number of these exciting new opportunities, including FDMand Kainos in the technology space, Wizz Air (ultra low cost airline), and a secondchallenger bank, Aldermore, to sit alongside our holding in OneSavings Bank. Wehave been pleased to see these new growth companies coming to the market, andto date have benefitted significantly from these investments.

Due in part to these new holdings in the portfolio, we have further increased ourdomestic focus within the fund, in order that our investments may continue to benefitfrom the strength of the UK economy and the UK consumer. This can be seen fromthe significant overweight positions we hold in General Retailers, in Financial Servicesand Banks, and in our Media overweight.

Outlook

The backdrop to our investments is generally positive. Both the US and the UKcontinue to grow, with the UK currently enjoying 2.6% GDP growth year-on-year.Inflation remains very low, benefiting from the on-going low oil price, the recentfall in commodity prices, and declining food prices. In addition, wage increases areoccurring well ahead of inflation; real wages are now predicted to rise by 3.5% thisyear, unemployment is down to 5.6% and we have now seen 20 consecutive monthsof year-on-year increase in consumer spending power. Unsurprisingly, this has led toUK consumer confidence being at a 15 year high.

In Europe, a key trading partner for the UK, Greece has secured a bailout extensionwith its creditors, and new data points from the Eurozone on business and consumerconfidence demonstrate that the recent Greek crisis caused little damage to thebroader Eurozone countries. We also expect the European economies to continue tobenefit from the on-going stimulus plan. Stock market concerns have now focused onChina, but it is our view that the perceived risks from recent Chinese stock marketturbulence are being over-played. The Chinese economy has clearly slowed from theheady days of 8% GDP growth per annum, but this slowdown is well-known and isalso less relevant for smaller companies.

There are three relevant risks on the horizon; the EU Referendum, interest rate risesin the US and UK and the increase in the National Living Wage. On the former, currentsurveys appear to show little risk of the UK leaving the EU. Regarding rate rises, itremains our view that any rises in interest rates (possibly in the second quarter of2016 in the UK) will be small and controlled, and reflect the improving health of both

Strategic Report continuedInvestment Managers’ Report continued



the US and UK economies. More recently, post the Summer Budget, the Chancellor’ssignificant increases in the minimum wage – the National Living Wage – have alreadystarted to have an impact. It is currently our view that the beneficial impact on theconsumer, as wages rise, should approximately balance out the cost to certaincompanies of significant wage increases, but we are keeping a weather eye on theoutcome of this policy change.

Overall, we believe that smaller companies will remain strong beneficiaries of theon-going economic recovery. While bouts of stock market volatility have become thenorm, we continue to use them to add to our favoured holdings, and we continue tobelieve that the domestic bias of the majority of our holdings shelters them frommany global concerns. Valuations remain extremely attractive in smaller companies,as evidenced by the wave of M&A we have seen. This, plus the increasing number ofexciting new growth companies that we have seen coming to the market, provides uswith confidence for the year ahead.

Georgina BrittainKaten PatelInvestment Managers 15th October 2015



2015 2014

Total returns for the year ended 31st July‘Unit’ return to shareholders1,3 +15.7% —Return to Ordinary shareholders2 +14.6% +9.4%

Undiluted return on net assets3 +15.7% +8.5%Diluted return on net assets3,4 +13.4% —

Benchmark return5 +10.5% +15.2%

% change

Net asset value, share price and discount at 31st JulyShareholders’ funds (£’000) 179,597 165,229 +8.7Undiluted net asset value per Ordinary share 1,039.1p 908.0p +14.4Diluted net asset value per Ordinary share4 1,017.9p —Ordinary share price 844.5p 746.8p +13.1Ordinary share price discount to diluted net asset value per Ordinary share 17.0% 17.8%

Ordinary shares in issue 17,283,355 18,196,372Subscription share price6 41.0p —Subscription shares in issue6 3,561,542 —

Revenue for the year ended 31st JulyNet revenue available for Ordinary shareholders (£’000) 2,168 1,824 +18.9Revenue return per Ordinary share 12.20p 10.01p +21.9Dividend per Ordinary share 11.0p 9.60p

Gearing at 31st July7 8.4% 9.3%

Ongoing Charges8 1.19% 1.13%


1A Unit comprises five Ordinary shares and one Subscription share. The Subscription shares were issued on 25th February 2015.2Source: Morningstar.3Source: J.P. Morgan.4Calculated using the diluted net asset value, which assumes that all outstanding Subscription shares were converted into Ordinary shares at the year end.5Source: Datastream. The Company’s benchmark is the FTSE Small Cap Index (excluding investment trusts).6On 25th February 2015, the Company issued Subscription shares as a bonus issue to the Ordinary shareholders on the basis of one Subscription share for every five Ordinary sharesheld.

7Gearing represents the excess amount above shareholders’ funds of total assets expressed as a percentage of the shareholders’ funds. Total assets include total investments and netcurrent assets/liabilities less cash/cash equivalents and excluding bank loans of less than one year. If the amount calculated is negative, this is shown as a ‘net cash’ position.8Ongoing charges represents the management fees and all other operating expenses excluding interest, expressed as a percentage of the average daily net assets during the year andare calculated in accordance with guidance issued by the Association of Investment Companies in May 2012.

Strategic Report continuedSummary of Results



Performance Relative to BenchmarkFigures have been rebased to 100 at 31st July 2005

Source: Morningstar.

JPMorgan Smaller Companies – Ordinary share price total return.

JPMorgan Smaller Companies – net asset value total return1.

The benchmark has been rebased to 100 and is represented by the horizontal dotted line.

1Based on cum income NAV; prior to 30th June 2008 capital only NAV.

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20152014201320122011201020092008200720062005

Ten Year PerformanceFigures have been rebased to 100 at 31st July 2005


JPMorgan Smaller Companies – Ordinary share price total return.

JPMorgan Smaller Companies – net asset value total return1.

Benchmark return.

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Performance



At 31st July 20051 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Shareholders’ funds (£’000) 94,753 118,326 143,657 96,035 73,016 89,460 120,126 107,282 154,116 165,229 179,597

Undiluted net asset value per Ordinary share (p) 395.7 513.8 676.1 479.6 372.3 472.3 644.5 586.8 845.9 908.0 1,039.1

Diluted net asset value per Ordinary share (p)2 — — — — — — — — — — 1,017.9

Ordinary share price (p) 322.0 440.5 562.0 391.3 289.0 368.0 538.0 448.0 690.8 746.8 844.5

Discount (%) 18.6 14.3 16.9 18.4 22.4 22.1 16.5 23.7 18.3 17.8 17.0

Subscription share price (p)3 — — — — — — — — — — 41.0

Gearing (%) 6 6 7 6 7 6 7 7 8 9 8

Year ended 31st July

Gross revenue attributable to shareholders (£’000) 1,750 2,057 2,540 2,977 2,579 2,355 2,525 2,594 2,937 3,151 3,606

Revenue return per share (p) 3.62 4.37 5.22 8.67 11.43 8.92 8.50 9.01 10.38 10.01 12.20

Dividend per share (p) 3.75 4.25 5.00 7.00 11.004 8.50 8.50 9.00 9.50 9.60 11.0

Ongoing Charges (%)5 1.31 1.30 1.33 1.15 1.39 1.26 1.16 1.21 1.15 1.13 1.19

Rebased to 100 at 31st July 2005

Return to Ordinary shareholders6 100.0 138.3 177.9 125.0 96.0 125.0 186.2 158.2 248.4 271.8 311.5

Return on net assets7 100.0 132.5 175.8 124.9 99.3 128.0 177.4 164.1 240.1 260.5 295.3

Benchmark return8 100.0 112.8 133.9 86.4 76.9 88.9 107.6 101.0 150.0 172.8 191.0


1The results for the year ended 31st July 2005 have been restated in accordance with Financial Reporting Standard 21.2Assumes that all outstanding Subscription shares were converted into Ordinary shares at the year end.3On 25th February 2015, the Company issued Subscription shares as a bonus issue to the Ordinary shareholders on the basis of one Subscription share for every five Ordinary sharesheld.4Includes a special dividend of 3.00p per share representing VAT recovered on investment management fees.5Management fees and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during the year (2009 to 2011: Total ExpenseRatio (‘TER’): the average of the month end net assets during the year; 2008 and prior years: TER: the average of the opening and closing net assets).6Source: Morningstar.7Source: J.P. Morgan.8Source: Datastream. The Company’s benchmark is the FTSE Small Cap Index (excluding investment trusts).

Strategic Report continuedTen Year Financial Record



2015 2014Valuation Valuation

Company Sub-Sector £’000 %1 £’000 %1

Quintain Estates & Development Real Estate 7,175 3.6 4,953 2.7Quintain Estates & Development develops and invests in properties. The companyfocuses on the London commercial and residential real estate markets.

4imprint Group2 Media 6,734 3.4 2,912 1.64imprint supplies imprinted promotional merchandise via the Internet and overthe phone. The company offers a wide range of imprinted products ranging fromclothing and caps to pens and pencils.

Avon Rubber Aerospace & Defence 5,722 2.9 3,994 2.2Avon Rubber designs and engineers specialised products for the protection anddefence, and dairy industries. The company researches, develops, andmanufactures products such as respiratory protection systems, and liners andtubing for dairy processing. Avon Rubber operates in the United States and UnitedKingdom and distributes their products globally.

Safestore Holdings2 Real Estate 5,486 2.8 2,848 1.5Safestore Holdings owns and operates self storage facilities.

Lookers General Retailers 5,463 2.8 4,191 2.3Lookers is a motor vehicle distributor. The company’s main activities are the sale,hire and maintenance of autos, light trucks, agricultural machinery, motorcyclesand caravans, including the sale of fuel, parts and accessories. Lookers alsodelivers vehicles, builds coaches and operates caravan parks. The companyoperates in the United Kingdom.

Marshalls2,3 Construction & Materials 5,169 2.6 — —Marshalls is a holding company. Through its subsidiaries, the Group manufacturesand sells a variety of building materials for the construction, home improvementand garden landscaping sectors. Their merchandise includes concrete, stone andclay, patio and driveway products, drainage systems, and DIY items.

Hill & Smith2 Industrial Engineering 4,988 2.5 2,795 1.5Hill & Smith Holdings manufactures products for the infrastructure, galvanising,building, and construction industries. The company produces traffic barriers,fencing, gantries, lighting columns, pipe supports, steel storage tanks, andvariable message signs; plastic drainage pipe and pipe supports; powder coatings;and traffic counting data collection devices.

Trinity Mirror Media 4,987 2.5 6,114 3.3Trinity Mirror primarily publishes national and regional newspapers in the UnitedKingdom. The company’s other media operations consist of Web sites, magazines,and exhibitions.

Telit Communications2 Technology Hardware & 4,744 2.4 2,181 1.2Telit Communications operates as a global wireless technology and services Equipmentcompany. The company develops, manufactures and markets cellular long andshort range radio communication products, receiver modules, and connectivityand cloud platforms for connected products. Telit markets IT products to globalcompanies with wireless machine to machine communications.

Staffline2 Support Services 4,580 2.3 2,691 1.5Staffline Group provides recruitment and outsourced human resource services.The company specialises in supplying temporary and blue collar industrialworkers, and temporary and permanent placement in the engineering andconsumer goods sectors.

Total4 55,048 27.7

1Based on total assets less current liabilities of £198.6m (2014: £184.2m). The £19.0m drawn down on the Company’s loan facility at 31st July 2015 was treated as a long term liabilityfor the purpose of this analysis.

2Not included in the ten largest equity investments at 31st July 2014.3Not held in the Portfolio as at 31st July 2014.4At 31st July 2014, the value of the ten largest equity investments amounted to £46.3m representing 25.1% of total assets less current liabilities.

Ten Largest Equity Investments



31st July 2015 31st July 2014Portfolio Benchmark Portfolio Benchmark

Sector %1 % %1 %

Industrials 38.8 35.5 41.6 33.8Consumer Services 25.0 15.5 24.5 18.3Financials2 19.8 21.1 15.5 19.2Technology 11.7 9.2 10.4 6.6Consumer Goods 5.8 6.8 5.1 7.9Oil & Gas 4.0 3.7 6.4 4.2Health Care 3.3 4.3 4.3 4.7Telecommunications 0.5 1.1 0.7 1.5Utilities 0.3 0.3 0.5 —Basic Materials — 2.5 0.8 3.8Liquidity fund 1.4 — 1.9 —Net current liabilities and loan balances (10.6) — (11.7) —

Total 100.0 100.0 100.0 100.0

1Based on net assets of £179.6m (2014: £165.2m).2Optimal Payments has been reclassified as Financials from Industrials as at 31st July 2015.

Holdings breakdown based on Market Cap as at 31st July 2015

Number of Companies Total Value of Companies (£m)

£500m–above (20)

£250m–£500m (42)

£100m–£250m (23)

£0m–£100m (7)

£500m–above (£66m)

£250m–£500m (£88m)

£100m–£250m (£41m)

£0m–£100m (£4m)

Strategic Report continuedPortfolio Analysis



ValuationCompany £’000

IndustrialsSupport ServicesStaffline 4,580Ricardo 4,414Robert Walters 3,360Utilitywise 2,601St Ives 2,450Brammer 2,097Lavendon Group 2,090Tribal 1,799Safecharge International Group 1,780Communisis 1,139Restore 898Smart Metering Systems 738Harvey Nash 583Speedy Hire 398

Construction & MaterialsMarshalls 5,169Tyman 3,017Costain 2,301Eurocell Group 1,236Volution Group 939

Industrial EngineeringHill & Smith 4,988Renold 3,845Porvair 1,404Trifast 1,396

Electronics & Electrical EquipmentE2V Technologies 4,066Hellermanntyton Group 1,696Xaar 840Sprue Aegis 608


Aerospace & DefenceAvon Rubber 5,722Chemring Group 1,076

Industrial TransportationWincanton 2,489

Total Industrials 69,719

Consumer ServicesGeneral RetailersLookers 5,463Pendragon 3,941Topps Tiles 3,403JD Sports Fashion 2,695Carpetright 2,272Mothercare 1,003Entu (UK) 634Darty 389

Media4imprint Group 6,734Trinity Mirror 4,987STV Group 4,053NAHL Group 2,236

Travel & LeisureFuller Smith & Turner 2,320Wizz Air 993Action Hotels 522

Food & Drug RetailsGreggs 3,286

Total Consumer Services 44,931

List of Investmentsat 31st July 2015



Strategic Report continuedList of Investments continued


FinancialsReal EstateQuintain Estates & Development 7,175Safestore Holdings 5,486CLS 2,214Mckay Securities 1,832Harworth Group 1,245Urban&Civic 870

Financial ServicesOneSavings Bank 4,262Plus500 2,750S & U 1,376Optimal Payments 1,041Mortgage Advice Bureau 957

Non Life InsuranceNovae 4,015

BanksAldermore Group 2,402

Total Financials 35,625

TechnologySoftware & Computer ServicesNCC 4,519FDM Group 3,103SDL 2,069Fusionex International 1,045Iomart 806Anite 789First Derivatives 732Tracsis 620Kainos Group 513

Technology Hardware & EquipmentTelit Communications 4,744Sepura 2,102

Total Technology 21,042


Consumer GoodsFood ProducersGreencore Group 2,247Premier Foods 1,883Hilton Food 1,572

Household Goods & Home ConstructionMJ Gleeson 2,019Cairn Homes 841

BeveragesFevertree Drinks 1,828

Total Consumer Goods 10,390

Oil & GasOil Equipment, Services & DistributionLamprell 2,490Cape 1,858

Oil & Gas ProducersExillon Energy 695Amerisur Resources 627Enquest 568Bowleven 501Ithaca Energy 413

Total Oil & Gas 7,152

Health CarePharmaceuticals & BiotechnologyVectura 1,941Skyepharma 1,892Quantum Pharma 993Clinigen 577

Health Care Equipment & ServicesConstellation Healthcare Technologies 547

Total Health Care 5,950




TelecommunicationsMobile TelecommunicationsPeople’s Operator 488

Fixed Line TelecommunicationsCityfibre Infrastructure 418

Total Telecommunications 906

UtilitiesElectricityOPG Power Venture 577

Total Utilities 577

Liquidity FundsJPMorgan Sterling Liquidity Fund 2,539

Total Liquidity Funds 2,539

Total Investments 198,831

The portfolio comprises investments in equity shares.



Strategic Report continuedBusiness Review

The aim of the Strategic Report is to provide shareholders withthe ability to assess how the Directors have performed theirduty to promote the success of the Company during the yearunder review. To assist shareholders with this assessment, theStrategic Report sets out the structure and objective of theCompany, its investment policies and risk management,performance and key performance indicators, share capital,principal risks and how the Company seeks to manage thoserisks, the Company’s environmental, social and ethical policyand finally its future developments.

Business ReviewStructure of the CompanyJPMorgan Smaller Companies Investment Trust plc is aninvestment trust company that has a premium listing on theLondon Stock Exchange. With effect from 1st July 2014,JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’), an affiliateof JPMAM, has been appointed as the Company’s AlternativeInvestment Fund Manager (‘AIFM’) to manage its assets andalso to act as the new Company Secretary. The Board hasdetermined an investment policy and related guidelines andlimits as described below.

The Company is an investment company within the meaningof Section 833 of the Companies Act 2006 and has beenapproved by HM Revenue & Customs as an investment trust(for the purposes of Sections 1158 and 1159 of the CorporationTax Act 2010) for the year ended 31st July 2013 and futureyears. The Directors have no reason to believe that approvalwill not continue to be obtained. The Company is not a closecompany for taxation purposes.

The Company is subject to UK and European legislation andregulations including UK company law, Financial ReportingStandards, the UK Listing, Prospectus, Disclosure andTransparency Rules, taxation law and the Company’s ownArticles of Association.

ObjectiveThe Company’s objective is to achieve capital growth fromUK listed smaller companies by out-performance of theCompany’s benchmark index, the FTSE Small Cap Index(excluding investment trusts) and a rising share price overthe longer term by taking carefully controlled risks.

Investment Policies and Risk ManagementIn order to achieve this objective, the Company invests in adiversified portfolio of small companies, emphasising capital

rather than income growth, with the likely result that the levelof dividend will fluctuate.

Investment risks are managed by investing in a diversifiedportfolio of UK listed smaller companies. The number ofinvestments in the portfolio will normally range between70 and 150. The Company seeks to manage its risk relative to itsbenchmark index by limiting the active portfolio exposure tostocks and sectors. The maximum exposure to an investmentwill normally range between +/–3% relative to the benchmarkindex. The maximum exposure to a sector will normally rangebetween +/–10% relative to the benchmark index.

The Company invests in smaller companies which tend to bemore volatile than larger companies and the investment policyshould therefore be regarded as carrying greater thanaverage risk.

Liquidity and borrowings are managed with the aim ofincreasing returns to shareholders. The Company makes use ofborrowings to increase returns.

The Company does not invest more than 15% of its gross assetsin other UK listed investment companies (including investmenttrusts).

Investment Restrictions and GuidelinesThe Board seeks to manage the Company’s risk by imposingvarious investment limits and restrictions.

– No investment in the portfolio will be greater than 10% ofthe Company’s gross assets.

– The Company will not normally invest in unlisted securities.

– The Company will not normally invest in derivativeinstruments.

– The Company will not normally invest greater than 20% ofits gross assets in AIM stocks.

– The Company’s gearing policy is to operate within a rangeof –10% to +15% invested in normal markets.

– No investments in new companies with a capitalisationgreater than £1 billion will be made without consultationwith the Board.

Compliance with the Board’s investment restrictions andguidelines is monitored continuously by the Manager and isreported to the Board on a monthly basis.



PerformanceIn the year ended 31st July 2015, the Company produced atotal return to Ordinary shareholders of 14.6% and a totalundiluted return on net assets of 15.7%. This compares withthe return on the Company’s benchmark index of 10.5%. Asat 31st July 2015, the value of the Company’s investmentportfolio was £198.8 million. The Investment Managers’ Reporton pages 5 to 7 includes a review of developments during theyear as well as information on investment activity within theCompany’s portfolio.

Total Return, Revenue and Dividends Gross total return for the year amounted to £25,631,000 (2014:£15,224,000) and net total return after deducting interest,administration expenses and taxation amounted to£23,320,000 (2014: £13,017,000). Distributable income for theyear amounted to £2,168,000 (2014: £1,824,000).

The Directors recommend a final dividend of 11.0p (2014: 9.6p)per share payable on 18th December 2015 to holders on theregister at the close of business on 13th November 2015. Thisdistribution will absorb £1,901,000 (2014: £1,747,000).Following payment of the final dividend, the revenue reservewill amount to £1,549,000 (2014: £1,269,000).

Gearing The Board sets the overall gearing policy. A £24 millionunsecured floating rate borrowing facility is currently in placewith Scotiabank which expires in April 2016. This facility is highlyflexible and is used with the aim of enhancing returns. As at31st July 2015, £19 million had been drawn on the facility.Further details about the loan facility are given in note 12 onpage 50.

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 indexThis is the most important KPI by which performance isjudged. Information on the Company’s performance isgiven in the Chairman’s Statement and the InvestmentManagers’ Report. (Also, please refer to the graphs onpage 9.)

The Company outperformed its benchmark index in the yearended 31st July 2015 after a couple of disappointing years.Over the longer term, performance remains strong. Over theten years to 31st July 2015, the Company recorded a totalreturn of 195.3% which compares very favourably with thebenchmark return of 91.0%.

The principal objective is to achieve capital growth relativeto the benchmark. However, the Board also monitors theperformance relative to a broad range of competitor funds.

• Share price discount to net asset value (‘NAV’) per shareThe Board operates a share repurchase programme thatseeks to address imbalances in supply and demand forthe Company’s shares within the market and therebyreduce the volatility of the discount to NAV per share atwhich the Company’s shares trade. In the year to 31st July2015, the discount ranged between 14.3% and 18.5% basedon month end data.

The Board at its regular meetings, undertakes reviews ofmarketing/investor relations and sales reports from theManager. It also considers their effectiveness as well asmeasures of investor sentiment.

Discount Performance


JPMorgan Smaller Companies Investment Trust plc – capital NAV discount.

• Ongoing ChargesThe ongoing 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 ongoing charges for the yearended 31st July 2015 were 1.19% (2014: 1.13%). The increasefrom last year is mainly due to the depositary fees. TheBoard reviews each year an analysis which shows acomparison of the Company’s ongoing charges and its mainexpenses with those of its peers.

Share CapitalThe Company has authority both to repurchase shares in themarket for cancellation and issue new shares for cash.

During the year, the Company repurchased a total of919,007 Ordinary shares at nominal value of approximately£230,000, for cancellation for a total consideration of

–25

–22

–19

–16

–13

–10

20152014201320122011201020092008200720062005



Strategic Report continuedBusiness Review continued

£7,053,000. This amount represented 5.1% of the issued sharecapital at the beginning of the year. As the shares wererepurchased at a discount to the underlying net asset value(‘NAV’) per share, they enhanced the NAV per share of theremaining shares. Since the year end, the Company hasrepurchased a further 112,696 Ordinary shares for cancellation.

A resolution to renew the authority to repurchase shares willbe put to shareholders at the forthcoming Annual GeneralMeeting.

On 25th February 2015, a bonus issue was made to Ordinaryshareholders in the form of Subscription shares issued on thebasis of one Subscription share for every five Ordinary sharesheld. Each Subscription share confers the right (but not theobligation) to subscribe for one Ordinary share at a price of915 pence per share to have effect on the last day of eachmonth commencing on 31st March 2015 and finishing on30th June 2017, after which a Company appointed trustee canchoose to exercise any unexercised Subscription share rights. Ifthe trustee does not exercise the Share subscription rights, therights on the Subscription shares will lapse.

Further details of the Subscription shares, including theapportionment of base cost for capital gains tax purposes andhow they may be exercised, are given on page 64.

Since the bonus issue, holders of 5,990 Subscription sharesexercised their right to convert those shares into Ordinaryshares at a price of 915p per share, giving a total considerationreceived of £55,000.

The Company does not currently hold any shares in Treasuryand does not have authority to reissue shares from Treasury ata discount to NAV per share.

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 remain unchanged since last year and fallbroadly under the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example asset allocation or the level ofgearing, may lead to under-performance against theCompany’s benchmark index and peer companies,resulting in the Company’s shares trading on a widerdiscount. The Board manages these risks by diversificationof investments through its investment restrictions and

guidelines which are monitored and reported on. TheManager provides the Directors with timely and accuratemanagement information, including performance data andattribution analyses, revenue estimates, liquidity reportsand shareholder analyses. The Board monitors theimplementation and results of the investment process withthe Investment Managers, who attend all Board meetings,and reviews data which shows statistical measures of theCompany’s risk profile. The Investment Manager employsthe Company’s gearing, within a strategic range set by theBoard. The Board usually holds a separate meeting devotedto strategy each year.

• Discount: A disproportionate widening of the discountrelative to the Company’s peers could result in loss of valuefor shareholders. The Board regularly discusses discountpolicy and has set parameters for the Manager and theCompany’s broker to follow.

• Smaller company Investment: Investing in smallercompanies is inherently more risky and volatile, partly dueto lack of liquidity in some shares, plus AIM stocks are lessregulated. The Board discusses these risk factors regularlyat each Board meeting with the Investment Managers. TheBoard has placed investment restrictions and guidelines tolimit these risks.

• Regulatory: Changes in financial or tax legislation, includingin the European Union, may adversely affect the Company.The Manager makes recommendations to the Board onaccounting, dividend and tax policies, and seeks externaladvice where appropriate.

• 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 25 to 30. The Board receives regularreports from the Manager and the Company’s broker aboutshareholder communications, their views and their activity.

• 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 gearing on a regular basis and hasset investment restrictions and guidelines, which are



monitored and reported on by the Manager. The Boardmonitors the implication 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 Income and Corporation Tax Act 2010(‘Section 1158’). Details of the Company’s approval are givenunder ‘Business of the Company’ above. Should theCompany breach Section 1158, it may lose its investmenttrust status and as a consequence capital gains within theCompany’s portfolio would be subject to Capital Gains Tax.The Section 1158 qualification criteria are continuallymonitored by the Manager and the results reported to theBoard each month. The Company must also comply withthe provisions of The Companies Act 2006 and, as itsshares are listed on the London Stock Exchange, the UKLAListing Rules and Disclosure and Transparency Rules(‘DTRs’). A breach of the Companies Act 2006 could resultin the Company and/or the Directors being fined or thesubject of criminal proceedings. Breach of the UKLA ListingRules or DTRs may result in the Company’s shares beingsuspended from listing which in turn would breach Section1158. The Board relies on the services of its CompanySecretary, JPMorgan Funds Limited, and its professionaladvisers to monitor compliance with all relevantrequirements.

• Operational: Disruption to, or failure of, the Manager’saccounting, dealing or payments systems or the depositary’sor custodian’s records may prevent accurate reporting andmonitoring of the Company’s financial position. On 1st July2014, the Company appointed BNY Mellon Trust &Depositary (UK) Limited to act as the depositary, responsiblefor overseeing the operations of the custodian, JPMorganChase Bank, N.A., and the Company’s cash flows. Details ofhow the Board monitors the services provided by theManager, its associates and depositary and the key elementsdesigned to provide effective internal control are includedwithin the Risk Management and Internal Control section ofthe Corporate Governance report on pages 28 and 29. Thethreat of cyber attack, in all its guises, is regarded as at leastas important as more traditional physical threats to businesscontinuity and security. The Company benefits directly orindirectly from all elements of JPMorgan’s Cyber Securityprogramme. The information technology controls aroundthe physical security of JPMorgan’s data centres, security of

its networks and security of its trading applications aretested by Deloitte and reported every six months against theAAF 01/06 standard.

• Financial: The financial risks faced by the Company includemarket price risk, interest rate risk, liquidity risk and creditrisk. Counterparties are subject to daily credit analysis bythe Manager and regular consideration at meetings of theBoard. In addition the Board receives reports on theManager’s monitoring and mitigation of credit risks onshare transactions carried out by the Company. Furtherdetails are disclosed in note 22 on pages 58 and 59

Board Diversity

When recruiting a new Director, the Board’s policy is to appointindividuals on merit. The Board believes diversity is importantin bringing an appropriate range of skills, knowledge andexperience to the Board and gives that consideration whenrecruiting new Directors. At 31st July 2015, there were five maleDirectors and one female Director on the Board.

Employees, Social, Community and Human Rights Issues

The Company has a management contract with the Manager.It has no employees and all of its Directors are non-executive.The day to day activities are carried out by third parties. Thereare therefore no disclosures to be made in respect ofemployees. The Board notes the Manager’s policy statementsin respect of Social, Community and Environmental and HumanRights issues, as highlighted in italics:

Social, Community, Environmental and Human Rights

The Manager believes that companies should act in a sociallyresponsible manner. Although our priority at all times is the besteconomic interests of our clients, we recognise that, increasingly,non-financial issues such as social and environmental factors havethe potential to impact the share price, as well as the reputation ofcompanies. Specialists within the Manager’s environmental, socialand governance (‘ESG’) team are tasked with assessing howcompanies deal with and report on social and environmental risksand issues specific to their industry.

The Manager is also a signatory to the United Nations Principles ofResponsible Investment, which commits participants to sixprinciples, with the aim of incorporating ESG criteria into theirprocesses when making stock selection decisions and promotingESG disclosure. Our detailed approach to how we implement theprinciples is available on request.



Greenhouse Gas Emissions

The Company is managed by the Manager. It has noemployees and all of its Directors are non-executive, the dayto day activities being carried out by third parties. There aretherefore no disclosures to be made in respect of employees.The Company itself has no premises, consumes no electricity,gas or diesel fuel and consequently does not have ameasurable carbon footprint. The Company’s Manager, isa signatory to the Carbon Disclosure Project and JPMorganChase is a signatory to the Equator Principles on managingsocial and environmental risk in project finance.

Future Developments

Clearly, the future development of the Company is muchdependent upon the success of the Company’s investmentstrategy in the light of economic and equity marketdevelopments and the continued support of its shareholders.Whilst there is expected to be a period of volatility anduncertainty ahead in the short-term and medium-term horizondue to the nature of the Company’s investments and sector, theBoard remains confident that the strategy followed by theCompany will deliver attractive long-term returns. TheChairman and the Investment Managers discuss the outlook intheir statement and report on pages 4 and 6 to 7 respectively.

For and on behalf of the Board Michael Quicke OBEChairman

15th October 2015

Strategic Report continuedBusiness Review continued



Ivo Coulson*†‡

A Director since October 2005.

Last reappointed to the Board: 2014.

He is a director of Baring Emerging Europe plc and Squint Limited. He is also aninvestment partner at Stanhope Capital LLP and a Fellow of the Securities Institute.

Connections with Manager: None.

Shared directorships with other Directors: None.

Richard Fitzalan Howard*†‡

A Director since February 1997.


He is chairman of FF&P Asset Management Limited and a director of CCFHB Limited,CCLA Investment Management Limited, the Dulverton Trust and the Gabelli Value Plus+Trust plc.


Shared directorships with other Directors: CCLA Investment Management Limited (withMichael Quicke).

Michael Quicke OBE*†‡ (Chairman of the Board and Nomination Committee)

A Director since October 2005.


He is chief executive of CCLA Investment Management Limited.


Shared directorships with other Directors: CCLA Investment Management Limited (withRichard Fitzalan Howard).

GovernanceBoard of Directors


Governance continuedBoard of Directors continued


* Member of the Audit Committee† Member of the Nomination Committee‡ Considered independent by the Board

Frances Davies*†‡

A Director since March 2013.


Since 2007, she has been a partner of Opus Corporate Finance, a corporate financeadvisory business providing independent strategic advice to businesses across Europe.She is a director of Aviva Life’s With Profits Committee.


Shared directorships with other Directors: None

Andrew Robson*†‡ (Chairman of the Audit Committee)

A Director since April 2007.


He is a director of British Empire Securities and General Trust plc, Witan PacificInvestment Trust plc, First Integrity Limited, Mobeus Income & Growth 4 VCT plc,Shires Income plc, Brambletye School Trust Limited, Peckwater Limited and BestSecurities Limited. He is a chartered accountant.


Shared directorships with other Directors: None.

Andrew Impey*†‡

A Director since March 2015.

Last reappointed to the Board: N/A.

Andrew is a director of OLIM Limited and responsible for managing both equity andbalanced portfolios there. He has over 25 years experience as a fund manager and hasmanaged a broad range of funds including several investment trusts. Prior to joiningOLIM in 2009, Andrew was Chief Investment Officer at Singer & Friedlander InvestmentManagement. In addition to his CIO responsibilities, Andrew managed the charityportfolios. Earlier in his career Andrew worked at Dresdner RCM, River and MercantileInvestment Management and Strauss Turnbull & Co specialising in UK small and midcapitalisation equities.


Shared directorships with other Directors: None



The Directors present their report and the audited financialstatements for the year ended 31st July 2015.

A number of disclosures previously incorporated in theDirectors’ Report are now included in the Strategic Review.These include: Business of the Company; Investment Objective;Investment Policies and Risk Management; InvestmentRestrictions and Guidelines; Performance; Total Return.Revenue and Dividends; KPIs; Share Capital; Principal Risks;Future Developments; Employee, Social, Community andHuman Rights Issues.

Management of the Company

The Manager and Secretary was JPMAM up to 30th June 2014.With effect from 1st July 2014, JPMF, an affiliate of JPMAM hasbeen appointed the Manager and Secretary. JPMF is employedunder a contract terminable on three month’s notice, withoutpenalty. If the Company wishes to terminate the contract onshorter notice, the balance of remuneration is payable by wayof compensation.

JPMAM and JPMF are wholly-owned subsidiaries of JPMorganChase Bank which, through other subsidiaries, also providebanking, dealing and custodian services to the Company.

The Board conducts a formal evaluation of the Manager on anannual basis. The evaluation includes consideration of theinvestment strategy and process of the Investment Managers,noting out-performance of the benchmark over the long term,and the support that the Company receives from the Manager.As a result of the evaluation process, the Board confirms that itis satisfied that the continuing appointment of the Manager isin the interests of shareholders as a whole.

The Alternative Investment Fund Managers Directive (‘AIFMD’)

JPMF has been appointed as the Company’s alternativeinvestment fund manager (‘AIFM’). JPMF has been approvedas an AIFM by the Financial Conduct Authority (‘FCA’). For thepurposes of the AIFMD the Company is an alternativeinvestment fund (‘AIF’).

The Company entered into a new investment managementagreement with JPMF on 1st July 2014. JPMF has delegatedresponsibility for the day to day management of theCompany’s portfolio to JPMAM. JPMF is required to ensurethat a depositary is appointed to the Company. The Companytherefore has appointed BNY Mellon Trust and Depositary (UK)Limited (‘BNY’) as its depositary. BNY has delegated itssafekeeping function to the custodian, JPMorgan Chase Bank,N.A. BNY remains responsible for the oversight of the custody

of the Company’s assets and for monitoring its cash flows.The AIFMD requires certain information to be made availableto investors in AIFs before they invest and requires thatmaterial changes to this information be disclosed in theannual report of each AIF. An Investor Disclosure Document,which sets out information on the Company’s investmentstrategy and policies, leverage, risk, liquidity, administration,management, fees, conflicts of interest and other shareholderinformation is available on the Company’s website atwww.jpmsmallercompanies.co.uk.

There have been no material changes (other than thosereflected in these financial statements) to this informationrequiring disclosure. Any information requiring immediatedisclosure pursuant to the AIFMD will be disclosed to theLondon Stock Exchange through a primary informationprovider. As an authorised AIFM, JPMF will make the requisitedisclosures on remuneration levels and polices to the FCA atthe appropriate time.

Management Fee

The management fee is paid by monthly instalments based onthe total assets less current liabilities at the beginning of eachmonth and is charged at a rate of 0.8% per annum on grossassets up to £200 million; thereafter, 0.7% on all assets inexcess. Loans that are drawn down under a loan facility with anoriginal maturity date of one year or more are not classified ascurrent liabilities for the purpose of the management feecalculation. If the Company invests in funds managed oradvised by the Manager or any of its associated companies, theinvestments are excluded from the calculation and thereforeattract no fee. The Company invests any surplus liquidity into anon-charging class of the JPMorgan Sterling Liquidity Fundand this Fund is therefore not excluded from the managementfee calculation. The Board has renegotiated the Company’smanagement fee which will be implemented contingent on thepassing of the resolution in favour of the Company’scontinuation at the forthcoming AGM.

Going Concern

The Directors believe that having considered the Company’sinvestment objective (see page 16), risk management policies(see pages 55 to 59), liquidity risk (see note 22(b) on page 58),capital management policies and procedures (see pages 59 and60), the nature of the portfolio and expenditure projections, thatthe Company has adequate resources, an appropriate financialstructure and suitable management arrangements in place tocontinue in operational existence for the foreseeable future.For these reasons, they consider that there is reasonable

Directors’ Report


Governance continuedDirectors’ Report continued


evidence to continue to adopt the going concern basis inpreparing the accounts.

Directors

The Directors of the Company who held office at the end of theyear are as detailed on pages 21 and 22.

Details of Directors’ beneficial shareholdings may be found inthe Directors’ Remuneration Report on page 32. No changeshave been reported to the Directors’ shareholdings since theyear end.

In accordance with corporate governance best practice, allDirectors will retire at the forthcoming Annual General Meetingand will stand for appointment/reappointment. TheNomination Committee, having considered their qualifications,performance and contribution to the Board and itscommittees, confirms that each Director continues to beeffective and demonstrates commitment to the role and theBoard recommends to shareholders that they be appointed/reappointed. As part of the Board’s succession planning, anindependent third party, Webster Partners Ltd, was engaged toconduct the search for a new Director, which resulted in theappointment of Andrew Impey in March 2015.

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 indemnities were in place duringthe year and as at the date of this report.

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 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)of which 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 provision of Section 418 of the CompaniesAct 2006.

Independent Auditor

Deloitte LLP has expressed its willingness to continue in officeas Auditor and a resolution proposing its reappointment, andto authorise the Directors to determine its remuneration forthe ensuing year, will be put to shareholders at the AnnualGeneral Meeting.

Section 992 Companies Act 2006

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

Capital StructureThe Company’s capital structure is summarised on the insidefront cover of this report.

Voting Rights in the Company’s shares Details 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 63.

Notifiable Interests in the Company’s Voting Rights

At the year-end, the following had declared a notifiableinterest in the Company’s voting rights:

Number of Shareholders voting rights %

JPMorgan Asset Management1 2,795,830 16.08East Riding of Yorkshire Council 1,271,816 6.98Royal London Asset Management Limited 799,082 4.64Legal & General Group Plc 782,158 4.00City of Bradford Metropolitan District Council 755,000 4.26

Investec Wealth & Investment Limited 709,991 4.08Rensburg Sheppards InvestmentManagement Limited 566,548 3.00

1Includes holdings by JPMorgan Elect plc of 953,433 shares (5.52%).

The Company is also aware that approximately 13.72% of theCompany’s total voting rights are held by individuals throughsavings products managed by the Manager and registered inthe name of Chase Nominees Limited. If those voting rights arenot exercised by the beneficial holders, in accordance with theterms and conditions of the savings products, under certaincircumstances the Manager has the right to exercise those



voting rights. That right is subject to certain limits andrestrictions and falls away at the conclusion of the relevantgeneral meeting.

No further changes to these holdings had been notified as atthe date of this report.

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

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

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 advisor 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 increase the maximum aggregate Directors’ fees(Resolution 12)

The Directors recommend that the maximum aggregateDirectors’ fees payable be increased from £150,000 to£200,000 per annum.

(ii) Authority to issue new shares for cash and disapplypre-emption rights (Resolutions 13 and 14)

The Directors will seek renewal of the authority at the AGM toissue up to 5% of the present issued share capital for cash. Thefull text of the resolutions is set out in the Notice of AnnualGeneral Meeting on pages 61 and 62.

It is advantageous for the Company to be able to issue newshares to participants purchasing shares through theManager’s savings products and also to other investors whenthe Directors consider that it is in the best interests ofshareholders to do so. Any such issues would only be made

at prices greater than the NAV, thereby increasing the assetsunderlying each share and spreading the Company’sadministrative expenses, other than the management feewhich is charged on the value of the Company’s marketcapitalisation, over a greater number of shares. The issueproceeds would be available for investment in line with theCompany’s investment policies.

(iii) Authority to repurchase the Company’s ordinary shares(Resolution 15)

The authority to repurchase up to 14.99% of the Company’sissued share capital, granted by shareholders at the 2014Annual General Meeting, will expire on 27th May 2016. Therepurchase of shares at a discount to the underlying net assetvalue (‘NAV’) would enhance the NAV of the remaining shares.The Board will therefore seek shareholder approval at the AGMto renew this authority which will last until 22nd May 2017 oruntil the whole of the 14.99% has been acquired, whichever isthe earlier.

The full text of the resolution is set out in the Notice of AnnualGeneral Meeting on pages 61 and 62. Repurchases will bemade at the discretion of the Board, and will only be made inthe market at prices below the prevailing NAV per share as andwhen market conditions are appropriate.

Recommendation

The Board considers that resolutions 12 to 15 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole. TheDirectors unanimously recommend that you vote in favour ofthe resolutions as they intend to do in respect of their ownbeneficial holdings which amount in aggregate to 22,984shares representing approximately 0.13% of the voting rightsof the Company.

Corporate Governance StatementCompliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 34, indicates how theCompany has applied the principles of recommendedgovernance of the Financial Reporting Council UK CorporateGovernance Code (the ‘UK Corporate Governance Code’) andthe AIC’s Code of Corporate Governance, (the ‘AIC Code’), whichcomplements the UK Corporate Governance Code andprovides a framework of 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, insofar as they are relevant to theCompany’s business, and with the best practice provisions ofthe AIC Code throughout the year under review and up to thedate of approval of the annual report and accounts.

Role of the Board

A management agreement between the Company and theManager sets out the matters over which the Manager hasauthority. This includes management of the Company’s assetsand the provision of accounting, company secretarial,administrative, and some marketing services. All other mattersare reserved for the approval of the Board. A formal scheduleof matters reserved to the Board for decision has beenapproved. This includes determination and monitoring of theCompany’s investment objectives and policy and its futurestrategic direction, gearing policy, management of the capitalstructure, appointment and removal of third party serviceproviders, review of key investment and financial data and theCompany’s corporate governance and risk controlarrangements.

The Board has procedures in place to deal with potentialconflicts of interest and, following the introduction of TheBribery Act 2010, has adopted appropriate proceduresdesigned to prevent bribery. It confirms that the procedureshave operated effectively during the period under review.

The Board meets at least four times 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 takeindependent professional advice if necessary and at theCompany’s expense. This is in addition to the access that everyDirector has to the advice and services of the CompanySecretary, JPMF, which is responsible to the Board for ensuringthat Board procedures are followed and that applicable rulesand regulations are complied with.

Board Composition

The Board is chaired by Michael Quicke, and consists of sixnon-executive Directors. All of the Board are regarded asindependent of the Company’s Manager, including theChairman. The Directors have a breadth of investment,

business and financial skills and experience relevant to theCompany’s business and brief biographical details of eachDirector are set out on pages 21 and 22.

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 consideredwhether a senior independent director should be appointedand has concluded that, as the Board comprises entirelynon-executive directors, this is unnecessary at present.However, the Chairman of the Audit Committee leads theevaluation of the performance of the Chairman and is availableto shareholders if they have concerns that cannot be resolvedthrough discussion with the Chairman.

Tenure

Subject to the performance evaluation carried out each year,the Board will agree whether it is appropriate for the Directorto seek an additional term. The Board does not believe thatlength of service in itself necessarily disqualifies a Directorfrom seeking reappointment but, when making arecommendation, the Board will take into account therequirements of the UK Corporate Governance Code, includingthe need to refresh the Board and its Committees. The Boardhas adopted corporate governance best practice and allDirectors stand for annual reappointment.

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 AGM.

Induction and Training

On appointment, the Manager and Company Secretaryprovide all Directors with induction training. Thereafter,regular briefings are provided on changes in law andregulatory requirements that affect the Company and theDirectors. Directors are encouraged to attend industry andother seminars covering issues and developments relevantto investment trust companies. Regular reviews of theDirectors’ training needs are carried out by the Chairman bymeans of the evaluation process described below.

Meetings and Committees

The Board delegates certain responsibilities and functions toCommittees. Details of membership of Committees are shownwith the Directors’ profiles on pages 21 and 22.



The table below details the number of Board and Committeemeetings attended by each Director. During the year therewere five full Board meetings, including a private meeting ofthe Directors to evaluate the Manager. There were also twoAudit Committee meetings and one meeting of the NominationCommittee during the year.

Audit NominationBoard Committee Committee

Meetings Meetings MeetingsDirector Attended Attended Attended

Ivo Coulson 5 2 1Richard Fitzalan Howard 5 2 1Michael Quicke 5 2 1Andrew Robson 5 2 1Frances Davies 5 2 1Andrew Impey1 1 1 —

1Appointed as a Director on 16th March 2015.

Board Committees

Nomination Committee The Nomination Committee is chaired by Michael Quicke. TheCommittee consists of all the independent Directors and meetsat least annually to ensure that the Board has an appropriatebalance of skills and experience to carry out its fiduciary dutiesand to select and propose suitable candidates for appointmentwhen necessary. The appointment process takes account ofthe benefits of diversity, including gender.

The Committee conducts an annual performance evaluation ofthe Board, its committees and individual Directors to ensurethat all Directors have devoted sufficient time and contributedadequately to the work of the Board and its Committees. Theevaluation of the Board considers the balance of experience,skills, independence, corporate knowledge, its diversity,including gender, and how it works together. In line with theBoard’s corporate governance policy and best practice, theDirectors commissioned Lintstock, a firm of independentconsultants, to facilitate the evaluation of the Board this year.Lintstock conducted interviews with each Director andprovided the Board with a written report which was discussedby the Nomination Committee. The evaluation of individualDirectors was led by the Chairman. The Audit CommitteeChairman led the evaluation of the Chairman’s performance.

The Committee also reviews Directors’ fees and makesrecommendations to the Board as and when required.

Audit Committee The Audit Committee is chaired by Andrew Robson. Themembership is set out on pages 21 and 22 and meets at leasttwice each year. The members of the Audit Committeeconsider that they have the requisite skills and experience tofulfil the responsibilities of the Committee and are satisfiedthat at least one member of the Audit 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.

During its review of the Company’s financial statements forthe year ended 31st July 2015, the Audit Committeeconsidered the following significant issues, including thosecommunicated by the Auditors during their reporting:

Significant issue How the issue was addressed

The valuation of investments isundertaken in accordance with theaccounting policies, disclosed in note 1to the accounts on page 43. Controlsare in place to ensure that valuationsare appropriate and existence isverified through Custodianreconciliations. Given the portfoliocomprises smaller companies, theAudit Committee also considers theliquidity of investee company shares,and any impact that it might have onvaluation.

The recognition of investment incomeis undertaken in accordance withaccounting policy note 1(c) to theaccounts on page 43. The Boardregularly reviews subjective elementsof income such as special dividendsand agrees their accounting treatment.

Approval for the Company as aninvestment trust under Sections 1158and 1159 for financial yearscommencing on or after 1st April 2013has been obtained and ongoingcompliance with the eligibility criteriais monitored by the Board on a regularbasis.

Valuation, existenceand ownership ofinvestments

Recognition ofInvestment Income

Compliance withSections 1158 and 1159




The Board was made fully aware of any significant financialreporting issues and judgements made in connection withthe preparation of the financial statements.

As a result of the work performed above, the Committee hasconcluded that the Annual Report for the year ended31st July 2015, taken as a whole, is fair, balanced andunderstandable and provides the information necessary forshareholders to assess the Company’s performance, businessmodel and strategy, and has reported on these findings tothe Board. The Board’s conclusions in this respect are set outin the Statement of Directors’ Responsibilities on page 34.

The Committee examines the effectiveness of the Company’sinternal control systems. It monitors the Company’s key risks,and the controls relating to those risks. It receives controlreports on the Manager and the custodian, and monitors thecontrols and service levels at the Company’s other key thirdparty suppliers. It also receives information from theManagers’ Compliance department.

The external auditor is Deloitte LLP. The Committee reviewsthe scope and results of the external audit, its effectivenessand cost effectiveness and the independence and objectivity ofthe external auditor including the provision of non auditservices and the period of service held by the senior statutoryauditor. In the Directors’ opinion, the auditor is independent.The Audit Committee also has a primary responsibility formaking recommendations to the Board on the reappointmentand removal of external auditor. The Committee also receivesconfirmations from the auditor, as part of their reporting, inregard to their objectivity and independence. Representativesof the Company’s auditor attend the Audit Committee meetingat which the draft annual report and accounts are considered.Having reviewed the performance of the external auditorincluding assessing the quality of work, timing ofcommunications and work with the Manager, the Committeeconsidered it appropriate to recommend its reappointmentand the Board supported this recommendation which will beput to the Shareholders at this year’s Annual General Meeting.Details of the auditor’s fees charged for audit services aredisclosed in note 5 on page 45.

The Committee has put in place a policy on non-audit services.A contribution to Deloitte LLP was made for non-audit servicesfees of £6.000 via the Manager. The Directors are satisfied thatthis does not compromise the independence and objectivity ofDeloitte LLP.

The current audit firm, Deloitte LLP, has audited the Company’sfinancial statements since its formation in 1990. TheCommittee is mindful of the EU regulations in relation to thestatutory audits of EU listed companies which will likely requirethe Company to change its audit firm by 2020, and therefore itintends to undertake a tender process before then. Thisfinancial year ended 31st July 2015 is the current Seniorstatutory auditor’s first of a five year maximum term inaccordance with present professional guidelines.

The Directors’ statement on the Company’s system of internalcontrol is set out overleaf.

Terms of Reference

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

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 and the Half Yearreport. This is supplemented by the daily publication, throughthe London Stock Exchange, of the net asset value of theCompany’s shares.

All shareholders have the opportunity, and are encouraged, toattend the Company’s Annual General Meeting at which theDirectors and representatives of the Managers are available inperson to meet with shareholders and answer their questions.In addition, a presentation is given by the InvestmentManagers who review the Company’s performance. During theyear the Company’s broker and the Manager held regulardiscussions with larger shareholders. The Directors are madefully aware of their views. The Chairman and Directors makethemselves available as and when required to addressshareholder queries. The Directors may be contacted throughthe Company Secretary whose details are shown on page 69 orvia the ‘Ask a Question’ link on the Company’s website.

The Company’s Annual Report and Accounts are published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders wishing to raise



questions in advance of the meeting are encouraged to writeto the Company Secretary at the address shown on page 69 orvia the ‘Ask a Question’ link on the Company’s website.

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 internal control and to report to shareholders thatthey have done so. This encompasses a review of all controls,which the Board has identified as including business, financial,operational, compliance and risk management.

The Directors are responsible for the Company’s system ofinternal control which is designed to safeguard the Company’sassets, maintain proper accounting records and ensure thatfinancial information used within the business, or published, isreliable. However, such a system can only be designed tomanage rather than eliminate the risk of failure to achievebusiness objectives and therefore can only provide reasonable,but not absolute, assurance against fraud, materialmisstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMAM and its associates, the Company’s system of internalcontrol mainly comprises monitoring the services provided bythe Manager and its associates, including the operatingcontrols established by them, to ensure they meet theCompany’s business objectives. There is an ongoing processfor identifying, evaluating and managing the significant risksfaced by the Company. This process accounts with the Turnbullguidance. The Company does not have an internal auditfunction of its own, but relies on the internal audit departmentof the Manager. This arrangement is kept under review. Thekey elements designed to provide effective internal control areas 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 Conduct Authority (FCA),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 theManager’s Compliance department which regularly monitorscompliance with FCA 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 internal control by monitoring the operation of the keyoperating controls of the Managers and its associates asfollows:

• reviews the terms of the management agreement andreceives regular reports from the Manager’s internal auditand Compliance department;

• 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 theinternal controls and the operations of the Manager.

Depositary – The Board has appointed BNY Mellon Trust &Depositary (UK) Limited as depositary, with responsibilities forsafe keeping of custodial assets and oversight of the recordsand cashflows.

By the means of the procedures set out above, the Boardconfirms that it has reviewed, and is satisfied with, theeffectiveness of the Company’s system of internal control forthe year ended 31st July 2015, and to the date of approval ofthis Annual Report and Accounts.

During the course of its review of the system of internalcontrol, the Board has not identified nor been advised of anyfailings or weaknesses which it has determined to besignificant. Therefore, a confirmation in respect of necessaryactions has not been considered appropriate.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to theManager. The following is a summary of the Manager’s policystatements on corporate governance, voting policy and socialand environmental issues, which has been reviewed and notedby the Board.



Corporate Governance The Manager believes that corporate governance is integral to ourinvestment process. As part of our commitment to delivering superiorinvestment performance to our clients, we expect and encourage thecompanies in which we invest to demonstrate the highest standards ofcorporate governance and best business practice. We examine the sharestructure and voting structure of the companies in which we invest, as wellas the board balance, oversight functions and remuneration policy. Theseanalyses then form the basis of our proxy voting and engagement activity.

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

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

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

– disclose their policy on managing conflicts of interest;

– monitor their investee companies;

– establish clear guidelines on how they escalate engagement;

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

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

– report to clients.

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

The Manager’s Voting Policy and Corporate GovernanceGuidelines are available on request from the CompanySecretary or can be downloaded from the Manager’s website:http://www.jpmorganinvestmenttrusts.co.uk/governance,which also sets out its approach to the seven principles of theFRC Stewardship Code, its policy relating to conflicts of interestand its detailed voting record.

By order of the Board Divya Amin, for and on behalf of JPMorgan Funds Limited,Company Secretary

15th October 2015




The Board has prepared this report in accordance with therequirements of Section 421 of the Companies Act 2006

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 includedin their report on pages 35 to 38.

Directors’ Remuneration Policy

The Directors’ Remuneration Policy is subject to a triennialbinding vote. However, the Board has resolved that for goodgovernance purposes, the policy vote will be put toshareholders every year. Accordingly, a resolution to approvethis policy will be put to shareholders at the 2015 AnnualGeneral Meeting. The policy subject to the vote, is set out in fullbelow and is currently in force.

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 fulfillingthose roles.

The Nomination Committee, comprising all Directors, reviewsfees on a regular basis and makes recommendations to theBoard as and when appropriate. Reviews are based oninformation provided by the Manager and industry research onthe level of fees paid to the directors of the Company’s peersand within the investment trust industry generally. Theinvolvement of remuneration consultants has not beendeemed necessary as part of this review. The Company has noChief Executive Officer and no employees and therefore, noconsultation of employees is required and there is noemployee comparative data to provide in relation to thesetting of the remuneration policy for Directors.

All of the Directors are non-executive. There are noperformance-related elements to their fees and the Companydoes not operate any type of incentive, share scheme, awardor pension scheme and therefore no Directors receive bonuspayments or pension contributions from the Company or holdoptions to acquire shares in the Company. Directors are notgranted exit payments and are not provided withcompensation for loss of office. No other payments are madeto Directors, other than the reimbursement of reasonableout-of-pocket expenses incurred in attending the Company’sbusiness.

In the year under review, Directors’ fees were paid at thefollowing rates: Chairman £32,000 per annum; Chairman ofthe Audit Committee £25,000 per annum; and, the otherDirectors £22,000 per annum. A decision has been taken tomake no changes to the Directors’ remuneration for the yearending 31st July 2016.

The Company’s Articles of Association stipulate that aggregatefees must not exceed £150,000 per annum. Any increase inthis the maximum aggregate amount requires both Board andshareholder approval. At the forthcoming AGM, shareholderswill be asked to approve an increase in the limit to £200,000per annum in order to allow for any future fee increases andthe temporary increase in Board size. There has been nochanges in the maximum limit since 2008.

The Company has no Chief Executive Officer and no employeesand therefore there was no consultation of employees, andthere is no employee comparative data to provide, in relationto the setting of the remuneration policy for Directors.

The Company has not sought shareholder views on itsremuneration policy. The Nomination Committee considersany comments received from shareholders on remunerationpolicy on an ongoing basis and will take account of these viewsif appropriate.

The Directors do not have service contracts with the Company.The terms and conditions of Directors’ appointments are setout in formal letters of appointment which are available forreview at the Company’s Annual General Meeting and theCompany’s registered office. Details of the Board’s policy ontenure are set out on page 26.

The Company’s Remuneration policy also applies to newDirectors.

Remuneration Policy Implementation Report

The Directors’ Remuneration Policy Implementation Reportis subject to an annual advisory vote and therefore an ordinaryresolution to approve this report will be put to shareholders atthe forthcoming Annual General Meeting. There have been nochanges to the policy during this financial year compared withthe year ended 31st July 2014 and no changes are proposed forthe year ending 31st July 2016.

At the Annual General Meeting held on 28th November 2014,of votes cast, 99.1% of votes cast were in favour of (or granteddiscretion to the Chairman who voted in favour of) theremuneration report and 0.9% voted against. Abstentionswere received from less than 0.5% of the votes cast.

Directors’ Remuneration Report


Governance continuedDirectors’ Remuneration Report continued


Details of voting on both the Remuneration Policy andRemuneration Policy Implementation Reports from the 2015Annual General Meeting will be given in the annual report forthe year ending 31st July 2016.

Details of the implementation of the Company’s remunerationpolicy are given below. No advice from remunerationconsultants was received during the year under review.

Single total figure of remuneration

The single total figure of remuneration for the Board as a wholefor the year ended 31st July 2015 was £131,349. The single totalfigure of remuneration for each Director is detailed belowtogether with the prior year comparative.

Single total figure table1

Total fees2

2015 2014

Michael Quicke £32,000 £30,000Andrew Robson £25,000 £24,000Ivo Coulson £22,000 £21,000Richard Fitzalan Howard £22,000 £21,000Frances Davies £22,000 £21,000Andrew Impey3 £8,349 —

Total £131,349 £117,000

1Audited information. Other subject headings for the single figure table as prescribed byregulations are not included because there is nothing to disclose in relation thereto.2Directors’ remuneration comprises an annual fee only. Directors are also reimbursed forout of pocket expenses incurred in attending the Company’s business.3Appointed 16th March 2015.

Directors’ Shareholdings1

There are no requirements pursuant to the Company’s Articlesof Association for the Directors to own shares in the Company.The Directors’ beneficial shareholdings are detailed below.

2015 2014Number of Number of

Directors’ Name shares held shares held

Ordinary sharesMichael Quicke 9,212 4,333Andrew Robson 2,163 1,163Ivo Coulson2 3,300 4,000Richard Fitzalan Howard 7,500 7,500Frances Davies 809 —Andrew Impey 1,500 —

1Audited information.2Non-beneficial holding.

2015 2014Number of Number of

Directors’ Name shares held shares held

Subscription sharesMichael Quicke 1,842 —Andrew Robson 432 —Ivo Coulson 660 —Richard Fitzalan Howard 1,500 —Frances Davies 161 —Andrew Impey — —

As at the lastest practicable date before the publication of thisdocument, there have been no changes to the Directors’shareholdings in the Company.

The Directors have no other share interests or share options inthe Company and no share schemes are available.

In accordance with the Companies Act 2006, a graph showingthe Company’s share price total return compared with itsbenchmark, the FTSE Small Cap Index (excluding investmenttrusts) over the last six years, is shown below. The Boardbelieves that this index is the most appropriate for theCompany’s performance comparison purposes because it mostclosely reflects the Investment Managers’ investment universe.

Six Year Share Price and Benchmark TotalReturn to 31st July 2015

Source: Morningstar/Datastream.

Share price total return.

Benchmark total return.

100

150

200

250

300

350

2015201420132012201120102009



A table showing the total remuneration for the Chairman overthe five years ended 31st July 2015 is below:

Remuneration for the Chairman over the five years ended 31st July 2015

Performance related benefits received as a

Year ended percentage of 31st July Fees maximum payable1

2015 £32,000 n/a2014 £30,000 n/a2013 £29,000 n/a2012 £27,333 n/a2011 £27,000 n/a

1In respect of one year period and periods of more than one year.

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

Expenditure by the Company on remuneration and distributions toshareholders

Year ended 31st July2015 2014

Remuneration paid to all Directors £131,349 £117,000

Distribution to shareholders— by way of dividend £1,734,000 £1,731,000— by way of share repurchases £7,053,000 £173,000

For and on behalf of the Board Michael Quicke OBEChairman

15th October 2015



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

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, theDirectors have elected to prepare the financial statements inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standardsand applicable law). Under Company law the Directors mustnot approve the financial statements unless they are satisfiedthat, taken as a whole, the Annual Report and Accounts arefair, balanced and understandable, provide the informationnecessary for shareholders to assess the Company’sperformance, business model and strategy and that they give atrue and fair view of the state of affairs of the Company and ofthe total return or loss of the Company for that period. In orderto provide these confirmations, and in preparing thesefinancial 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 departuresdisclosed and explained in the financial statements; and

• prepare the financial statements on the going concernbasis unless it is inappropriate to presume that theCompany will continue in business.

The Directors confirm that they have done so.

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any 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.

The accounts are published on thewww.jpmsmallercompanies.co.uk website, which is maintainedby the Company’s Manager. The maintenance and integrity ofthe website maintained by the Manager is, so far as it relates tothe Company, the responsibility of the Manager. The workcarried out by the auditor does not involve consideration ofthe maintenance and integrity of this website and, accordingly,the auditor accepts no responsibility for any changes that haveoccurred to the accounts since they were initially presented onthe website. The accounts are prepared in accordance with UKlegislation, which may differ from legislation in otherjurisdictions.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report, Strategic Reportand Directors’ Remuneration Report that comply with that lawand those regulations.

Each of the Directors, whose names and functions are listed onpages 21 and 22 confirm that, to the best of their knowledge:

• 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 Strategic 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.

The Board confirms that it is satisfied that the annual reportand accounts taken as a whole are fair, balanced andunderstandable and provide the information necessary forshareholders to assess the strategy and business model of theCompany.

For and on behalf of the BoardMichael Quicke OBEChairman

15th October 2015

Governance continuedStatement of Directors’ Responsibilities



Opinion on financial statements of JPMorgan Smaller Companies Investment Trust plc

In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairs as at 31st July 2015 and of its return for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice and Statement ofRecommended Practice issued by the Association of Investment Companies in January 2009 ‘Financial Statements ofInvestment Trust Companies and Venture Capital Trusts; and

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

The financial statements comprise Income Statement, the Reconciliation of Movements in Shareholders’ Funds, the BalanceSheet, the Cash Flow Statement and the related notes 1 to 24. The financial reporting framework that has been applied in theirpreparation is applicable law, United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice)and the Statement of Recommended Practice issued by the Association of Investment Companies in January 2009 ‘FinancialStatements of Investment Trust Companies and Venture Capital Trusts’

Going concern

As required by the Listing Rules we have reviewed the Directors’ statement contained within the Directors’ Report on pages 23and 24 that the Company is a going concern. We confirm that:

• we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financialstatements is appropriate; and

• we have not identified any material uncertainties that may cast significant doubt on the Company’s ability to continue as agoing concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’sability to continue as a going concern.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, theallocation of resources in the audit and directing the efforts of the engagement team:

Risk How the scope of our audit responded to the risk

Valuation and ownership of investments

The investments of the Company (£198.8 million) make up111% of net assets (£179.6 million). There is a risk that the pricesquoted for the investments may not be reflective of fair value.

There is a risk that the assets recorded may not represent theproperty of the Company.

See note 1(b) Accounting policies: Valuation of investments andnote 10 Investments.

We evaluated the design and implementation of controls inplace to value the investment portfolio.

We agreed the valuation of 100% of the investment portfolio tothird party pricing sources.

In order to confirm that investments are actively traded, weverified the trading activity and volume of investments heldthroughout the year.

We tested the ownership of investments by verifying 100% ofthe portfolio to an independent confirmation from thecustodian.

We reviewed a report prepared on the design and operation ofcontrols at the custodian, who are responsible for holding theinvestments on the Company’s behalf, to determine whetherthere are any issues with the controls in place over thesafekeeping of assets at the custodian.

Independent Auditor’s ReportTo the members of JPMorgan Smaller Companies Investment Trust plc


Independent Auditor’s Reportcontinued


Risk How the scope of our audit responded to the risk

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committeediscussed on page 27.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole,and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified withrespect to any of the risks described above, and we do not express an opinion on these individual matters.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economicdecisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scopeof our audit work and in evaluating the results of our work.

We determined materiality for the Company to be £1,795,000 (2014: £1,652,200), which is below 1% (2014: 1%) of Net Assets.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £35,000 (2014:£33,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reportto the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financialstatements.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessingthe risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by theaudit engagement team.

As part of our audit we evaluated the design and implementation controls in place at the fund administrator who prepares thefinancial statements of the Company by reviewing a controls report over their activities.

Recognition of investment income

Income from investments (£3.6 million) is recorded on anex-dividend basis.

Revenue may be understated where it is not recognised orrecognised in the incorrect period. There is a risk that not allaccrued revenue has been recorded by the Company.

There is a risk that corporate actions and special dividendsmay be incorrectly valued or incorrectly allocated betweenrevenue and capital.

See note 1(b) Accounting policies: Income and note 3 Income.

We evaluated the design and implementation of controls formonitoring completeness of revenue and key controls overrevenue recognition.

For a sample of investments held at year end and throughoutthe year, we agreed the ex-dividend dates and rates fordividends declared, obtained from an independent source, andagreed to the dividend entitlement report.

We tested a sample of dividends received after the balancesheet date to assess if they had been recorded in the correctperiod.

We assessed whether the allocation between revenue andcapital was appropriate for a sample of corporate actions andspecial dividends.



Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

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

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

Matters on which we are required to report by exception

Adequacy of explanations received and accounting recordsUnder the Companies Act 2006 we are required to report to you if, in our opinion:

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

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches notvisited by us; or

• the financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remunerationUnder the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remunerationhave not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accountingrecords and returns. We have nothing to report arising from these matters.

Corporate Governance StatementUnder the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the Company’scompliance with ten provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual ReportUnder International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in theannual report is:

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

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

• otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired duringthe audit and the directors’ statement that they consider the annual report is fair, balanced and understandable and whether theannual report appropriately discloses those matters that we communicated to the audit committee which we consider shouldhave been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Other matter

Although not required to do so, the Directors have voluntarily chosen to make a corporate governance statement detailing theextent of their compliance with the UK Corporate Governance Code. We reviewed the part of the Corporate GovernanceStatement relating to the Company’s compliance with ten provisions of the UK Corporate Governance Code. We have nothing toreport arising from our review.



Respective responsibilities of Directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of thefinancial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinionon the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We also comply withInternational Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our qualitycontrol procedures are effective, understood and applied. Our quality controls and systems include our dedicated professionalstandards review team and independent partner reviews.

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 might state to the Company’s members those matters we are required tostate to them in an auditor’s report and/or those further matters we have expressly agreed to report to them on in ourengagement letter and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions wehave formed.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonableassurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes anassessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistentlyapplied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overallpresentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report toidentify material inconsistencies with the audited financial statements and to identify any information that is apparently materiallyincorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If webecome aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Andrew Partridge, CA (Senior Statutory Auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory Auditor, London, United Kingdom

15th October 2015

Independent Auditor’s Reportcontinued



2015 2014Revenue Capital Total Revenue Capital Total

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

Gains on investments held at fair value through profit or loss 2 — 22,012 22,012 — 12,074 12,074

Net foreign currency gains/(losses) — 13 13 — (1) (1)Income from investments 3 3,604 — 3,604 3,126 — 3,126Other interest receivable and similar

income 3 2 — 2 25 — 25

Gross return 3,606 22,025 25,631 3,151 12,073 15,224Management fee 4 (733) (733) (1,466) (743) (743) (1,486)Other administrative expenses 5 (486) — (486) (413) — (413)

Net return on ordinary activities before finance costs and taxation 2,387 21,292 23,679 1,995 11,330 13,325

Finance costs 6 (140) (140) (280) (137) (137) (274)

Net return on ordinary activities before taxation 2,247 21,152 23,399 1,858 11,193 13,051

Taxation 7 (79) — (79) (34) — (34)

Net return on ordinary activities after taxation 2,168 21,152 23,320 1,824 11,193 13,017

Return per Ordinary share – undiluted 9 12.20p 119.02p 131.22p 10.01p 61.44p 71.45pReturn per Ordinary share – diluted1 9 12.20p 119.02p 131.22p — — —

1The Subscription shares have no dilutive effect as the conversion price for these shares exceeded the average market price of the Ordinary shares from the date of issue to 31st July2015.

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 43 to 60 form an integral part of these accounts.

Financial StatementsIncome Statementfor the year ended 31st July 2015



Called up Capitalshare Share redemption Capital Revenue

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

At 31st July 2013 4,555 18,360 2,111 126,167 2,923 154,116Repurchase and cancellation of the

Company’s own shares (6) — 6 (173) — (173)Net return on ordinary activities — — — 11,193 1,824 13,017Dividend appropriated in the year — — — — (1,731) (1,731)

At 31st July 2014 4,549 18,360 2,117 137,187 3,016 165,229Repurchase and cancellation of the

Company’s own shares (230) — 230 (7,053) — (7,053)Bonus Issue of Subscription shares 4 (4) — — — —Issue of Ordinary shares on exercise of

Subscription shares 1 54 — — — 55Subscription share issue costs — (220) — — — (220)Net return on ordinary activities — — — 21,152 2,168 23,320Dividend appropriated in the year — — — — (1,734) (1,734)

At 31st July 2015 4,324 18,190 2,347 151,286 3,450 179,597

The notes on pages 43 to 60 form an integral part of these accounts.

Financial Statements continuedReconciliation of Movements in Shareholders’ Fundsfor the year ended 31st July 2015



2015 2014Notes £’000 £’000

Fixed assets Investments held at fair value through profit or loss 196,292 181,571Investment in liquidity fund held at fair value through profit or loss 2,539 3,050

10 198,831 184,621Current assets 11Debtors 231 482Cash and short term deposits 1,293 564

1,524 1,046Creditors: amounts falling due within one year 12 (20,758) (1,438)

Net current liabilities (19,234) (392)

Total assets less current liabilities 179,597 184,229

Creditors: amounts falling due after more than one year 13 — (19,000)

Net assets 179,597 165,229

Capital and reserves Called up share capital 14 4,324 4,549Share premium 15 18,190 18,360Capital redemption reserve 15 2,347 2,117Capital reserves 15 151,286 137,187Revenue reserve 15 3,450 3,016

Total equity shareholders’ funds 179,597 165,229

Net asset value perOrdinary share – undiluted 16 1,039.1p 908.0pNet asset value per Ordinary share – diluted1 16 1,017.9p —

1The 31st July 2015 dilution has been calculated using the new Subscription shares issued on 25th February 2015.

The accounts on pages 39 to 60 were approved and authorised for issue by the Directors on 15th October 2015 and were signedon their behalf by:

Michael QuickeDirector

The accompanying notes on pages 43 to 60 form an integral part of these accounts.

The Company is registered in England and Wales No. 2515996.

Balance Sheetat 31st July 2015



2015 2014Notes £’000 £’000

Net cash inflow from operating activities 17 1,216 1,070

Returns on investments and servicing of financeInterest paid (279) (258)

Net cash outflow from returns on investments and servicing of finance (279) (258)

Taxation recovered — 17

Capital expenditure and financial investmentPurchases of investments (91,356) (132,280)Sales of investments 100,274 129,434Other capital charges (14) (15)

Net cash inflow/(outflow) from capital expenditure and financial investment 8,904 (2,861)

Dividends paid (1,734) (1,731)

Net cash inflow/(outflow) before financing 8,107 (3,763)

Financing Net drawdown of loans — 4,000Subscription share issue costs (220) —Issue of Ordinary shares on exercise of Subscription shares 55 —Repurchase and cancellation of the Company’s own shares (7,226) —

Net cash (outflow)/inflow from financing (7,391) 4,000

Increase in cash and cash equivalents 18 716 237

The accompanying notes on pages 43 to 60 form an integral part of these accounts.

Financial Statements continuedCash Flow Statementfor the year ended 31st July 2015



1. Accounting policies

(a) Basis of accountingThe financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally AcceptedAccounting Practice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment TrustCompanies and Venture Capital Trusts’ (the ‘SORP’) issued by the AIC in January 2009.

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

The financial statements have been prepared on a going concern basis. The disclosures on going concern in the Directors’Report on pages 23 and 24 form part of these accounts.

The policies applied in these financial statements 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. Unquotedinvestments are valued at the best estimate of market value.

Gains and losses on sales of investments are dealt with in capital reserves within ‘Gains and losses on sales of investments’.Increases and decreases in the valuation of investments held at the year end are accounted for in capital reserves within‘Holding gains and losses on investments’.

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

(c) IncomeDividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of theBoard, the dividend is capital in nature, in which case it is included in capital.

UK dividends are accounted for net of tax credits.

Interest receivable is taken to 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 cashdividend 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.

(d) Expenses All expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue with the following exceptions:

– management fees are allocated 50% to revenue and 50% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company’s investment portfolio.

– expenses incidental to the purchase and sale of an investment are charged to capital. These expenses are commonlyreferred to as transaction costs and include items such as stamp duty and brokerage commission.

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

Finance costs are allocated 50% to revenue and 50% to capital in line with the Board’s expected long term split of revenueand capital returns from the Company’s investment portfolio.

Notes to the Financial Statementsfor the year ended 31st July 2015



Financial Statements continuedNotes to the Financial Statements continued

1. Accounting policies continued(f) Financial instruments

Cash 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 short term in nature and are accordingly stated at nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

Interest bearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Finance costs,including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis inprofit or loss using the effective interest rate method.

The Company has not utilised any derivative instruments in the current or comparative year.

(g) Taxation Deferred tax is accounted for in accordance with FRS 19: ‘Deferred Tax’.

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

Tax relief is allocated to expenses charged to capital on the marginal basis. On this basis, if taxable income is capable of beingoffset entirely by revenue expenses, then no tax relief is transferred to capital.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expectedto reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured onan undiscounted basis.

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

(i) Value added tax (‘VAT’)Irrecoverable VAT is included in the expense on which it has been suffered.

(j) Share issue costsThe costs of issuing shares are charged against the share premium account.

(k) Conversion of Subscription sharesWhen the holders of Subscription shares exercise their right to convert their shares into Ordinary shares, the nominal value ofthose Subscription shares is transferred to share premium. The nominal value of the Ordinary shares created is credited tocalled up share capital with the balance of the consideration credited to share premium.

2015 2014 £’000 £’000

2. Gains on investments held at fair value through profit or loss Gains on investments held at fair value through profit or loss based on historical cost 7,176 22,457

Amounts recognised in investment holding gains in the previous year in respect of investments sold during the year (12,202) (24,137)

Losses on sales of investments based on fair value at previous balance sheet date (5,026) (1,680)Net movement in investment holding gains and losses 27,053 13,770Other capital charges (15) (16)

Total capital gains on investments held at fair value through profit or loss 22,012 12,074



2015 2014 £’000 £’000

3. Income Income from investmentsUK dividend income 2,485 2,630Property income distribution 120 75Overseas dividends 601 287Dividends from liquidity fund 18 10Scrip dividends 380 124

3,604 3,126

Other interest receivable and similar incomeUnderwriting commission 2 25

2 25

Total income 3,606 3,151

2015 2014Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

4. Management fee Management fee1 733 733 1,466 743 743 1,486

1Details of the management fee are given in the Directors’ Report on page 23.

2015 2014 £’000 £’000

5. Other administrative expensesProfessional fees 28 21Directors’ fees1 131 117Savings scheme costs2 92 93Depositary fees 31 —Registrar fees 21 12Irrecoverable VAT 25 13Printing costs 28 27Brokers fees 20 25Auditor’s remuneration for audit services3 27 26Auditor’s remuneration for all other services4 6 6Other administration expenses 77 73

486 413

1Full disclosure is given in the Directors’ Remuneration Report on page 32.2Paid to the Manager for themarketing and administration of savings scheme products. Includes £16,000 (2014: £16,000) irrecoverable VAT.3Includes £5,000 (2014: £4,000) irrecoverable VAT.4Assurance services under the AAF 01/06 standard controls reporting.





6. Finance costs Interest on bank loans and overdrafts 140 140 280 137 137 274

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

2015 2014 £’000 £’000

Overseas tax 79 34

Current tax charge for the year 79 34

(b) Factors affecting current tax charge for the year

The tax assessed for the year is lower (2014: lower) than the UK corporation tax rate chargeable for the year of 20.67%(2014: 22.33%). The factors affecting the current tax charge/(credit) for the year are as follows:


Net return on ordinary activities before taxation 2,247 21,152 23,399 1,858 11,193 13,051

Net return on ordinary activities before taxation multiplied by the applicable rate of corporation tax of 20.67% (2014: 22.33%) 464 4,372 4,836 415 2,499 2,914

Effects of:Non taxable capital gains — (4,552) (4,552) — (2,695) (2,695)Non taxable UK dividends (514) — (514) (587) — (587)Non taxable overseas dividends (38) — (38) (35) — (35)Non taxable scrip dividends (78) — (78) (28) — (28)Unrelieved expenses 166 180 346 235 196 431Overseas withholding tax 79 — 79 34 — 34

Current tax charge for the year 79 — 79 34 — 34



(c) Deferred taxation

The Company has an unrecognised deferred tax asset of £5,229,000 (2014: £4,895,000) based on the corporation tax rate of20% (2014: 20%). The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income.Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable future andtherefore no asset has been recognised in the accounts. The UK Government announced in July 2015 that the corporation taxrate is set to be cut to 19% in 2017 and 18% in 2020. These rate reductions have not been substantively enacted, therefore theimpact of these reductions has not been incorporated into the tax charge for the period.

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

8. Dividends

(a) Dividends paid and proposed

2015 2014 £’000 £’000

2014 final dividend of 9.6p (2013: 9.5p) 1,734 1,731

Total dividends paid in the year 1,734 1,731

Final dividend proposed of 11.0p (2014: 9.6p) 1,901 1,747

For the year ended 31st July 2014, the Company declared a dividend of £1,747,000 but the final dividend paid amounted to£1,734,000 due to share buybacks after the balance sheet date but prior to the share register record date.

The final dividend has been proposed in respect of the year ended 31st July 2015 and is subject to approval at the forthcomingAnnual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in theaccounts for the year ending 31st July 2016.

(b) 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 declared in respect of the financial year asfollows:

2015 2014 £’000 £’000

Final dividend of 11.0p (2014: 9.6p) 1,901 1,734

The revenue available for distribution by way of dividend for the year is £2,168,000 (2014: £1,824,000).




9. Return per share

2015 2014£’000 £’000

Revenue return 2,168 1,824Capital return 21,152 11,193

Total return 23,320 13,017

Weighted average number of Ordinary shares in issue during the year used for the purpose of the undiluted calculation 17,772,488 18,219,309

Weighted average number of Ordinary shares in issue during the year used for the purpose of the diluted calculation 17,772,488 —

UndilutedRevenue return per share 12.20p 10.01pCapital return per share 119.02p 61.44p

Total Return per share 131.22p 71.45p

Diluted1

Revenue return per share 12.20p —Capital return per share 119.02p —

Total return per share 131.22p —

1The 31st July 2015 dilution has been calculated using the new Subscription shares issued on 25th February 2015. However, there is no dilutive effect as the conversion price forthese shares exceeded the average market price of the Ordinary shares from the date of issue to 31st July 2015.

The diluted return per Ordinary share represents the return on ordinary activities after taxation divided by the weightedaverage number of Ordinary shares in issue during the year as adjusted in accordance with the requirements of FinancialReporting Standard 22 ‘Earnings per share’.



10. Investments 2015 2014£’000 £’000

Investments listed on a recognised stock exchange 196,292 181,555JPMorgan Sterling Liquidity Fund 2,539 3,050|Unlisted investments — 16|

198,831 184,621

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

Opening book cost 143,413 3,095 146,508Opening investment holding gains/(losses) 38,142 (29) 38,113

Opening valuation 181,555 3,066 184,621

Movements in the year:Purchases at cost 68,007 24,2031 92,210Sales – proceeds (75,303) (24,724)1 (100,027)(Losses)/gains on sales based on the carrying value at the previous balance sheet date (5,036) 10 (5,026)Net movement in investment holding gains and losses 27,069 (16) 27,053

196,292 2,539 198,831

Closing book cost 143,283 2,584 145,867Closing investment holding gains/(losses) 53,009 (45) 52,964

Total investments held at fair value 196,292 2,539 198,831

1Includes transactions in liquidity funds.

Transaction costs on purchases during the year amounted to £309,000 (2014: £503,000) and on sales during the yearamounted to £95,000 (2014: £134,000). These costs include stamp duty and brokerage commission.

During the year £12,202,000 (2014: £24,137,000) of investment holding gains have been transferred to gains and losses onsales of investments as disclosed in note 15 on page 52.




2015 2014 £’000 £’000

11. Current assetsDebtorsSecurities sold awaiting settlement — 247Overseas tax recoverable 29 —Dividends and interest receivable 187 216Other debtors 15 19

231 482

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

Cash and short term depositsCash and short term deposits comprises bank balances and short term deposits. The carrying amount of these representstheir fair value. Cash balances in excess of a predetermined amount are placed on short term deposit at market rates ofinterest.

2015 2014 £’000 £’000

12. Creditors – amounts falling due within one yearBank loan – £24million floating rate loan with Scotiabank 19,000 —Securities purchased awaiting settlement 1,627 1,153Repurchases of the Company’s own shares awaiting settlement — 173Other creditors and accruals 131 112

20,758 1,438

The Company has a £24.0 million loan facility with Scotiabank which expires in April 2016. Under the terms of this agreementthe Company may draw down up to £24.0 million, or the equivalent in euros, at an interest rate of the interbank offer rate for therelevant currency and period, plus a margin of 0.85% per annum plus the Mandatory Cost, which is the lender’s cost ofcomplying with certain regulatory requirements of the Bank of England, FCA, or the European Central Bank. There is also afurther option to increase the facility commitment amount by £10.0 million to £34.0 million in two increments of £5.0 millionsubject to certain conditions. At 31st July 2015, the Company had £19.0 million drawn down on the facility at an interest rate of1.43% repayable in October 2015.

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



2015 2014 £’000 £’000

13. Creditors – amounts falling due after more than one yearBank loan – £24million floating rate loan facility with Scotiabank — 19,000

The Directors consider that the carrying amount of creditors falling due after more than one year approximates to their fairvalue.

2015 2014 £’000 £’000

14. Called up share capital Issued and fully paid:Ordinary shares of 25p eachOpening balance of 18,196,372 (2014: 18,219,372) Ordinary shares 4,549 4,555Repurchase of 919,007 (2014: 23,000) Ordinary shares for cancellation (230) (6)Issue of 5,990 (2014: nil) Ordinary shares on exercise of Subscription shares 1 —

Closing balance of 17,283,355 (2014: 18,196,372) Ordinary shares 4,320 4,549

Subscription shares of 0.1p eachBonus issue of 3,567,532 (2014: nil) shares to the market 4 —Exercise of 5,990 (2014: nil) Subscription shares into Ordinary shares — —

Closing balance of 3,561,542 (2014: nil) Subscription shares 4 —

Total called up share capital 4,324 4,549

During the year, the Company repurchased 919,007 Ordinary shares, nominal value £230,000, for cancellation, representing5.1% of the shares outstanding at the beginning of the year. The aggregate consideration paid for these shares was £7,053,000and the reason for the purchases was to seek to manage the volatility and absolute level of the share price discount to netasset value per share.

The Subscription shares were issued as a bonus issue to the Ordinary shareholders on 25th February 2015, on the basis of oneSubscription share for every five Ordinary shares held. Since the bonus issue, holders of 5,990 Subscription shares exercisedtheir right to convert those shares into Ordinary shares at a price of 915.0p per share respectively, giving a total considerationreceived of £55,000.




2015Capital reserves

Gains and HoldingCapital losses on gains and

Share redemption sales of losses on Revenuepremium reserve investments investments reserve

£’000 £’000 £’000 £’000 £’000

15. Reserves Opening balance 18,360 2,117 99,074 38,113 3,016Foreign currency gains on cash and short term deposits — — 13 — —Losses on sales of investments based on fair valueat the previous balance sheet date — — (5,026) — —

Transfer on disposal of investments — — 12,202 (12,202) —Net movement in investment holding gains and losses — — — 27,053 —Bonus issue of Subscription shares (4) — — — —Issue of Ordinary shares on exercise of Subscription shares 54 — — — —Subscription share issue costs (220) — — — —Repurchase and cancellation of the Company’s own shares — 230 (7,053) — —

Management fee and finance costs charged to capital — — (873) — —Other capital charges — — (15) — —Dividend appropriated in the year — — — — (1,734)Net revenue for the year — — — — 2,168

Closing balance 18,190 2,347 98,322 52,964 3,450

16. Net asset value per share

2015 2014£’000 £’000

UndilutedOrdinary shareholders funds (£’000) 179,597 165,229Number of Ordinary shares in issue 17,283,355 18,196,372Net asset value per Ordinary share (pence) 1,039.1 908.0

Diluted1

Ordinary shareholders funds assuming exercise of Subscription shares (£'000) 212,184 —Number of potential Ordinary shares in issue 20,844,807 —Net asset value per Ordinary share (pence) 1,017.9 —

1The 31st July 2015 dilution has been calculated using the new Subscription shares issued on 25th February 2015.



2015 2014£’000 £’000

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

Net return on ordinary activities before finance costs and taxation 23,679 13,325Less capital return before finance costs and taxation (21,292) (11,330)Scrip dividends received as income (380) (124)Decrease/(increase) in accrued income 29 (24)Decrease/(increase) in other debtors 4 (5)Increase in accrued expenses 17 4Tax on unfranked investment income (108) (33)Management fee charged to capital (733) (743)

Net cash inflow from operating activities 1,216 1,070

At 31st July Exchange At 31st July2014 Cash flow movement 2015£’000 £’000 £’000 £’000

18. Analysis of changes in net debtCash and short term deposits 564 716 13 1,293Bank loan (19,000) — — (19,000)

Net debt (18,436) 716 13 (17,707)

19. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments at the balance sheet date (2014: nil).

20. Transactions with the Manager and affiliates of the Manager

Details of the management contract are set out in the Directors’ Report on page 23. The terms make allowance for the exclusionof management charges on investments held in funds on which the Manager earns a separate management fee. The fee payableto the Manager for the year was £1,466,000 (2014: £1,486,000) of which £nil (2014: £nil) was outstanding at the year end.

Expenses amounting to £92,000 (2014: £93,000) were payable to the Manager for the marketing and administration ofsavings scheme products, of which £nil (2014: £7,000) was outstanding at the year end.

Included in other administration expenses in note 5 on page 45 are safe custody fees payable to JPMorgan Chase amountingto £3,000 (2014: £3,000) of which £1,000 (2014: £nil) was outstanding at the year end.

The Manager carries out some of its dealing transactions through group subsidiaries. These transactions are carried out atarm’s length. The commission payable to JPMorgan Securities for the year was £8,000 (2014: £14,000) of which £nil (2014: £nil)was outstanding at the year end.

Handling charges incurred on dealing transactions amounting to £15,000 (2014: £16,000) were payable to JPMorgan Chase ofwhich £4,000 (2014: £3,000) was outstanding at the year end.

During the current and prior year, the Company made purchases and sales of units in the JPMorgan Sterling Liquidity Fundwhich is managed by JPMAM. At the year end, the Company’s investment in this fund amounted to £2,539,000 (2014:£3,050,000) and represented 1.3% (2014: 1.7%) of the Company’s investment portfolio. Income amounting to £18,000 (2014:£10,000) was receivable from this investment for the year, of which £nil (2014: £nil) was outstanding at the year end. TheManager earns no management fee on this fund.

At the year end, a bank balance of £1,293,000 (2014: £564,000) was held with JPMorgan Chase. Interest amounting to £nil(2014: £nil) was receivable by the Company from JPMorgan Chase for the year.




21. Disclosures regarding financial instruments measured at fair value

The Company’s financial instruments within the scope of FRS 29 that are held at fair value comprise its investment portfolio.

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)on page 43.

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

2015Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss Equity investments 196,292 — — 196,292Liquidity fund 2,539 — — 2,539

Total 198,831 — — 198,831

2015Equity

investments£’000

Level 3 financial assets held at fair value through profit or loss Opening balance 16Liquidation payment received (10)Transfers out of Level 1 —Net movement in investment holding gains and losses (6)

Closing balance —

The Level 3 investment relates to an investment in Brookwell Limited, for which trading in the shares is suspended.

2014Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss Equity investments 181,555 — 16 181,571Liquidity fund 3,050 — — 3,050

Total 184,605 — 16 184,621



2014Equity

investments£’000

Level 3 financial assets held at fair value through profit or loss Opening balance 24Transfers out of Level 1 —Net movement in investment holding gains and losses (8)

Closing balance 16

The transfer from Level 1 into Level 3 related to an investment (Brookwell Limited) for which listing had been suspended in theprior year.

22. 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 secure its investmentobjective stated on the ‘Features’ page of this report. In pursuing this objective, the Company is exposed to a variety of risksthat could result in a reduction in the Company’s net assets or a reduction in the profits available for dividends. These risksinclude market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The Directors’ policy formanaging these risks is set out below. The Company Secretary, in close cooperation with the Board and the Manager,coordinates the Company’s risk management strategy. The Company has very limited direct exposure to foreign currencies.The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set outbelow, have not changed from those applying in the comparative year.

The Company’s financial instruments may comprise the following:

– investments in equity shares of UK companies and a sterling liquidity fund. These are held in accordance with theCompany’s investment objective;

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

– a sterling bank loan, the purpose of which is to raise finance for the Company’s operations and provide leveraged returnsfor the Company’s shareholders.

(a) Market risk The 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 two elements – interest rate risk and other price risk. Information to enable an evaluation ofthe nature and extent of these two elements of market risk is given in parts (i) and (ii) of this note, together with sensitivityanalyses where appropriate. The Board reviews and agrees policies for managing these risks and these policies haveremained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk whenmaking each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on anongoing basis.

(i) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and investments in liquidity funds andthe interest payable on the Company’s variable rate cash borrowings when rates are reset.

Management of interest rate risk The Company does not normally hold significant cash balances. Short term borrowings are used when required.

The Company may finance part of its activities through borrowings at levels approved and monitored by the Board.

The possible effects on cash flows that could arise as a result of changes in interest rates are taken into account when theCompany borrows on the loan facility. However, amounts drawn down on this facility are normally for short term periodsand therefore exposure to interest rate risk is not significant.




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

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

Interest rate exposure The exposure of financial assets and liabilities to floating interest rates, giving cash flow interest rate risk when rates arereset, is shown below.

2015 2014 £’000 £’000

Exposure to floating interest ratesJPMorgan Sterling Liquidity Fund 2,539 3,050Cash and short term deposits 1,293 564Creditors: amounts falling due within one yearBank loan – £24million floating rate loan with Scotiabank (19,000) —Creditors: amounts falling due after more than one yearBank loan – £24 million floating rate loan with Scotiabank — (19,000)

(15,168) (15,386)

The target interest rate earned on the JPMorgan Sterling Liquidity Fund is the 7 day sterling London Interbank Bid rate.

Interest receivable on cash balances is at a margin below LIBOR.

Bank loans are unsecured and are drawn down on the Company’s floating rate loan facility with Scotiabank. Further detailsare given in note 12 on page 50.

The exposure to floating interest rates, has fluctuated during the year as follows:

2015 2014 £’000 £’000

Maximum debit interest rate exposure to floating rates – net loan balances (17,480) (16,691)Minimum debit interest rate exposure to floating rates – net loan balances (10,400) (12,592)

Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1% (2014: 1%)increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. Thislevel of change is considered to be a reasonable illustration based on observation of current market conditions. Thesensitivity analysis is based on the Company’s monetary financial instruments held at the balance sheet date, with all othervariables held constant.

2015 20141% increase 1% decrease 1% increase 1% decrease

in rate in rate in rate in rate £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (57) 57 (59) 59 Capital return (95) 95 (95) 95

Total return after taxation for the year (152) 152 (154) 154

Net assets (152) 152 (154) 154



In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposureto interest rate changes due to fluctuation in the level of cash balances, investment in the JPM Sterling Liquidity Fund anddrawings on the loan facility.

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

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

Other price risk exposure The Company’s exposure to changes in market prices at 31st July comprises its holdings in equity investments as follows:

2015 2014 £’000 £’000

Equity investments held at fair value through profit or loss 196,292 181,571

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

Concentration of exposure to other price risk An analysis of the Company’s investments by industry sector is given on pages 13 to 15. All of the investments’ value is inthe UK. Accordingly there is a concentration of exposure to that country. However, it should be noted that an investmentmay not be wholly exposed to the economic conditions in its country of domicile or of listing.

Other price risk sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase ordecrease of 10% (2014: 10%) in the fair value of the Company’s equities. This level of change is considered to be areasonable illustration based on observation of current market conditions. The sensitivity analysis is based on theCompany’s equities and adjusting for change in the management fee, but with all other variables held constant.

2015 201410% increase 10% decrease 10% increase 10% decreasein fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (79) 79 (73) 73 Capital return 19,551 (19,551) 18,084 (18,084)

Total return after taxation for the year 19,472 (19,472) 18,011 (18,011)

Net assets 19,472 (19,472) 18,011 (18,011)




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

(b) Liquidity risk This 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 risk Liquidity risk is not significant as the Company’s assets comprise readily realisable securities, which can be sold to meetfunding requirements if necessary. Short term flexibility is achieved through the use of overdraft facilities.

The Board’s policy is for the Company to remain fully invested in normal market conditions and that short term borrowings beused to manage short term liabilities, working capital requirements and to gear the Company as appropriate. Details of thecurrent loan facility are given in note 12 on page 50.

Liquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest dates on which payment can be requiredby the lender are as follows:

2015More than More than

Three three months one year but months but not more not more thanor less than one year five years Total£’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearBank loan – £24 million floating rate loan with Scotiabank 67 19,120 — 19,187Securities purchased awaiting settlement 1,627 — — 1,627Other creditors and accruals 131 — — 131

1,825 19,120 — 20,945

2014More than More than

Three three months one year but months but not more not more thanor less than one year five years Total£’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement 1,153 — — 1,153 Repurchases of the Company’s own shares awaiting settlement 173 — — 173

Other creditors and accruals 112 — — 112

Creditors: amounts falling due after more than one yearBank loan – £24 million floating rate loan with Scotiabank 64 197 19,180 19,441

1,502 197 19,180 20,879

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



Management of credit risk Portfolio dealingThe Company invests in markets that operate Delivery Versus Payment (‘DVP’) settlement. The process of DVP mitigates therisk of losing the principle 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 havebeen appointed by both the JPMorgan Counterparty Risk Group and the Board.

Exposure to JPMorgan ChaseJPMorgan Chase Bank, N.A. is the custodian of the Company’s assets. The custody agreement grants a general lien over thesecurities credited 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, no absolute guarantee can be given to investors on the protection of all assets of the Company.

Credit risk exposure The amounts shown in the balance sheet under investment in liquidity fund, debtors and cash and short term depositsrepresent the maximum exposure to credit risk at the current and comparative year ends.

The liquidity fund has a AAA (2014: AAA) credit rating.

Cash and short term deposits comprises balances held at banks that have a minimum credit rating of A1/P1 (2014: A1/P1) fromStandard & Poor’s and Moody’s respectively.

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

23. Capital management policies and procedures

The Company’s debt and capital structure comprises the following:

2015 2014£’000 £’000

DebtBank loan 19,000 19,000

EquityShare capital 4,324 4,549Reserves 175,273 160,680

Total equity 179,597 165,229

The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximise incomeand capital return to its equity shareholders through an appropriate level of gearing.

The Board’s policy is to limit gearing within the range 10% net cash to 15% geared. Gearing for this purpose is defined as theexcess amount above shareholders’ funds of total assets expressed as a percentage of the shareholders’ funds. Total assetsinclude total investments and net current assets/liabilities less cash/cash equivalents and excluding bank loans of less thanone year.


23. Capital management policies and procedures continued

2015 2014£’000 £’000

Investments held at fair value excluding liquidity fund holdings 196,292 181,571Current assets excluding cash 231 482Current liabilities excluding bank loans (1,758) (1,438)

Total assets 194,765 180,615

Net assets 179,597 165,229

Gearing 8.4% 9.3%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on anongoing basis. This review includes:

– the planned level of gearing, which takes into account the Manager’s views on the market;

– the need to buy back equity shares for cancellation, which takes into account the share price discount or premium; and

– the need for issues of new shares.

24. Alternative Investment Fund Managers Directive (‘AIFMD’)

The Company’s maximum and actual leverage levels at 31st July 2015 are shown below:

Leverage Exposure Gross method Commitment method

Maximum limit 175% 175%Actual 121% 121%

For the purposes of the Alternative Investment Fund Managers Directive (‘AIFMD’), leverage is any method which increases theCompany’s exposure, including the borrowing of cash and the use of derivatives. It is expressed as a ratio between theCompany’s exposure and its net asset value and is calculated on a gross and a commitment method in accordance with AIFMD.Under the gross method, exposure represents the sum of the Company’s positions without taking into account any hedgingand netting arrangements. Under the commitment method, exposure is calculated after certain hedging and netting positionsare offset against each other.

60 JPMorgan Smaller Companies Investment Trust plc. Annual Report & Accounts 2015




Notice is hereby given that the twenty fifth Annual GeneralMeeting of JPMorgan Smaller Companies Investment Trust plcwill be held at 60 Victoria Embankment, London EC4Y 0JP at3.00 p.m. on Monday, 23rd November 2015 for the followingpurposes.

1. To receive the Directors’ Report, the Annual Accounts andthe Independent Auditor’s Report for the year ended31st July 2015.

2. To approve the Directors’ Remuneration Policy.

3. To approve the Directors’ Remuneration Report for theyear ended 31st July 2015.

4. To approve a final dividend of 11.0p per ordinary share.

5. To reappoint Frances Davies a Director of the Company.

6. To reappoint Ivo Coulson a Director of the Company.

7. To reappoint Richard Fitzalan Howard a Director of theCompany.

8. To reappoint Michael Quicke a Director of the Company.

9. To reappoint Andrew Robson a Director of the Company.

10. To appoint Andrew Impey a Director of the Company.

11. To reappoint Deloitte LLP as Auditor to the Company and toauthorise the Directors to agree their remuneration.

Special Business

To consider the following resolutions:

Authority to increase the maximum aggregate Directors’ fees –Ordinary Resolution

12 THAT in accordance with Article 97 of the Company’sArticles of Association, the maximum aggregate Directors’fees payable be increased from £150,000 to £200,000 perannum with immediate effect.

Authority to allot new shares – Ordinary Resolution 13. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors),pursuant to and in accordance with Section 551 of theCompanies Act 2006 (the ‘Act’) to exercise all the powersfor the Company to allot relevant securities (within themeaning of Section 551 of the Act) up to an aggregatenominal amount of £214,660, representing approximately5% of the Company’s issued ordinary share capital as at thedate of the passing of this resolution and shall expire at theconclusion of the Annual General Meeting of the Company

to be held in 2016 unless renewed at a general meetingprior to such time, save that the Company may before suchexpiry make offers, agreements or arrangements whichwould or might require relevant securities to be allottedafter such expiry and so that the Directors of the Companymay allot relevant securities in pursuance of such offers,agreements or arrangements as if the authority conferredhereby had not expired.

Authority to disapply pre-emption rights on allotment of newshares – Special Resolution 14. THAT subject to the passing of Resolution 13 set out above,

the Directors of the Company be and they are herebyempowered pursuant to Sections 570, of the CompaniesAct 2006 (the ‘Act’) to allot equity securities (within themeaning of Section 560(i) of the Act) pursuant to theauthority conferred by Resolution 13 as if Section 561(1) ofthe Act did not apply to any such allotment, provided thatthis power shall be limited to the allotment of equitysecurities for cash up to an aggregate nominal amount of£214,660, representing approximately 5% of the totalordinary share capital as at the date of the passing of thisresolution at a price of not less than the net asset value pershare and shall expire at the conclusion of the AnnualGeneral Meeting of the Company to be held in 2016 unlessrenewed at a general meeting prior to such time, save thatthe Company may before such expiry make offers,agreements or arrangements which would or might requireequity securities to be allotted after such expiry and so thatthe Directors of the Company may allot equity securities inpursuant of such offers, agreements or arrangements as ifthe power conferred hereby had not expired.

Authority to repurchase the Company’s shares – Special Resolution

15. THAT the Company be generally and subject as hereinafterappears unconditionally authorised in accordance withSection 701 of the Companies Act 2006 (the ‘Act’) to makemarket purchases (within the meaning of Section 693 of theAct) of its issued Ordinary shares and Subscription shares inthe capital of the Company.

PROVIDED ALWAYS THAT:

(i) the maximum number of Ordinary shares andSubscription shares hereby authorised to be purchasedshall be 2,574,212 and 533,544 respectively, or if less,that number of Ordinary shares or Subscription shareswhich is equal to 14.99% of the Company’s ordinaryissued share capital as at the date of the passing of thisresolution;

Shareholder InformationNotice of Annual General Meeting



Shareholder Information continuedNotice of Annual General Meeting continued

(ii) the minimum price which may be paid for an Ordinaryshare shall be 25p and Subscription shares shall be 0.1p;

(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 anOrdinary share or Subscription share taken from andcalculated by reference to the London Stock ExchangeDaily Official List for the five business days immediatelypreceding the day on which the Share is purchased; or(b) the price of the last independent trade; or (c) thehighest current independent bid;

(iv) any purchase of Ordinary shares will be made in themarket for cash at prices below the prevailing net assetvalue per ordinary share (as determined by theDirectors);

(v) the authority hereby conferred shall expire on22ndMay 2017 unless the authority is renewed at theCompany’s Annual General Meeting in 2016 or at anyother general meeting 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 and may make a purchase of ordinaryshares pursuant to any such contract notwithstandingsuch expiry.

By order of the Board Divya Amin, for and on behalf ofJPMorgan Funds Limited, Company Secretary

23rd October 2015

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 nolater than 3.00 p.m. two business days prior to the meeting(ie. excluding weekends and bank holidays).

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments (seeabove) also applies in relation to amended instructions. Anyattempt to terminate or amend a proxy appointment received afterthe relevant 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 lastsent shall be treated as replacing and revoking the other or others.

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. twobusiness days prior to the adjourned Meeting or, if the Companygives notice of the adjourned Meeting, at the time specified in thatnotice.

6. Entry to the Meeting will be restricted to shareholders, with guestsadmitted 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 (as amended by theShareholder Rights Directive 2009, each such representative(s)may exercise the same powers as the corporation could exercise ifit were an individual member of the Company, provided that theydo not do so in relation to the same shares. It is therefore no longernecessary to nominate a designated corporate representative.

Representatives should bring to the meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of 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 report andthe 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 Auditor no later than the time it makes its statementavailable on the website.

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; no answer need be given if it is undesirablein the interests of the Company or the good order of the meeting.

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 accompanied by astatement setting out the grounds for the request.

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 on theCompany’s website www.jpmsmallercompanies.co.uk

13. The register of interests of the Directors and connected persons inthe share capital of the Company is available for inspection at theCompany’s registered office during usual business hours on anyweekday (Saturdays, Sundays and public holidays excepted). It willalso be available for inspection at the Annual General Meeting.

14. You may not use any electronic address provided in this Notice ofMeeting to communicate with the Company for any purposes otherthan those expressly stated.

15. As an alternative to completing a hard copy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies 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.

16. As at 13th October 2015 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capitalconsists of 17,172,863 ordinary shares of 25 pence each, carryingone vote each. Therefore the total voting rights in the Companyare 17,172,863.

Electronic appointment – CREST membersCREST members who wish to appoint a proxy or proxies by utilising theCREST electronic proxy appointment service may do so for the Meetingand any adjournment(s) thereof by using the procedures described inthe CREST Manual. See further instructions on the proxy form.



On 25th February 2015, JPMorgan Smaller CompaniesInvestment Trust plc issued Subscription shares to QualifyingShareholders on the basis of one Subscription share for everyfive Ordinary shares held.

Holders of JPMorgan Smaller Companies Investment Trust plcSubscription shares can choose to convert their Subscriptionshares at the exercise price of 915 pence per share on the lastday of each month commencing on 31st March 2015 andfinishing on 30th June 2017. After this date, the rights on theSubscription shares will lapse.

A decision to convert Subscription shares should only be madeafter careful consideration of the prevailingmarket price of theOrdinary shares and other relevant factors. If there is anydoubt, holders are strongly encouraged to seek independentfinancial advice.

Conversion

Through the J.P. Morgan ISA or Investment AccountJ.P. Morgan shareholders wishing to convert their JPMorganSmaller Companies Investment Trust plc Subscription sharesshould complete and return the relevant conversion form(made available on the Company’s website,www.jpmsmallercompanies.co.uk) with a cheque to thefreepost address at the top of the form. To be valid for exerciseat the end of each month from March 2015 to June 2017, thecompleted conversion form must be received by J.P. MorganAsset Management at least seven business days before the endof the month in which you wish to convert your Subscriptionshares. The JPMorgan Smaller Companies Investment Trust plcOrdinary shares arising on conversion will be issued, subject tocleared funds being received, within the first 10 business daysof the month following the month in which your conversionform is received by J.P. Morgan Asset Management.

Certificated formShareholders wishing to convert their JPMorgan SmallerCompanies Investment Trust plc Subscription shares, who holdtheir Subscription shares in Certificated form, should refer tothe instructions on the reverse of their Subscription ShareCertificate(s). To be exercised, a notice of exercise must bereceived by the Registrar no later than 5.00 p.m. on the lastbusiness day of each month between and including the last

business day in March 2015 and the last business day in June2017. The JPMorgan Smaller Companies Investment Trust plcOrdinary shares arising on conversion will be issued, subject tocleared funds being received, within the first 10 business daysof the month following the month in which your conversionform is received by the Registrar.

Through CREST (Uncertified Shareholders) If you hold your JPMorgan Smaller Companies InvestmentTrust plc Subscription shares in uncertificated form (i.e. inCREST), the CREST Participant and Member Account IDs are asfollows:

CREST Participant ID = 2RA35

CREST Member Account ID = RA113924

To be exercised, CREST instructions must be submitted no laterthan 5.00 p.m. on the last business day of each month betweenand including the last business day in March 2015 and the lastbusiness day in June 2017. The JPMorgan Smaller CompaniesInvestment Trust plc Ordinary shares arising on conversion willbe issued, subject to cleared funds being received, within thefirst 10 business days of the month following the month inwhich your CREST instructions are received.

Tax

For the purpose of UK Taxation, the issue of Subscriptionshares is treated as a reorganisation of the Company’s sharecapital. Whereas such reorganisations do not trigger achargeable disposal for the purposes of the taxation of capitalgains, they do require shareholders to reallocate the base costsof their Ordinary and Subscriptions shares received.

At the close of business on 25th February 2015 the middlemarket prices of the Company’s Ordinary shares andSubscription shares were as follows:

Ordinary shares: 769.00p

Subscription shares: 40.25p

Accordingly an individual investor who on 25th February 2015held five Ordinary shares (or a multiple thereof) would havereceived a bonus issue of one Subscription share (or therelevant multiple thereof) and would apportion the base cost ofsuch holding 98.96% to the five Ordinary shares and 1.04% tothe Subscription shares.

Shareholder Information continuedSubscription Shares



Additional information

The Subscription shares do not carry any voting rights.

ISIN: GB00BV7L8Z35

Bloomberg ticker: JMIS LN

If you have any further questions, please visit the Company’swebsite at www.jpmsmallercompanies.co.uk. Alternatively, youcan call1:

(1) The Company’s registrars, Equiniti’s ShareholderHelpline on 0371 384 2326 (from within the UK) or on+44 121 415 0225 (if calling from outside the UK). Calls tothe 0371 384 2326 number cost no more than a nationalrate call to a 01 or 02 number. Lines are open frombetween 8.30 a.m. to 5.30 p.m. Monday to Friday(excluding English and Welsh public holidays). Calls tothe helpline from outside the UK will be charged at theapplicable international rate; or,

(2) if you hold your shares through the J.P. Morgan ISA orInvestment Account, then contact the J.P. Morgan UKRetail Client Services team on 0800 20 40 20 or+44 (0)20 7742 9995.

1Your calls may be recorded and randomly monitored for your security or trainingpurposes.

Terms used on this page shall, unless the context otherwiserequires, bear the meaning given to them in the Prospectusdated 23rd January 2015. The Prospectus is available todownload from the Company’s website,www.jpmsmallercompanies.co.uk under ‘Subscription Sharesdocuments’.



Unit return to shareholders

Return to the ‘Unit’ holder on a mid-market price tomid-market price basis. A Unit comprises five Ordinary sharesand one Subscription share.

Return toOrdinary shareholders

Total return to the investor, on a mid-market price tomid-market price basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe Company at the time the shares were quoted ex-dividend.

Undiluted return on net assets

Return on the undiluted NAV per Ordinary share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested into the shares of the Company atthe NAV per share at the time the shares were quotedex-dividend.

Diluted return on net assets

Return on the diluted NAV per Ordinary share, on a bid value tobid value basis, assuming that all dividends paid out by theCompany were reinvested into the shares of the Company atthe NAV per share at the time the shares were quotedex-dividend.

Diluted NAV per Ordinary share

The diluted NAV per Ordinary share assuming that alloutstanding Subscription shares were converted into Ordinaryshares at the year end.

Benchmark return

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested into the shares of the underlying companies atthe time the shares were quoted ex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the Company’sinvestment universe. The Company’s investment strategy doesnot follow or ‘track’ this index and consequently, there may besome divergence between the Company’s performance andthat of the benchmark.

Gearing/Net Cash

Gearing represents the excess amount above shareholders’funds of total assets, expressed as a percentage of theshareholders’ funds. Total assets include total investments andnet current assets/liabilities less cash/cash equivalents andexcluding bank loans of less than one year. If the amountcalculated is negative, this is shown as a ‘net cash’ position.

Ongoing charges

Management fees and all other operating expenses excludinginterest, expressed as a percentage of the average of the dailynet assets during the year (2009 to 2011: Total Expense Ratio(‘TER’): the average of the month end net assets during theyear; 2008 and prior years: TER: the average of the openingand closing net assets).

Share price discount to diluted NAV per Ordinary share

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.

Performance attribution

Analysis of how the Company achieved its recordedperformance relative to its benchmark.

Performance Attribution Definitions:

Sector and stock selection Measures the effect of investing in sectors and securities to agreater or lesser extent than their weighting in the benchmark,or of investing in securities which are not included in thebenchmark.

Gearing/cashMeasures the impact on returns of borrowings or cashbalances on the Company’s relative performance.

Management fee/other expenses The payment of fees and expenses reduces the level of totalassets, and therefore has a negative effect on relativeperformance.

Shareholder Information continuedGlossary of Terms and Definitions



Repurchase of shares for cancellationMeasures the effect on relative performance of repurchasingand cancelling the Company’s own shares at a price which isless than the net asset value per share.

Exercise of Subscription SharesMeasures the negative impact on the Net Asset Value (‘NAV’) pershare arising from the exercise of Subscription shares intoOrdinary shares at a price less than the NAV per share.

Subscription Share Dilution EffectMeasures the dilutive effect of the potential conversion of alloutstanding Subscription shares at the year end.

LeverageFor the purposes of the Alternative Investment Fund ManagersDirective (‘AIFMD’), leverage is any method which increases theCompany’s exposure, including the borrowing of cash and theuse of derivatives. It is expressed as a ratio between theCompany’s exposure and its net asset value and is calculatedon a gross and a commitment method in accordance withAIFMD. Under the gross method, exposure represents the sumof the Company’s positions without taking into account anyhedging and netting arrangements. Under the commitmentmethod, exposure is calculated after certain hedging andnetting positions are offset against each other.



Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority

Where to buy J.P. Morgan Investment Trusts

Savings Plan

The Company participates in the J.P. Morgan Investment TrustsSavings Plan, which facilitates both regular monthlyinvestments and occasional lump sum investments in theCompany’s ordinary shares. Shareholders who would likeinformation on the Savings Plan should call J.P. Morgan AssetManagement free on 0800 731 1111 or visit its website athttps://am.jpmorgan.co.uk/investor/guidance-and-planning/guides/regular-savings-made-simple-guide.aspx

Stocks & Shares Individual Savings Accounts (ISA)

The Company’s shares are eligible investments withinJ.P. Morgan’s Stocks & Shares ISA. For the 2015/16 tax year,from 6th April 2015 and ending 5th April 2016, the total ISAallowance is £15,240. Details are available from J.P. MorganAsset Management free on 0800 731 1111 or via its website athttps://am.jpmorgan.co.uk/investor/isas/what-is-a-stocks-and-shares-isa.aspx.

There are a number of ways that you can buy shares ininvestment trust companies; you can invest throughJ.P. Morgan WealthManager+ or on the following:

Fund supermarkets:

Alternatively you can invest through an InvestmentProfessional (e.g. a Financial Adviser) on the following3rd party platforms:

Ascentric Nucleus Avalon Praemium Axa Elevate TransactNovia

Please note that these websites are third party websites andJ.P. Morgan Asset Management does not endorse orrecommend any of them. This list is not exhaustive and issubject to change. Please observe each site’s privacy andcookie policies as well as their platform charges structure.

You can also buy investment trusts through stockbrokers,wealth managers and banks.

To familiarise yourself with the Financial Conduct Authority(‘FCA’) adviser charging and commission rules, visitwww.fca.org.uk.

AJ BellAlliance TrustBarclays StockbrokersBestinvestCharles Stanley DirectHalifax Share Dealing ServiceHargreaves Lansdown

Interactive InvestorJames Brearley James HaySelftradeTD DirectThe Share Centre Transact


HistoryThe Company was formed in June 1990 as River & MercantileSmaller Companies Trust plc and raised £25 million by a publicoffer of shares. Its original policy was to invest in a diversifiedportfolio of investments in UK and foreign smaller companies.Its name was changed to The Fleming Smaller CompaniesInvestment Trust plc in April 1996, and again in November 2002 toJPMorgan Fleming Smaller Companies Investment Trust plc. TheCompany adopted its present name in 2006.

Company NumbersCompany registration number: 2515996London Stock Exchange code: 0741600Bloomberg code: JMI LNReuters code: JMI.L

Market InformationThe Company’s shares are listed on the London Stock Exchange. Themarket price is shown daily in the Financial Times, The Times, theDaily Telegraph, The Scotsman and on the JPMorgan website atwww.jpmsmallercompanies.co.uk, where the share price is updatedevery fifteen minutes during trading hours.

Websitewww.jpmsmallercompanies.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through astockbroker, intermediary or professional adviser acting on aninvestor’s behalf. They may also be purchased and held throughthe J.P. Morgan Investment Account and J.P. Morgan ISA. Theseproducts are all available on the online wealth manager service,J.P. Morgan WealthManager+ available atwww.jpmorganwealthmanagerplus.co.uk

Manager and Company SecretaryJPMorgan Funds Limited.

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone: 020 7742 4000

For company secretarial and administrative matters please contactDivya Amin.

DepositaryBNY Mellon Trust and Depositary (UK) LimitedBNY Mellon Centre160 Queen Victoria StreetLondon EC4V 4LA

The Depositary has appointed JPMorgan Chase Bank, N.A. as theCompany’s custodian.

RegistrarsEquiniti LimitedReference 1139Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone number: 0371 384 2326

Calls to this number cost no more than a national rate call to a 01 or02 number. Lines open 8.30 a.m. to 5.30 p.m. Monday to Friday. Theoverseas helpline number is +44 (0)121 415 0225.

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrars quoting reference 1139. Registered shareholders canobtain further details on individual holdings on the internet byvisiting www.shareview.co.uk.

Independent AuditorDeloitte LLP Chartered Accountants and Statutory Auditor2 New Street SquareLondon EC4A 3BZ United Kingdom

BrokersWinterflood Securities LimitedThe Atrium BuildingCannon Bridge25 Dowgate HillLondon EC4R 2GA

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISAand J.P. Morgan SIPP, see contact details on the back cover of thisreport.

Financial CalendarFinancial year end 31st JulyFinal results announced OctoberHalf year end 31st JanuaryHalf year results announced MarchDividend on ordinary shares paid DecemberAnnual General Meeting November/December

A member of the AIC


Information about the Company


JPMorgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmsmallercompanies.co.uk


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