JPMorgan European Smaller Companies Trust plc … · JPMorgan European Smaller Companies Trust plc...

JPMorgan European Smaller CompaniesTrust plc Half Year Report & Financial Statements for the six months ended 30th September 2018

European Smaller Companies HY Cover A4.qxp 05/12/2018 12:47 Page FC1

K E Y F E A T U R E S

Objective

Capital growth from smaller European companies (excluding the United Kingdom).

Investment Policies

• To invest in a diversified portfolio of smaller companies in Europe, excluding the United Kingdom. • To emphasise capital growth rather than income. Therefore shareholders should expect the dividend to vary from year to year.• To manage liquidity and borrowings to increase potential returns to shareholders. The Board’s current gearing policy is to be

between 20% net cash and 20% geared. • To invest no more than 15% of gross assets in other UK listed investment companies (including investment trusts).

Risk

It should be noted that the Company invests in the shares of smaller companies, which tend to be more volatile than those of largercompanies. The Company also employs gearing to generate greater returns. The Company’s shares should therefore be regarded ascarrying greater than average risk.

Benchmark

Euromoney Smaller European Companies (ex UK) Index in sterling terms.

Capital Structure

At 30th September 2018, the Company’s share capital comprised 159,987,885 ordinary shares of 5p each.

Management Company and Company Secretary

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

Association of Investment Companies (‘AIC’)

The Company is a member of the AIC.

Website

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

J P M O R G A N E U R O P E A N S M A L L E R C O M PA N I E S T R U S T P L C . H A L F Y E A R R E P O R T & F I N A N C I A L S TAT E M E N T S 2 0 1 8

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C O N T E N T S

Half Year Performance 3 Financial Highlights

Chairman’s Statement 6 Chairman’s Statement

Investment Review 8 Investment Managers’ Report

10 List of Investments

11 Portfolio Analyses

Financial Statements 14 Statement of Comprehensive Income

15 Statement of Changes in Equity 16 Statement of Financial Position

17 Statement of Cash Flows 18 Notes to the Financial Statements

Interim Management 22 Report

Shareholder Information 24 Glossary of Terms and Alternative

Performance Measures (‘APMs’)

26 Where to buy J.P. Morgan Investment Trusts

27 Information about the Company

European Smaller Companies HY pp01_04.qxp 06/12/2018 11:46 Page 1

Half Year Performance

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F I N A N C I A L H I G H L I G H T S

H A L F Y E A R P E R F O R M A N C E | 3

TOTAL RETURNS (INCLUDING DIVIDENDS REINVESTED) TO 30TH SEPTEMBER 2018

3 years 5 years 10 years 6 months cumulative cumulative cumulative

Share price total return1

Net asset value total return2

Benchmark total return3

Net asset total returnagainst benchmark return3

Share price returnagainst benchmark return

Interim dividend

+0.3% +79.6% +111.8% +348.5%

+6.2% +75.3% +115.5% +306.6%

+4.8% +65.7% +87.1% +213.8%

+1.4% +9.6% +28.4% +92.8%

–4.5% +13.9% +24.7% +134.7%

1.2p

1 Source: Morningstar.2 Source: Morningstar/J.P. Morgan, using cum income net asset value per share.3 Source: Euromoney. The Company’s benchmark is the Euromoney Smaller European Companies (ex UK) Index in sterling terms.

A glossary of terms and alternative performance measures is provided on pages 24 and 25.


F I N A N C I A L H I G H L I G H T S

4 | J PMORGAN EUROPEAN SMAL L ER COMPAN I E S T RUS T P L C . HA L F Y EAR R E PORT & F I NANC I A L S TA T EMENTS 2 0 1 8

SUMMARY OF RESULTS

30th September 31st March 2018 2018 % change

Shareholders’ funds (£’000) 737,023 702,175 +5.0

Number of shares in issue 159,987,885 159,987,885

Net asset value per share 460.7p 438.9p +5.01

Share price 402.0p 406.0p –1.02

Share price discount to net asset value per share 12.7% 7.5%

Gearing/(Net cash) (2.4)% 7.9%

Ongoing charges 1.04% 1.03%

1 % change, excluding dividends paid. Including dividend the return is +6.2%.2 % change, excluding dividends paid. Including dividends the return is +0.3%.

A glossary of terms and alternative performance measures is provided on pages 24 and 25.


Chairman’s Statement


C H A I R M A N ’ S S T A T E M E N T

6 | J PMORGAN EUROPEAN SMALLER COMPAN IES TRUST PLC . HALF YEAR REPORT & F INANC IAL S TATEMENTS 20 18

Dear Shareholder,

I am pleased to present the Company’s results for the six months ended 30th September 2018.

Performance

Net asset value total return of +6.2% in the six months to 30th September 2018 compared with a returnof +4.8% over the same period from the Company’s benchmark index (the Euromoney SmallerCompanies (ex UK) index), an out-performance of 1.4%. The share price return, however, was only+0.3%, resulting from a widening of the discount over the period. As at 30th September 2018, theCompany’s discount was 12.7% compared to 7.5% at 31st March 2018.

This is another positive result from our Investment Managers in challenging equity market conditionsand the main contributor to performance was stock selection, with country allocation beinga consequence of the bottom-up investment process.

Their report on pages 8 and 9 reviews the markets and provides more detail on the performancedrivers within the portfolio and the stocks and countries in which the Company is invested.

Revenue and Dividends

Gross revenue return for the six months to 30th September 2018 was higher than the correspondingperiod in 2017 at £13.9 million (2017: £11.5 million) and was the result of an increase in dividendreceipts. The Board has decided to pay an interim dividend of 1.2 pence (2017: 1.2 pence) per sharewhich will be paid on 18th January 2019 to shareholders on the register as at 14th December 2018 (theex-dividend date will be 13th December 2018).

Share Repurchases

The Board continues to monitor the level of the discount of the Company’s share price to net assetvalue carefully. It seeks to use its ability to repurchase shares to minimise the short term volatility andthe absolute level of the discount. Whilst no shares were repurchased in the period to 30th September2018, 200,000 shares were purchased in November at an average discount of 12.6%. Equity marketvolatility, as described in the Managers’ report, in addition to Brexit-related uncertainty, led todiscounts widening across a range of investment trusts, including those companies investing inEuropean markets.

The Board

As part of the Board’s succession planning, and outlined in the Annual Report, I will step down asChairman and a Director at the Annual General Meeting in 2019. I am pleased that Marc van Gelder hasagreed to succeed me and I would like to wish him every success in his new role. The Board has starteda recruitment process with a view to appointing a new director.

Outlook

At the time of writing the outcome of the Brexit negotiations remains uncertain and that is creatingvolatility in the UK stock market. However, the underlying European companies in which the Companyinvests continue to offer good prospects for growth.

Carolan DobsonChairman 5th December 2018

Carolan DobsonChairman

This is anotherpositive resultfrom ourInvestmentManagers


Investment Review


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I N V E S T M E N T M A N A G E R S ’ R E P O R T


Francesco ConteInvestment Manager

The portfoliooutperformedits benchmarkover thesix months to30th September2018

Edward GreavesInvestment Manager

Review

Following a sharp correction at the start of the calendar year, equity markets rebounded between April andSeptember 2018. However the period saw significant volatility due to concerns around slowing globaleconomic growth, margin pressure from rising costs, the threat of a global trade war, political uncertaintyin the UK and Italy and the approaching end of quantitative easing and the start of quantitative tightening.

The portfolio rose by 6.2% during the period, outperforming the benchmark Euromoney Smaller EuropeanCompanies (ex UK) Index, which rose by 4.8%.

Portfolio

With a return of 6.2% over the six months to 30th September 2018, the portfolio outperformed itsbenchmark. Top performers included Dutch speciality chemicals and food ingredients distributor, IMCD, asit continued to gain scale in North America following a number of accretive acquisitions, Danish brewer,Royal Unibrew, as prolonged good weather over the summer increased demand for its products, andAustrian industrial Internet of Things expert, S&T, due to structurally growing end markets and improvingrevenue mix. Detractors included French liquid and gas storage and distribution specialist, Rubis, as thebusiness suffered from political disruptions in Turkey and Iran, Swedish cosmetics retailer, Oriflame, as itfaced significant foreign exchange headwinds and increasing pricing pressure from competitors, andFinnish consumer packaging manufacturer, Huhtamaki, following raw material price inflation and pricepressure from major customers.

As economic momentum weakened, we reduced the portfolio’s exposure to companies with more cyclicalbusiness models. Many of the companies we sold were manufacturing companies based in Germany such aslight construction machinery manufacturer, Wacker Neuson, forklift truck manufacturer, Jungheinrich,automotive LED lighting specialist, Hella, automotive components supplier, Stabilus, truck and trailercomponents supplier, SAF-Holland, and printing press machine manufacturer, Koenig & Bauer, all due toslowing operational momentum driven by the deteriorating outlook for global growth.

The proceeds from these divestments were used to build positions in companies with more defensivebusiness models. These included the market leading Swiss pharmaceuticals retailer, Galenica, due to itsability to consolidate the Swiss market and expansion opportunities within its own-brand OTC productportfolio, Swedish speciality vegetable oils producer, AAK, as the global trend towards healthier eatingcontinues to increase demand for its plant-based oils, Dutch glasses retailer GrandVision, where the newCEO appears to be successfully executing on his business strategy, and French care home operator, Korian,as the benefits of portfolio repositioning strategy began to feed through to better than expectedprofitability. We added a number of oil services companies including Austrian Schoeller-Bleckmann, DutchSBM Offshore, and Italian Saipem as the sector’s outlook improved due to the rising oil price and historicunderinvestment.

As a result of these changes, Healthcare became the largest sector overweight and the Oil sector movedfrom an underweight to an overweight position. Conversely, the Industrial Engineering sector moved to anunderweight position having been the largest sector overweight at the start of the period. The Netherlandsremained the portfolio’s largest country overweight while Germany became the largest countryunderweight. We further de-risked the portfolio by moving from 7.9% geared to 2.4% cash over the period.


I N V E S T M E N T M A N A G E R S ’ R E P O R T

I N V E S T M E N T R E V I E W | 9

As valuationsbecame moreattractive bythe end ofOctober westarted raisingour gearing

Outlook

Nevertheless, long term inflationary expectations remain anchored at around 2% and the US mid-termelections resulted in a split congress, meaning the loose fiscal policies may be reined in. With Italian 2 yearyields close to 1% and sterling weak but stable it seems that the bond and currency markets expect politicalrisks in Europe to be manageable. One interpretation could be that the market has concluded thatindividual counties have far more to lose from confrontation with the EU than the block as a whole andconsequently are likely to pare down their demands.

The recent rise in the US 10 year bond, at one point to above a 3.2% yield, reduced the appetite for stocksacross all geographies, including Europe. On this side of the Atlantic, fears about the Italian budget andcontinued uncertainty around Brexit added to the general malaise. The US mid-term elections in the USresulted in a split Congress, meaning the recent loosening of fiscal policy, through tax cuts, is unlikely to berepeated. This has been a driver of higher US interest rates, and therefore we see a standstill here asa positive. In Europe, with Italian 2 year yields close to 1%, bond markets are signalling that political risksare manageable. In summary, we believe the volatility in October was a long overdue correction, ratherthan start of a more prolonged downturn in markets.

As valuations became more attractive by the end of October we started raising our gearing, findingopportunities in the industrial and automotive sectors in particular.

Francesco ConteEdward GreavesInvestment Managers 5th December 2018


L I S T O F I N V E S T M E N T S


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ValuationCompany £’000



ITALYSaipem 18,445

Amplifon 16,381

DiaSorin 14,309

De’ Longhi 14,246

Recordati 14,147

Datalogic 11,230

Technogym 9,085

Interpump 7,681

Reply 7,453

Industria Macchine Automatiche 7,350

MARR 6,820

127,147

NETHERLANDSASR Nederland 16,935

Koninklijke Vopak 16,083

IMCD 14,987

B&S 13,606

ForFarmers 12,795

SBM Offshore 11,054

Aalberts Industries 10,683

Arcadis 10,146

TKH, CVA 7,009

Intertrust 6,715

GrandVision 2,158

NSI 1,756

123,927

SWITZERLANDGalenica 18,397

Siegfried 16,331

Helvetia 15,633

Vontobel 11,040

Valora 8,082

PSP Swiss Property 7,319

Bucher Industries 7,274

Georg Fischer 6,468

90,544

NORWAYStorebrand 15,542

Tomra Systems 14,658

Subsea 7 13,560

Sbanken 11,638

Atea 10,100

Salmar 7,514

Bakkafrost P/F 6,098

79,110

SWEDENAAK 15,157

Thule 14,612

AF ‘B’ 14,581

Nobina 11,278

Capio 10,964

Bravida 8,577

75,169

FRANCEAlten 16,441

Korian 15,858

Rubis 13,588

Sopra Steria 10,472

Remy Cointreau 7,427

ICADE 7,022

Vilmorin & Cie 135

70,943

GERMANYS&T 15,428

Gerresheimer 14,263

Software 10,722

Carl Zeiss Meditec 6,938

Elmos Semiconductor 3,009

Nemetschek 2,014

52,374

AUSTRIASchoeller-Bleckmann Oilfield

Equipment 14,003

FACC 13,904

Wienerberger 10,833

38,740

DENMARKRoyal Unibrew 9,881

Topdanmark 7,681

SimCorp 7,053

24,615

BELGIUM

Fagron 18,106

18,106

FINLANDTieto 10,869

10,869

SPAINAlmirall 7,684

7,684

TOTAL INVESTMENTS 719,228

LIST OF INVESTMENTS

AT 30TH SEPTEMBER 2018


P O R T F O L I O A N A L Y S E S

I N V E S T M E N T R E V I E W | 1 1

GEOGRAPHICAL ANALYSIS

at 30th September 2018 at 31st March 2018 Portfolio Benchmark Portfolio Benchmark %1 % %1 %

Italy 17.7 10.3 14.1 11.9

Netherlands 17.2 5.4 14.7 5.5

Switzerland 12.6 10.7 12.5 10.6

Norway 11.0 6.1 9.6 4.9

Sweden 10.4 12.4 8.2 12.5

France 9.9 13.0 16.9 11.6

Germany 7.3 13.9 13.9 15.2

Austria 5.4 4.1 — 3.5

Denmark 3.4 2.7 4.0 4.1

Belgium 2.5 5.3 3.7 4.6

Finland 1.5 4.6 2.4 4.5

Spain 1.1 7.5 — 8.1

Portugal — 1.2 — 1.4

United States — 1.2 — —

Ireland — 0.9 — 1.2

United Kingdom — 0.5 — 0.3

Colombia — 0.1 — —

Poland — 0.1 — —

Greece — — — 0.1

Total 100.0 100.0 100.0 100.0

1 Based on total investments of £719.2m (31st March 2018: £757.9m).


P O R T F O L I O A N A L Y S E S


SECTOR ANALYSIS

at 30th September 2018 at 31st March 2018 Portfolio Benchmark Portfolio Benchmark %1 % %1 %

Industrials 21.5 23.9 27.4 23.8

Health Care 21.3 7.8 3.7 8.2

Information Technology 14.6 8.4 17.2 9.3

Financials 10.9 15.1 6.3 13.5

Energy 10.2 4.0 1.5 3.2

Consumer Staples 9.2 6.3 12.2 6.5

Consumer Discretionary 6.7 13.1 25.6 13.9

Real Estate 2.2 9.0 — 8.0

Utilities 1.9 3.1 2.3 3.6

Materials 1.5 7.2 3.8 7.2

Telecommunication Services — 2.1 — 2.8

Total 100.0 100.0 100.0 100.0

1 Based on total investments of £719.2m (31st March 2018: £757.9m).


Financial Statements


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1 4 | J PMORGAN EUROPEAN SMALLER COMPAN IES TRUST PLC . HALF YEAR REPORT & F INANC IAL S TATEMENTS 20 18

S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E

FOR THE SIX MONTHS ENDED 30TH SEPTEMBER 2018

(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended

30th September 2018 30th September 2017 31st March 2018Revenue Capital Total Revenue Capital Total Revenue Capital Total

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss — 34,781 34,781 — 81,304 81,304 — 82,036 82,036

Net foreign currency gains — 266 266 — 1,426 1,426 — 2,099 2,099Income from investments 13,798 — 13,798 11,445 — 11,445 13,129 — 13,129Interest receivable and similar income 88 — 88 60 — 60 122 — 122

Gross return 13,886 35,047 48,933 11,505 82,730 94,235 13,251 84,135 97,386Management fee (1,013) (2,364) (3,377) (927) (2,162) (3,089) (1,931) (4,506) (6,437)Other administrative expenses (409) — (409) (391) — (391) (739) — (739)

Net return on ordinaryactivities before finance costs and taxation 12,464 32,683 45,147 10,187 80,568 90,755 10,581 79,629 90,210

Finance costs (130) (305) (435) (61) (143) (204) (153) (356) (509)

Net return on ordinaryactivities before taxation 12,334 32,378 44,712 10,126 80,425 90,551 10,428 79,273 89,701

Taxation (1,065) — (1,065) (750) — (750) (853) — (853)

Net return on ordinaryactivities after taxation 11,269 32,378 43,647 9,376 80,425 89,801 9,575 79,273 88,848

Return per share (note 3) 7.04p 20.24p 27.28p 5.86p 50.27p 56.13p 5.98p 49.55p 55.53p

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

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns representsupplementary information prepared under guidance issued by the Association of Investment Companies.

The net return on ordinary activities after taxation represents the profit for the period/year and also the total comprehensive income.


F I N A N C I A L S T A T E M E N T S | 1 5

S T A T E M E N T O F C H A N G E S I N E Q U I T Y


Called up Capitalshare Share redemption Capital Revenuecapital premium reserve reserves reserve1 Total£’000 £’000 £’000 £’000 £’000 £’000

Six months ended 30th September 2018 (Unaudited)At 31st March 2018 8,000 1,312 7,636 673,600 11,627 702,175 Net return on ordinary activities — — — 32,378 11,269 43,647 Dividend paid in the period (note 4) — — — — (8,799) (8,799)

At 30th September 2018 8,000 1,312 7,636 705,978 14,097 737,023

Six months ended 30th September 2017(Unaudited)At 31st March 2017 8,000 1,312 7,636 594,327 9,571 620,846 Net return on ordinary activities — — — 80,425 9,376 89,801 Dividend paid in the period (note 4) — — — — (5,600) (5,600)

At 30th September 2017 8,000 1,312 7,636 674,752 13,347 705,047

Year ended 31st March 2018 (Audited)At 31st March 2017 8,000 1,312 7,636 594,327 9,571 620,846 Net return on ordinary activities — — — 79,273 9,575 88,848 Dividends paid in the year (note 4) — — — — (7,519) (7,519)

At 31st March 2018 8,000 1,312 7,636 673,600 11,627 702,175

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


F


S T A T E M E N T O F F I N A N C I A L P O S I T I O N

AT 30TH SEPTEMBER 2018

(Unaudited) (Unaudited) (Audited)30th September 2018 30th September 2017 31st March 2018

£’000 £’000 £’000

Fixed assetsInvestments held at fair value through profit or loss 719,228 722,190 757,861

Current assetsDerivative financial assets 6 — —Debtors 13,087 966 18,186Cash and cash equivalents 37,615 20,798 21,998

50,708 21,764 40,184Current liabilitiesCreditors: amounts falling due within one year (8,864) (38,907) (3,805)Derivative financial liabilities — — (10)

Net current assets/(liabilities) 41,844 (17,143) 36,369

Total assets less current liabilities 761,072 705,047 794,230

Creditors: amounts falling due after more than one year (24,049) — (92,055)

Net assets 737,023 705,047 702,175

Capital and reservesCalled up share capital 8,000 8,000 8,000Share premium 1,312 1,312 1,312Capital redemption reserve 7,636 7,636 7,636Capital reserves 705,978 674,752 673,600Revenue reserve 14,097 13,347 11,627

Total shareholders’ funds 737,023 705,047 702,175

Net asset value per share (note 5) 460.7p 440.7p 438.9p



S T A T E M E N T O F C A S H F L O W S



30th September 2018 30th September 2017 31st March 2018£’000 £’000 £’000

Net cash (outflow)/inflow from operations before dividendsand interest (note 6) (2,365) 199 (3,591)

Dividends received 11,448 10,666 12,377 Overseas tax recovered 80 51 66 Interest paid (372) (257) (459)

Net cash inflow from operating activities 8,791 10,659 8,393

Purchases of investments and derivatives (451,295) (234,636) (597,508)Sales of investments and derivatives 536,093 252,894 563,457 Settlement of forward currency contracts (204) 142 291

Net cash inflow/(outflow) from investing activities 84,594 18,400 (33,760)

Dividends paid (8,799) (5,600) (7,519)Drawdown of bank loans — 22,000 79,613 Repayment of bank loans (68,969) (49,015) (49,015)

Net cash (outflow)/inflow from financing activities (77,768) (32,615) 23,079

Increase/(decrease) in cash and cash equivalents 15,617 (3,556) (2,288)

Cash and cash equivalents at start of period 21,998 24,285 24,285 Exchange movements — 69 1 Cash and cash equivalents at end of period 37,615 20,798 21,998

Increase/(decrease) in cash and cash equivalents 15,617 (3,556) (2,288)

Cash and cash equivalents consist of:Cash and short term deposits 285 271 2,175 Cash held in JPMorgan Euro Liquidity Fund 37,330 20,527 19,823

Total 37,615 20,798 21,998


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N O T E S T O T H E F I N A N C I A L S T A T E M E N T S


1. Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by theCompany’s auditors.

The figures and financial information for the year ended 31st March 2018 are extracted from the latest published financialstatements of the Company and do not constitute statutory accounts for that year. Those financial statements have beendelivered to the Registrar of Companies, including the report of the auditors which was unqualified and did not containa statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 ‘The Financial ReportingStandard applicable in the UK and Republic of Ireland’ of the United Kingdom Generally Accepted Accounting Practice(‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and VentureCapital Trusts’ (the revised ‘SORP’) issued by the Association of Investment Companies in November 2014 and updated inFebruary 2018.

FRS 104, ‘Interim Financial Reporting’, issued by the Financial Reporting Council (‘FRC’) in March 2015 has been applied inpreparing this condensed set of financial statements for the six months ended 30th September 2018.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financialstatements for the year ended 31st March 2018.

3. Return per share

(Unaudit ed) (Unaudited) (Audited)Six months ended Six months ended Year ended


Return per share is based on the following:Revenue return 11,269 9,376 9,575Capital return 32,378 80,425 79,273

Total return 43,647 89,801 88,848

Weighted average number of shares in issue 159,987,885 159,987,885 159,987,885Revenue return per share 7.04p 5.86p 5.98pCapital return per share 20.24p 50.27p 49.55p

Total return per share 27.28p 56.13p 55.53p




4. Dividends paid



2018 final dividend of 5.5p (2017: 3.5p) per share 8,799 5,600 5,6002018 interim dividend of 1.2p per share — — 1,919

Total dividends paid in the period/year 8,799 5,600 7,519

All dividends paid in the period have been funded from the revenue reserve.

An interim dividend of 1.2p (2018: 1.2p) has been declared in respect of the six months ended 30th September 2018, amountingto £1,920,000.

5. Net asset value per share


30th September 2018 30th September 2017 31st March 2018

Net assets (£’000) 737,023 705,047 702,175Number of shares in issue 159,987,885 159,987,885 159,987,885

Net asset value per share 460.7p 440.7p 438.9p

6. Reconciliation of net return on ordinary activities before finance costs and taxation to net cash(outflow)/inflow from operations before dividends and interest



Net return on ordinary activities before finance costs and taxation 45,147 90,755 90,210

Less capital return on ordinary activities before finance costs and taxation (32,683) (80,568) (79,629)

Scrip dividends received as income (828) (302) (302)Decrease in accrued income and other debtors — 633 822(Decrease)/increase in accrued expenses (84) 8 63Management fee allocated to capital (2,364) (2,162) (4,506)Overseas withholding tax (1,522) (1,102) (1,273)Dividends received (11,448) (10,666) (12,377)Realised gains on foreign exchange transactions 697 117 586Exchange gain on liquidity fund 720 3,486 2,815

Net cash (outflow)/inflow from operations before dividends and interest (2,365) 199 (3,591)




7. Fair valuation of investments

The fair value hierarchy analysis for financial instruments held at fair value at the period end is as follows:


30th September 2018 30th September 2017 31st March 2018Assets Liabilities Assets Liabilities Assets Liabilities£’000 £’000 £’000 £’000 £’000 £’000

Level 1 719,228 — 722,190 — 757,861 —Level 2¹ 6 — — — — (10)

Total 719,234 — 722,190 — 757,861 (10)

1 Includes forward foreign currency contracts.


Interim Management Report

European Smaller Companies HY pp21-22.qxp 06/12/2018 11:45 Page 21

2 2 | J PMORGAN EUROPEAN SMALLER COMPAN IES TRUST PLC . HALF YEAR REPORT & F INANC IAL STATEMENTS 20 18

I N T E R I M M A N A G E M E N T R E P O R T

The Company is required to make the following disclosures in its half year report:

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investmentunderperformance and strategy; market and currency; accounting, legal and regulatory; operational; cyber crime, financial andcorporate governance and shareholder relations. Information on each of these areas is given in the Business Review within the AnnualReport and Accounts for the year ended 31st March 2018.

Related Party Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materiallyaffected the financial position or the performance of the Company.

Going Concern

The Directors believe that, having considered the Company’s investment objective, risk management policies, capital managementpolicies and procedures, the nature of the portfolio and expenditure and cashflow projections, the Company has adequate resources,an appropriate financial structure and suitable management arrangements in place to continue in operational existence for theforeseeable future. More specifically, they believe that there are no material uncertainties pertaining to the Company that wouldprevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half yearlyfinancial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis inpreparing the financial statements.

Directors’ Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i) the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance withFRS 104 ‘Interim Financial Reports’ and gives a true and fair view of the state of affairs of the Company and of the assets,liabilities, financial position and net return of the Company, as at 30th September 2018, as required by the UK Listing AuthorityDisclosure Guidance and Transparency Rules 4.2.4R; and

(ii) the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK ListingAuthority Disclosure Guidance and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed andexplained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continuein business;

and the Directors confirm that they have done so.

For and on behalf of the BoardCarolan DobsonChairman 5th December 2018


Shareholder Information


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GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES ( ‘APMs’ )

Return to Shareholders (APM)

Total return to the shareholder, on a last traded price to last traded price basis, assuming that all dividends received were reinvested,without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.

6 months endedTotal return calculation Page 30th September 2018

Opening share price (p) 4 406.0Closing share price (p) 4 402.0 (a)Reinvestment of dividend paid during the financial year

Interim dividend (p) 5.5 (b)Share price on ex-dividend date 14th June 2018 421.0 (c)

Total dividend adjustment factor (d = b / c + 1) 1.013064 (d)Adjusted closing share price (e = a x d) 407.3 (e)

Total return to shareholders 0.3%

Return on Net Assets (APM)

Total return on net asset value (‘NAV’) per share, on a bid value to bid value basis, assuming that all dividends paid out by the Companywere reinvested, without transaction costs, into the shares of the Company at the NAV per share at the time the shares were quotedex-dividend.

6 months endedTotal return calculation Page 30th September 2018

Opening cum-income NAV per share (p) 4 438.9 Closing cum-income NAV per share (p) 4 460.7 (a)Reinvestment of dividend paid during the financial year

Interim dividend (p) 5.5 (b)NAV on ex-dividend date 14th June 2018 468.8 (c)

Total dividend adjustment factor (d = b / c + 1) 1.011732 (d)Adjusted closing cum-income NAV per share (e = a x d) 466.1 (e)

Total return on net assets 6.2%

Benchmark total return

Total return on the benchmark, on a closing-market value to closing-market value basis, assuming that all dividends received werereinvested, without transaction costs, in the shares of the underlying companies at the time the shares were quoted ex-dividend.

The benchmark is a recognised index of stocks which should not be taken as wholly representative of the Company’s investmentuniverse. The Company’s investment strategy does not follow or ‘track’ this index and consequently, there may be some divergencebetween the Company’s performance and that of the benchmark.


S H A R E H O L D E R I N F O R M A T I O N | 2 5

GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES ( ‘APMs’ )

Gearing/Net cash (APM)

Gearing represents the excess amount above shareholders’ funds of total investments, expressed as a percentage of the shareholders’funds. If the amount calculated is negative, this is shown as a ‘net cash’ position.

30th September 31st March 2018 2018Gearing calculation Page £’000 £’000

Investments held at fair value through profit or loss 16 719,228 757,861 (a)

Net assets 16 737,023 702,175 (b)

Gearing / (Net cash) (c = a / b – 1) (2.4)% 7.9% (c)

Ongoing charges (APM)

The ongoing charges represent the Company’s management fee and all other operating expenses excluding finance costs payable,expressed as a percentage of the average of the daily cum-income net assets during the year and is calculated in accordance withguidance issued by the Association of Investment Companies.

The figure as at 30th September 2018 is an estimated annualised figure based on the numbers for the six months ended30th September 2018.

30th September 31st March 2018 2018Ongoing charges calculation Page £’000 £’000

Management fee 14 6,754 6,437 Other administrative expenses 14 818 739

Total management fee and other administrative expenses 7,572 7,176 (a)

Average daily cum-income net assets 729,238 694,012 (b)

Ongoing charges (c = a / b) 1.04% 1.03% (c)

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

If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount. The discount isshown as a percentage of the NAV per share.

The opposite of a discount is a premium. It is more common for an investment trust’s shares to trade at a discount than at a premium(page 4).


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W H E R E T O B U Y J . P . M O R G A N I N V E S T M E N T T R U S T S

You can invest in a J.P. Morgan investment trust through thefollowing;

1. Directly from J.P. Morgan

Investment Account

The Company’s shares are available in the J.P. Morgan InvestmentAccount, which facilitates both regular monthly investments andoccasional lump sum investments in the Company’s ordinaryshares. Shareholders who would like information on theInvestment Account should call J.P. Morgan Asset Managementfree on 0800 20 40 20 or visit its website atam.jpmorgan.co.uk/investor

Stocks & Shares Individual Savings Accounts (ISA)

The Company’s shares are eligible investments withina J.P. Morgan ISA. For the 2018/19 tax year, from 6th April 2018and ending 5th April 2019, the total ISA allowance is £20,000.The shares are also available in a J.P. Morgan Junior ISA. Detailsare available from J.P. Morgan Asset Management free on0800 20 40 20 or via its website at am.jpmorgan.co.uk/investor

2. Via a third party provider

Third party providers include;

Please note this list is not exhaustive and the availability ofindividual trusts may vary depending on the provider. Thesewebsites are third party sites and J.P. Morgan Asset Managementdoes not endorse or recommend any. Please observe each site’sprivacy and cookie policies as well as their platform chargesstructure.

3. Through a professional adviser

Professional advisers are usually able to access the products of allthe companies in the market and can help you find an investmentthat suits your individual circumstances. An adviser will let youknow the fee for their service before you go ahead. You can findan adviser at unbiased.co.uk

You may also buy investment trusts through stockbrokers, wealthmanagers and banks.

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

AJ BellAlliance Trust SavingsBarclays StockbrokersBestinvestCharles Stanley DirectFundsNetwork

Hargreaves LansdownInteractive InvestorJames BrearleyJames HaySelftradeThe Share Centre


S H A R E H O L D E R I N F O R M A T I O N | 2 7

I N F O R M A T I O N A B O U T T H E C O M P A N Y

Avoid investment fraud1 Reject cold calls

If you’ve received unsolicited contact about an investment opportunity, chances are it’s a high risk investment or a scam. You should treat the call with extreme caution. The safest thing to do is to hang up.

2 Check the FCA Warning List The FCA Warning List is a list of �rms and individuals we know are operating without our authorisation.

3 Get impartial advice Think about getting impartial �nancial advice before you hand over any money. Seek advice from someone unconnected to the �rm that has approached you.

Report a ScamIf you suspect that you have been approached by fraudsters please tell the FCA using the reporting form at www.fca.org.uk/consumers/report-scam-unauthorised-�rm. You can also call the FCA Consumer Helpline on 0800 111 6768

If you have lost money to investment fraud, you should report it to Action Fraud on 0300 123 2040 or online at www.actionfraud.police.uk

Find out more at www.fca.org.uk/scamsmart

Investment scams are designed to look like genuine investmentsSpot the warning signs

Have you been:

• contacted out of the blue• promised tempting returns

and told the investment is safe• called repeatedly, or• told the offer is only available

for a limited time?

If so, you might have been contacted by fraudsters. Remember: if it sounds too good to be true,

it probably is!

Be ScamSmart


I N F O R M AT I O N A B O U T T H E C O M PA N Y

S H A R E H O L D E R I N F O R M AT I O N | 2 9

HistoryOn 24th April 1990, the Company acquired the undertaking and assets of FlemingEuropean Fledgeling Fund Limited (the ‘Fund’) in exchange for the issue of itsshares and warrants. The Fund was an open-ended, unquoted investment companybased in Jersey and formed in June 1987 with the same objectives and investmentpolicies as the Company. The Company adopted its present name in July 2010.

DirectorsCarolan Dobson (Chairman) Marc van GelderAshok GuptaNicholas SmithStephen White

Company NumbersCompany registration number: 2431143 London Stock Exchange number: 0341969 ISIN: GB00BMTS0Z37 Bloomberg code: JESC LN LEI: 54930049CEWDI46Y3U28

Market InformationThe Company’s net asset value (‘NAV’) per share is published daily, via theLondon Stock Exchange. The Company’s shares are listed on the London StockExchange. The market price is shown daily in the Financial Times, The Times,The Daily Telegraph, The Scotsman and on the Company’s website atwww.jpmeuropeansmallercompanies.co.uk, where the share price is updated everyfifteen minutes during trading hours.

Websitewww.jpmeuropeansmallercompanies.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbroker orprofessional adviser acting on an investor’s behalf. They may also be purchasedand held through the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan Junior ISA. These products are all available on the online service atjpmorgan.co.uk/online

Manager and Company SecretaryJPMorgan Funds Limited

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

For company secretarial issues and administrative matters, please contactFaith Pengelly.

Depositary The Bank of New York Mellon (International) Limited1 Canada SquareLondon E14 5AL

The Depositary has appointed JPMorgan Chase Bank, N.A. as the Company’scustodian.

RegistrarsEquiniti LimitedReference 1083Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone number: 0371 384 2325

Lines open 8.30 a.m. to 5.30 p.m. Monday to Friday. Calls to the helpline will costno more than a national rate call to a 01 or 02 number. Callers from overseasshould dial +44 121 415 0225.

Notifications of changes of address and enquiries regarding share certificates ordividend cheques should be made in writing to the Registrar quoting reference1083.

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

Independent AuditorsPricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

BrokersCenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account and J.P. Morgan ISA,see contact details on the back cover of this report.

FCA regulation of ‘non-mainstream pooled investments’ and‘Complex Instruments’The Company currently conducts its affairs so that the shares it issues can berecommended by Independent Financial Advisers to ordinary retail investors inaccordance with the rules of the Financial Conduct Authority (‘FCA’) in relation tonon-mainstream investment products and intends to continue to do so for theforeseeable future.

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

The Company’s ordinary shares are not considered to be ‘complex instruments’under the FCA’s ‘Appropriateness’ rules and guidance in the Conduct of Businesssourcebook.

FINANCIAL CALENDAR

Financial year end 31st March

Final results announced May/June

Half year end 30th September

Half year results announced November

Annual General Meeting July

Dividend July/November

A member of the AIC

European Smaller Companies HY Cover A4.qxp 05/12/2018 12:47 Page IBC1

Telephone calls may be recorded and monitored for security and training purposes.

GB I112 | 12/18

J.P. MORGAN HELPLINE

Freephone 0800 20 40 20 or +44 (0) 1268 444470.Telephone lines are open Monday to Friday, 9.00am to 5.30pm.

www.jpmeuropeansmallercompanies.co.uk

European Smaller Companies HY Cover A4.qxp 05/12/2018 12:47 Page BC2

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