The JPMorgan Smaller Companies Investment Trust plc - July 2020
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The JPMorgan Smaller Companies Investment Trust plc July 2020 Georgina Brittain, Portfolio Manager Katen Patel, Portfolio Manager FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
Agenda The case for UK mid & small caps UK market outlook Investment process The JPMorgan Smaller Companies Investment Trust plc 2 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
The case for UK mid & small caps A compelling long-term asset class 3 | FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
Long term performance of UK mid and small caps
Cumulative returns
1,800
1,600
S&P 500
FTSE 250 (ex IT)
1,400 Russell 2000
MSCI Europe (ex UK) Small Cap
1,200 MSCI Europe (ex UK)
MSCI AC Asia Pacific (ex Japan)
1,000 MSCI Emerging Markets
FTSE All-Share
TOPIX
800
600
400
200
0
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
… long term returns amongst the best in the world
Source: J.P. Morgan Asset Management, Bloomberg. All series are rebased to 100 as at 31 December 1994 to 30 June 2020. All indices in GBP and include reinvested dividends.
Indices do not include fees or operating expenses and are not available for actual investment.
Past performance is not a reliable indicator of current and future results.
4 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
Opportunities for extraordinary growth
Innovators or disruptors
Nimble business models
Rapidly growing new markets
OneSavings Oxford
Future Spirent
Bank Instruments
Image source: Shutterstock
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
5 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
Mergers & Acquisitions
Sell-side Buy-side
Percentage of index acquired FTSE 100
FTSE 250
Smaller companies Larger companies
12%
Small Cap
FTSE 100 avg.
10% Corporate
Family ownership
ownership
8%
6%
Less efficient or Fewer opportunities
4%
sub-scale for business
businesses improvement
2%
0%
Limited overall Regulatory and
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 market impact logistical challenges
Source: Liberum, Bloomberg, as at 31 December 2019.
Past performance is not a reliable indicator for current and future results.
6 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
Opportunities for active managers in under-researched companies
Rolling average analyst coverage by market cap
25
20
FTSE 100 FTSE 250 FTSE Small Cap
15
10
5
0
£m
... Average of 18 analysts covering each FTSE 100 company
Average of 10 analysts covering each FTSE 250 company
Average of 5 analysts covering each FTSE Small Cap company
Source: Liberum, Datastream. As at 7 January 2020.
7 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
The UK Market Outlook 8 | FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
Economic outlook: pandemic woes visible to all, outlook beyond unclear
UK retail sales and consumer confidence UK GDP growth forecasts for 2020 at historic lows
8 10 15%
10%
0 0
Real GDP, YoY %
5%
-8 -10
0%
-16 -20 -5%
UK Retail Sales % YOY
(LHS) NIESR, -7.2%
-24 -30 -10% IMF, -10.2%
GFK Consumer OBR, -12.4%
Confidence (RHS) -15%
-32 -40 1900 1920 1940 1960 1980 2000 2020
2005 2008 2011 2014 2017 2020
Outturn IMF OBR NIESR
UK Purchasing Managers Index Brent crude oil price ($/barrel)
70
100
60
80
50
60
40
Manufacturing PMI 40
30 Services PMI
Construction PMI 20
20
0
10 2015 2016 2017 2018 2019 2020
2005 2008 2011 2014 2017 2020
Sources: top left chart: ONS, GfK, with data from January 2005 to June 2020; bottom left chart: Bloomberg, data from January 2005 to June 2020; top right chart: Panmure Gordon, data as of 14th July 2020; bottom right
chart: Bloomberg, data from January 2015 to July 2020. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our
judgment and are subject to change without notice. There can be no guarantee they will be met.
Past performance is not a reliable indicator of current and future performance.
9 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONUK market valuation
FTSE 100 FTSE 250 NSCI & AIM
2021 P/E ratio (ex loss-makers) 13.4x 13.3x 11.7x
2021 median earnings growth 12.1% 19.0% 19.6%
2021 dividend yield (ex non-pay) 4.5% 3.5% 3.6%
12m forward rolling median P/E – largest to smallest
Source: Top table is from Peel Hunt as at 13 July 2020; bottom chart is from Liberum as at 10 September 2019, using Datastream. Opinions, estimates, forecasts,
projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change
without notice. There can be no guarantee they will be met.
10 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONGlobal earnings expectations and equity valuations GTM – UK | 48
Consensus estimates for global earnings per share growth Global forward price-to-earnings ratios
% change year on year, earnings per share estimates x, multiple
50 75x
40x
45 2020 2021
Current
40 35x
35 Range since 1990
30 Average since 1990
25 30x
20
15 25x
10
Equities
5
20x
0
-5
-10 15x
-15
-20 10x
-25
-30
5x
-35
-40
-45 0x
US Europe UK Japan EM US Europe UK Japan EM
ex-UK ex-UK
Source: (Left) FTSE, IBES, MSCI, Refinitiv Datastream, Standard & Poor’s, TOPIX, J.P. Morgan Asset Management. MSCI indices are used for Europe ex-UK and
EM. UK is FTSE All-Share, US is S&P 500 and Japan is TOPIX. Data used are in local currency, except for EM, which is in US dollars. (Right) IBES, MSCI, Refinitiv
Datastream, Standard & Poor’s, J.P. Morgan Asset Management. MSCI indices are used for all regions/countries (due to data availability), except for the US, which is
represented by the S&P 500. Past performance is not a reliable indicator of current and future results. Guide to the Markets - UK. Data as of 22 June 2020.
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the
publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.
11Are UK equities still cheap?
UK market cheap on price to book and near the lows of the 1980s
UK Market Price to Book (x)
UK Market Price To Book Value Max Min Median
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1980 1990 2000 2010 2020
Source: Datastream, Morgan Stanley Research. Data from 1 January 1980 to 23 June 2020..
Past performance is not a reliable indicator of current and future results
12 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONInvestment Process 13 | FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
What do we look for in a company?
For every stock we ask 3 questions:
IS IT A GOOD BUSINESS?
We consider the quality of the company through its profitability, sustainability of earnings and capital allocation discipline
IS IT ATTRACTIVELY VALUED?
We look at a company’s valuation to assess if its future prospects have been incorrectly estimated by the market
IS THE OUTLOOK IMPROVING?
Assessing the operational momentum of the business and how is this being reflected in expectations
THREE COMPLEMENTARY CONSIDERATIONS THAT HELP PREDICT STOCK RETURNS
14 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONStock specific considerations: A differentiated approach to fundamental analysis
Focused fundamental research on the drivers of share prices
Stock specific considerations
2,945 820 408 60
Company newsflow Fundamental Company meetings IPOs and Placings
(Comments written) revisions evaluated
Source: J.P. Morgan Asset Management, Data for International Equity Group – European Behavioural Finance Team for calendar year 2019 for UK equities only.
15 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONInvestment philosophy
We believe that attractively valued, high quality stocks with
positive momentum outperform the market
VALUE QUALITY MOMENTUM
Themes: Themes: Themes:
- Out of favour stocks with - Market leaders - Structurally growing end
catalysts markets
- High return of capital
- Cyclical end market recovery - Bolt-on acquisition strategy
- Disciplined capital allocation
- High cash generation - Disruptive technology
The numbers: The numbers: The numbers:
FCF yield Trust Index ROIC Trust Index Momentum Trust Index
Small Cap 6.5% 3.7% Small Cap 13.5% 9.3% Small Cap -13.2% -17.7%
Source: J.P. Morgan Asset Management, FactSet, as of 30 June 2020. Figures reported are weighted medians. Figures shown are Value = Free Cash Flow Yield, Quality = return on invested
capital, Momentum = 3 month historic earnings per share revisions. Small Cap is the JPMorgan Smaller Companies Investment Trust plc, whose index is Numis Smaller Companies plus AIM ex
IT.
16 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONA deep understanding of the portfolio’s positioning
A powerful tool for visualizing exposures
Red flags
Liquidity
analysis
Style exposures
Fundamental
adjustments
Top stock actives
Alpha drivers
ESG rating
17 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONThe investment process in action – Dunelm
High quality business Dunelm– Total Return
• UK Market leader in fragmented homewares category GBP Share Price Consensus EPS Estimate GBP
• Improving product range and well-managed supply chain 14 0.80
13 0.75
0.70
Attractively valued 12
0.65
11
• Consistently cash generative and strong balance-sheet 0.60
10 0.55
• Disciplined approach to shareholder returns
9 0.50
0.45
Promising outlook 8
0.40
7 0.35
• Market share gains driving multi-channel revenue growth
6 0.30
• Margin expansion potential Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020
Source: J.P. Morgan Asset Management, Bloomberg. Share Price 30 June 2019 – 30 June 2020. * The consensus EPS estimate is an arithmetic average of selected broker estimates for earnings per
share of the company for the year shown. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell..
Past performance is not a reliable indicator of current and future results.
18 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONThe investment process in action – Computacenter
High quality business Computacenter – Total Return
• Global IT infrastructure/services provider. High returns on GBP Share Price Consensus EPS Estimate GBP
capital and track record of outperforming market estimates 20 0.96
0.94
18
Attractively valued 0.92
16
• Strong cash-flow generation, high dividend growth and net 0.90
cash balance sheet 14 0.88
0.86
12
Promising outlook 0.84
10
0.82
• Benefitting from a multi-year trend of digital investment by
8 0.80
enterprise and public-sector clients Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020
Source: J.P. Morgan Asset Management, Bloomberg. Share Price 30 June 2019 – 30 June 2020. * The consensus EPS estimate is an arithmetic average of selected broker estimates for earnings per
share of the company for the year shown. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
Past performance is not a reliable indicator of current and future results.
19 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONThe JPMorgan Smaller Companies Investment Trust plc 20 | FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
Fund summary
JPM Smaller Companies Investment Trust plc
Annualised performance to 30 June 2020
Georgina Brittain Katen Patel
Portfolio Manager Portfolio Manager
Experience: 25 / 25 Experience: 15 / 7 15% 13.11
Trust Benchmark
9.31
10%
6.98 7.22
Nimble and Portfolio size £223.4m 5%
2.11
focused No. of stocks 88 0.08
0%
-5% -3.54
Discount to NAV 13.4%
Inexpensive
Historic dividend yield 1.6% -10%
-10.74
-15%
Strong long term outperformance 1 year 3 years p.a. 5 years p.a. 10 years p.a.
Performance 1st in peer group over 3 years and over 1 Excess
+12.12 +10.91 +5.00 +3.47
year* return (%)
Source: J.P. Morgan Asset Management. As at 30 June 2020 unless otherwise stated. Experience: Industry/Firm as of 31 March 2020. NAV returns are net of fees, in GBP, with income reinvested.
Prospective dividend yield is indicative and based on mid market prices, and include the declared and net prospective dividends for the current financial year. Benchmark changed from the FTSE
Smaller Companies Index ex IT to the NUMIS Smaller Companies Index plus AIM ex IT on 1st January 2019. *Peer group of 26, Morningstar peer quartile ranking within EAA CE UK Small-Cap Equity
universe. Morningstar™ rankings/universe: © Morningstar. All Rights Reserved.
Past performance is not a reliable indicator for current and future results .
21 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONPerformance attribution
Stock: 11.68
JPM Smaller Companies Investment Trust plc Attribution summary
Sector: -0.17
for 12 months ending 30 June 2020 Benchmark
Numis Smaller Companies
plus AIM (ex IT) Index
Stock attribution
Relative Stock Impact Relative Stock Impact
Top 10 contributors Top 10 detractors
weight (%) return (%) (%) weight (%) return (%) (%)
Games Workshop Group 4.07 65.73 2.41 Vistry Group 1.33 -25.28 -0.68
Avon Rubber 2.07 136.87 1.89 OneSavings Bank 2.90 -25.66 -0.64
Team17 Group 2.25 88.62 1.57 Dart Group 1.84 -1.24 -0.63
Judges Scientific 3.01 52.52 1.52 ITM Power Not Held 686.12 -0.52
Future 3.38 31.78 1.41 Centamin -0.63 9.85 -0.50
Dunelm Group 2.86 37.76 1.13 Ferrexpo -0.15 -48.98 -0.48
Spirent Communications 1.80 61.26 0.98 Go-Ahead Group 0.28 -59.69 -0.45
Liontrust Asset Mgmt 1.42 88.25 0.95 GlobalData Not Held 89.69 -0.45
Codemasters Group Holdings 1.66 50.44 0.83 TBC Bank Group 0.82 -43.70 -0.43
Ei Group 0.75 43.34 0.67 Rank Group 0.31 -36.21 -0.35
Source: Factset. Data is gross of fees in GBP. Attribution results are for indicative purposes only. The portfolio is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are
subject to change at the discretion of the Investment Manager without notice. Past performance is not a reliable indicator of current and future results.
22 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONPortfolio positions
Numis Smaller Companies plus
JPM Smaller Companies Investment Trust plc Benchmark AIM (excluding Investment
as of 30 June 2020 Companies) Index
Top 10 overweight positions
Stock Portfolio weight (%) Benchmark weight (%) Relative position (%)
Games Workshop Group 4.8 0.0 4.8
Dunelm Group 4.5 0.0 4.5
Future 4.6 0.7 3.9
Team17 Group 3.6 0.4 3.2
Judges Scientific 3.3 0.2 3.1
Computacenter 3.1 0.0 3.1
Softcat 2.5 0.0 2.5
OneSavings Bank 2.2 0.0 2.2
Pets At Home 2.8 0.7 2.2
Avon Rubber 2.7 0.5 2.1
Total 34.1 2.5 31.6
Source: J.P. Morgan Asset Management, Factset. The investment trust is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion of
the Investment Manager without notice.
23 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONPortfolio positions
Numis Smaller Companies plus
JPM Smaller Companies Investment Trust plc Benchmark AIM (excluding Investment
as of 31 December 2019 Companies) Index
Top 10 overweight positions
Stock Portfolio weight (%) Benchmark weight (%) Relative position (%)
Games Workshop Group 4.5 0.8 3.7
OneSavings Bank 3.7 0.4 3.3
Future Plc 3.7 0.5 3.2
Judges Scientific 3.2 0.1 3.1
4Imprint Group 3.4 0.4 3.0
Forterra Plc 2.8 0.3 2.5
Dunelm Group 3.5 0.9 2.5
Dart Group 3.5 1.0 2.5
MJ Gleeson 2.6 0.2 2.4
Marshalls 3.1 0.7 2.3
Total 34.0 5.3 28.5
Source: J.P. Morgan Asset Management, Factset. The investment trust is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion of
the Investment Manager without notice.
24 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONPortfolio positions
Numis Smaller Companies
JPMorgan Smaller Companies Investment Trust plc plus AIM (excluding
Benchmark
as of 30 June 2020 Investment Companies)
Index
Active and absolute sector positions
Relative to benchmark (%)
12 11.2
10
8
6.2
6
4 3.3 3.0 2.8
2
0
-2
-1.9 -2.1 -2.3 -2.4
-4 -3.1
Leisure General H'h' Software Media Pharmaceuticals & Oil Support Construction Mining
Goods Retailers Goods & Biotechnology & Services &
& Comp. Gas Materials
Home Serv. Producers
Construct.
Portfolio
Weight (%)
13.6 10.1 5.2 10.8 7.8 2.5 1.9 4.4 2.4 2.0
Source: J.P. Morgan Asset Management, Factset. The investment trust is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion of
the Investment Manager without notice.
25 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONCOVID-19: Update
The Smaller Companies investment trust is focused on bottom up stock selection and that has not changed as a result of the
COVID-19 crisis.
Paying particular attention to firms balance sheets and cash flow, but this is not a deviation from how we pick stocks.
Picking the long term winners is our area of expertise, not timing the market.
Assessing relative upside on a multi-year approach to determine new buys and sells for the portfolio
Revenue reserves:
Smaller Companies revenue reserve as at 31st January 2020 was £ 6,004,000 which provides approximate cover of 1.4x
the 2019 dividend rate.
Source: J.P. Morgan Asset Management as of 13 May 2020. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the
publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.
26 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONCOVID-19 – Portfolio changes
Buys
– Adding to existing high conviction holdings – Media, Construction, Retail, Technology
– New opportunities created by share price volatility – Industrials, Leisure, Technology
Sells
– Position reduction due to relative valuation – Leisure, Construction, Real estate
– Sold due to preferred opportunities elsewhere – Transport, Financials
Gearing
– Reduced to provide firepower for opportunities (placings/share price volatility)
Already starting to be utilized
Highly selective participation in placings to date
Source: J.P. Morgan Asset Management as of 30 June 2020. The portfolio is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion
of the investment manager without notice.
27 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONLong term investment performance
Cumulative returns 30 June 2020 (%)
450%
400% JPMorgan Smaller Companies Investment Trust NAV
350% Benchmark
300%
250%
200%
+107%
150%
100% Share price discount to NAV is 13.4%
50%
Oct 2009 Oct 2010 Oct 2011 Oct 2012 Oct 2013 Oct 2014 Oct 2015 Oct 2016 Oct 2017 Oct 2018 Oct 2019
...long term alpha generation by current portfolio managers
Source: Bloomberg, J.P. Morgan Asset Management. Data from 31 October 2009 – 30 June 2020. Benchmark changed from the FTSE Smaller Companies Index ex IT to the NUMIS Smaller
Companies Index plus AIM ex IT on 1 January 2019. NAV returns are net of fees, in GBP, with income reinvested. All indices in sterling and include reinvested dividends. Indices do not include fees or
operating expenses and are not available for actual investment. Returns are cumulative.
Past performance is not a reliable indicator of current and future performance.
28 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONSummary
Opportunities for extraordinary growth by small and mid cap companies
Robust, disciplined process. Established and refined over three decades
Strong long term trust performance vs. benchmark and peers
Past performance is not a reliable indicator of current and future performance.
29 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONAppendix 30 | FOR PROFESSIONAL CLIENTS | NOT FOR RETAIL USE OR DISTRIBUTION
Performance
JPMorgan Smaller Companies Investment Trust plc as of 30 June 2020
Annualised performance, net of fees (%)
One Three Five
Three months YTD
year years years
JPMorgan Smaller Comp. NAV (debt at fair value) 22.00 -20.14 0.08 6.98 7.22
JPMorgan Smaller Comp.share price 21.47 -30.16 2.13 10.23 8.29
NUMIS Smaller Companies Index plus AIM ex IT * 19.17 -19.78 -10.74 -3.54 2.11
Excess return (NAV) +2.37 -0.45 +12.12 +10.91 +5.00
Calendar year performance, net of fees (%)
2015 2016 2017 2018 2019
JPMorgan Smaller Comp. NAV (debt at fair value) 20.37 -0.95 31.62 -13.64 49.21
JPMorgan Smaller Comp. share price 26.03 -6.69 36.41 -9.04 67.53
NUMIS Smaller Companies Index plus AIM ex IT * 12.99 12.54 15.61 -13.80 22.14
Excess return (NAV) +6.53 -11.98 +13.85 +0.19 +22.14
Source: J.P. Morgan Asset Management/Morningstar. Net asset value performance data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in
GBP. NAV is the cum income NAV with debt at fair value, diluted for treasury and/or subscription shares if applicable, with any income reinvested. Share price performance figures are calculated on a mid market basis in
GBP with income reinvested on the ex-dividend date. The performance of the company's portfolio, or NAV performance, is not the same as share price performance and shareholders may not realise returns which are
the same as NAV performance. Indices do not include fees or operating expenses and you cannot invest in them. Geometric excess returns. Periods over one year are annualised. *Benchmark changed from the FTSE
Smaller Companies Index ex IT to the NUMIS Smaller Companies Index plus AIM ex IT on 1st January 2019. Past performance is not a reliable indicator for current or future results.
31 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONPremium/Discount to NAV
JPM Smaller Companies Investment Trust plc
0
-5
-10
-15
-20
-25
-30
-35
Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Jun '18 Sep '18 Dec '18 Mar '19 Jun '19 Sep '19 Dec '19 Mar '20 Jun '20
Source: Bloomberg. Data from 31 December 2016 to 30 June 2020.
Past performance is not a reliable indicator for current and future results.
32 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION5 years' historic gearing level vs. benchmark
JPM Smaller Companies Investment Trust plc
Gearing Level Index
20% 6,000
Month end gearing level - LHS
Old benchmark level - RHS
16%
New benchmark level - RHS
5,000
12%
8%
4,000
4%
0% 3,000
May 15 Sep 15 Jan 16 May 16 Sep 16 Jan 17 May 17 Sep 17 Jan 18 May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20
Source: Bloomberg, J.P. Morgan Asset Management
As at 30 June 2020 (weightings exclude cash/cash equivalents). Investment trusts may utilise gearing which will exaggerate market movements both down and up which could mean sudden and large falls in value. For
further details, please refer to the trust’s annual report and accounts. Gearing is the ability to borrow money to invest that money on behalf of the shareholders.
Past performance is not a reliable indicator for current and future returns.
33 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONBenefits of mid & small cap strategy in an actively managed closed ended structure
Benefits Reserves provide the ability to smoothing income return
Pence per share
7
Liquid access to a less
No inflows/ outflows Special dividend
liquid asset class
6 Dividend
Earnings per share
5 Net revenue reserves per share (RHS)
Reserves provide the ability
Active use of gearing to
to smoothing income return
enhance returns 4
for shareholders
3
Independent Board of
Higher disclosure 2
Directors provide oversight
1
Share buybacks at a Opportunity for investors to
0
discount to NAV accretive buy shares at a discount to
to shareholders NAV
…with the opportunity for active managers to add value in under-researched companies
Source: J.P. Morgan Asset Management. All figures based on the current trust total shares, after the 5 for 1 rights issue which lapsed in 2017. Data as at 31 December 2019.
Past performance is not a reliable indicator for current and future results.
34 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONJ.P. Morgan International Equity Group – Drawing on resources around the world
Malcolm Smith
Head of the International Equity Group
Quantitative Research* Fundamental Research
10 years average industry experience 19 years average industry experience
Nick Horne Mark Ferguson
Head of Global Structured Equity Group Global Head of Equity Research
Christian Pecher David Small
Philippa Clough Asia Head of Research North America Head of Research
Head of Quantitative Research - London 14 Asia Research Analysts 25 North America Research Analysts
7 Quantitative Research Analysts
Maciej Wasilewicz Shumin Huang & Giovanni Carriere
Won Choi Europe Head of Research Emerging Markets Heads of Research
Head of Quantitative Research – New York 13 Europe Research Analysts 29 Emerging Market Research Analysts
7 Quantitative Research Analysts ^^^
10 Product Analysts*
Portfolio Management
19 years average industry experience
56 Portfolio Managers**, supported by a team of 12 Associate Portfolio Managers
Managing Global, International^, Europe & UK Equity Portfolios
Investment Specialists Implementation* Trading & Data Scientists***
19 years average industry experience 19 years average industry experience 21 years average industry experience^^
Frances Gerhold James Ford Kristian West
11 Investment Specialists in Asia, Europe & the US 10 Implementation Specialists 31 Equity Traders
7 Trading Analytics & Strategy
Supported by a team of 14
7 Data Scientists
Data as at 30 June 2020. * Some of the team members have additional PM responsibilities. Quantitative research team for New York includes VP & above **Some of the team members have additional
Implementation, Quantitative Research or Analyst roles. ^ International is Global ex-US. ^^ex-data scientists. *** Trading & Data scientists details are as of March 31, 2020. ^^^ VP & above. Note this
illustrates the resources available and does not necessarily reflect reporting lines
35 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONEuropean Small and Mid Cap team
Continental Europe UK Small & Mid Cap
Francesco Conte Guy Anderson Georgina Brittain
Industry: 31 yrs Industry: 18 yrs Industry: 25 yrs
Firm: 21 yrs Firm: 8 yrs Firm: 25 yrs
Ed Greaves Katen Patel Ed Hezlet
Industry: 13 yrs Industry: 15 yrs Industry: 5 yrs
Firm: 9 yrs Firm: 7 yrs Firm: 5 yrs
Jack Featherby Anthony Lynch Manasij Hajra
Industry: 6 yrs Industry:Portfolio implementation
Dedicated team ensures efficient portfolio implementation, in collaboration with our award-winning trading desk
Implementation team Trading team
Guideline management
Corporate actions
Account on/off boarding
Cashflow monitoring
Prime broker interactions
Portfolio reporting
Source: J.P. Morgan Asset Management. Data as at 31 December 2019. 1Markets Choice Awards: a peer-based survey of exchanges, sell-side desks, institutional buy-side investors, hedge funds and
technology providers. 2Financial News Trading & Technology Awards
Past performance is not a reliable indicator of current and future results.
37 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONIntegrating ESG into our investment approach
Quantitative ranking Fundamental analysis
Fundamental
analysis to
Third party data sources integrated Bottom-up ESG analysis
understand
into proprietary methodology impact Materiality focus
Data can be incomplete
Improvement / deterioration as
well as absolute score Understand transmission
mechanisms
In-house ‘red flags’ model
– Corporate governance Stewardship
– Forensic accounting Informs scoring
Partnership with specialist ESG team
– Financial distress
What is the impact on shareholder
Challenge value
data
...systematic and explicit consideration of ESG factors throughout the investment process
ESG - Environmental, Social, & Governance.
38 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONThe UK Edge Image source: J.P. Morgan Asset Management. 39 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
Biography
Georgina Brittain, Managing Director, is a portfolio manager for small and mid cap strategies within the J.P. Morgan Asset
Management International Equity Group – Behavioural Finance Team, based in London. Georgina is a fund manager for the JPM
UK Smaller Companies Fund, the JPMorgan Smaller Companies Investment Trust and co-manager for the JPMorgan Mid Cap
Investment Trust. She is also a co-manager for our range of European small cap funds. An employee since 1995, Georgina was
previously an analyst in the UK research department. Georgina obtained an M.A. in Classics from Oxford University, and earned
a Diploma in Law from City University, London. She is a qualified barrister.
Katen Patel, Executive Director, is a portfolio manager for small and mid cap strategies within the J.P. Morgan Asset
Management International Equity Group – Behavioural Finance Team. He is the co-manager of the JPM UK Smaller Companies
Fund, the JPM UK Equity Income Fund, the JPMorgan Smaller Companies Investment Trust and the JPMorgan Mid Cap
Investment Trust. An employee since April 2013, he previously worked at HSBC Bank Plc in a European equity sales role. He
obtained a B.Sc. in Management from the London School of Economics. Katen is a CFA charterholder.
… expertise, experience and the backing of a large group
40 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONInvestment objective and risk profile
JPMorgan Smaller Companies Investment Trust plc (the Company) as at September 2019
Investment objective
Aims to provide capital growth from UK listed smaller companies. The Company aims to provide capital appreciation for shareholders from a
diversified portfolio of UK listed small companies, emphasising capital rather than income growth. Returns are principally determined by the
performance of the investments made by The Company, although The Company has the ability to use borrowing to gear the portfolio within the
range of 10% net cash to 15% geared in normal market conditions. Gearing may magnify gains or losses experienced by The Company.
Key Risks
External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds could decline at the same time,
or fluctuate in response to the performance of individual companies and general market conditions.
This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.
This Company invests in smaller companies which may increase its risk profile.
The share price may trade at a discount to the Net Asset Value of the Company.
The single market in which the Company primarily invests, in this case the UK, may be subject to particular political and economic risks and, as
a result, the Company may be more volatile than more broadly diversified Company's.
Companies listed on AIM tend to be smaller and early stage companies and may carry greater risks than an investment in a Company with a full
listing on the London Stock Exchange.
Please refer to the Investor Disclosure Document, latest annual report, and Key Information Document (KID) for more information relating to the Company.
41 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTIONImportant information For Professional Clients only – not for Retail use or distribution. This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Investor Disclosure Document, Key Features and Terms and Conditions and Key Information Document can be obtained free of charge from JPMorgan Funds Limited or www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP. Material ID: 0903c02a82895403 42 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
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