JPMorgan UK Small Cap Growth & Income

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN SMALLER COMPANIES INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED
31ST JANUARY 2021

Legal Entity Identifier: 549300PXALXKUMU9JM18

Information disclosed in accordance with DTR 4.2.2

Chairman's Statement

Investment Review

Your board hopes that you have fared well over the challenging past six months. It was most disappointing that your Company was not able to hold its AGM as usual but the board was grateful to the considerable number of shareholders who voted nonetheless. The continuation motion was well supported and it is gratifying that your managers have responded by continuing to perform well. They have been deft in their positioning of investments, taking advantage of the attractive valuation of many UK companies and looking through the various challenges facing the global economy and those specific to the UK. It is pleasing to report that your Company has continued to perform strongly producing a return to shareholders of +42.9% in the six months period. The total return on net assets was +30.9%, outperforming the Numis Smaller Companies plus AIM (excluding Investment Trusts) Index which rose by +28.7%. The greater return for shareholders reflects a significant narrowing of the share price discount to net asset value from 13.7% at the start of the financial year to 6.0% at the end of the half year. It is gratifying, and perhaps surprising, to note that your company's net asset value has comfortably surpassed the pre Covid levels and made a new all time high during the period.

I am happy to report that over the period from 31st January 2021 to 23rd March 2021, the Company's assets have continued to rise with the total return on net assets increasing by 7.2%. This compares to a rise in the Company's benchmark of 8.2%. The discount to net assets has also continued to narrow to 4.4% as at 23rd March 2021, increasing the return to shareholders of 8.9%.

In their report, your Investment Managers provide further detail on portfolio performance, positioning and attribution, together with a commentary on markets.

Loan Facility and Gearing

During the period, the Company renewed the flexible borrowing facility of £25 million in place with Scotiabank. Under the terms of the agreement, the Company has the option to increase the facility commitment amount to £35.0 million in two increments of £5.0 million subject to certain conditions. In December 2020, the Board increased the amount drawn down on the facility to £30.0 million, therefore taking advantage of the accordion facility in place. Following the strong growth in assets this gave your managers the ability to maintain gearing as a percentage of total funds.

During a period of low interest rates, the use of gearing is an attractive way of amplifying the effect of rising markets, but inevitably increases the risk of loss if markets fall. The Company has maintained a fairly constant level of gearing, with the Board giving the Investment Managers flexibility to adjust the gearing tactically within guidelines. During the reporting period, the Company's gearing ranged from 5.2% to 10.7%, ending the half year at 9.8% geared as your managers took advantage of perceived attractive valuations. As at 23rd March 2021 the Company's gearing was 9.2%, with total borrowings of £30.0 million.

Share buybacks

During the six months to 31st January 2021 it was not necessary for the Company to repurchase any shares as the share price discount to net asset value narrowed considerably following the Company's strong investment performance. The board's objective remains to reduce the volatility of the discount, acting in the best interests of shareholders by making purchases should supply and demand for shares become unbalanced.

Board

As noted in the previous Annual Report, we welcomed Gordon Humphries as Chairman of the Audit Committee following the retirement of Andrew Robson at the Annual General Meeting in November 2020. Given the recent changes to the Board, its composition and size are considered sufficient for the time being and no further changes are anticipated over the next 12 months.

Outlook

The big macro themes dominate. World stock markets have generally performed strongly, responding positively to the extreme but necessary measures taken by government and central banks. Indeed, the recent $1.9 trillion package announced by President Biden amounts to a staggering 9% of US GDP. The impressive speed in which vaccines have been developed and, in many cases, given to large swathes of the population has understandably further bolstered confidence in economic recovery. However, it is yet to be seen what the longer term effects of these measures will have on factors such as sustainable growth, inflation, employment and society as a whole. Policy makers have a delicate balance between ensuring a return to normality and somehow paying back the huge debts incurred without choking off recovery. The UK has the additional challenge of reshaping its relationship with Europe as, despite the success of achieving a Brexit deal, there is much detail yet to be agreed and new trade agreements to be forged elsewhere.

However, below the headlines and viewed through the lens of a stock picker, your managers perceive opportunity and in their report they make a strong case for the current attractiveness of UK smaller companies. A key attraction of smaller companies is their ability to make their own success, often in the face of macroeconomic headwinds. This has been recognised to some extent by the recent relative share price outperformance of smaller companies since the emergence of the pandemic but valuations remain attractive. The best performing markets such as the US have been driven by a relatively small number of stocks and there is a good case for increasing diversification through an attractively valued yet out of favour asset class such as UK smaller companies.

Andrew Impey

Chairman

25th March 2021

INVESTMENT MANAGERS' REPORT

Performance and Market Background

The first half of your Company's financial year was naturally dominated by COVID-19. The impact of the pandemic on the UK caused the economy to contract by 9.9% in 2020. As feared, the winter months led to a second wave of infections but, as hoped, the scientific community succeeded in producing vaccines against the virus. This breakthrough led to dramatic returns in stockmarkets, with the Numis Small Cap plus AIM (ex Investment Companies) Index rising 20.5% in the last two months of 2020 after the first vaccines were announced. Further positive news on Christmas Eve was the signing of a trade deal with the EU. While at best described as 'thin', this trade deal was a better outcome for the UK economy than the threatened no deal.

Against this backdrop, your Company produced a total return on net asset value of +30.9% in the six month period, compared to a return of +28.7% for the Numis Small Cap plus AIM (ex Investment Companies) Index. The share price total return was higher at +42.9%, as the discount of the share price relative to net assets was significantly reduced, due to renewed interest in the UK equity market as the re-opening of our economy drew nearer.

Portfolio

In our last Annual Report, we described our investment approach during the pandemic. We sought to maintain a balance within the portfolio between more defensive investments suffering minimal or no impact from COVID-19 and lock down measures, and those companies which were heavily affected by the pandemic, but which we believed would come out the other side as stronger companies with better competitive positions.

The benefit of this strategy can be seen in the individual performance of a number of your Company's holdings. Strong contributors to performance included Jet2, the tour operator, and OSB, the buy-to-let banking specialist, both of which had been hard hit at the start of the pandemic. In addition, our holdings in some more defensive companies such as the video gaming companies Codemasters and Sumo continued to be notable contributors to performance, and just post the period end Codemasters was taken over at a significant premium. Other positive contributors included Ergomed, a provider of drug development services to the pharmaceutical industry, and the retailer Watches of Switzerland. Key detractors included not owning William Hill, which received a bid, nor the green energy companies ITM Power and Ceres Power. In addition, our positions in both Dunelm and Games Workshop were detractors. While both had enjoyed a very strong year of excellent financial performance, they did not participate in the market rally at the end of 2020.

As an end to lockdowns drew nearer, we added a number of new holdings to the portfolio over the period. This included companies which we expect to benefit from the re-opening of the economy, such as the bus company National Express, the pub company Marston's, and Dixons Carphone, the retailer. In addition, perhaps surprisingly during such a tumultuous year, we participated in a number of IPOs including Bytes Technology, a technology reseller, HeiQ, an innovative textile manufacturer, and Fonix, a mobile payments and messaging company. There is a strong pipeline of exciting IPOs in 2021, and we have already participated in three.

Outlook

2020 has taught us all many things, not least to be very wary of forecasting the future. Having said that, we see several reasons to be optimistic on the outlook for the UK stockmarket. In the near term, the UK economy will decline in the first quarter of 2021, brought about by the third national lockdown, which we expect to be followed by a rise in insolvencies in small to mid-sized unquoted companies, and by unemployment levels potentially reaching 7% when the furlough scheme ends. Inflationary risks are also rising, and the record deficit continues to grow. And yet - vaccines are being rolled out at an impressive. rate, bringing normality tantalisingly close, as evidenced by the Government's roadmap. Brexit is done, and a trade deal with the EU is in place. While far from satisfactory or comprehensive, it does provide UK companies with a level of certainty that has been lacking for the last five years. There are also some counter-intuitive effects of the lockdowns. The extraordinary way of life we endured in 2020 has led to a huge increase in the savings ratio. Between January and October last year household deposits (savings as a proportion of disposable income) increased by £113 billion, and estimates are for the figure for 2020 to be closer to £150 billion.

We believe the UK economy is set for a strong period of recovery, driven in no small part by consumers' desire to get out of their homes and start spending again. We have positioned the portfolio to benefit from this and have a [14%] overweight to the UK economy relative to our benchmark. We are also at the top of our gearing range of 10%. Current economic forecasts for the year suggest GDP growth of around 5% for 2021, despite the lockdown in the first quarter, which gives an idea of the potential strength of pent-up demand. Interest rates are set to remain extremely low, and Central Banks' largesse to remain high. We do not believe the valuation of the UK stockmarket reflects this, with the Numis Small Cap plus AIM Index on less than 15x price/earnings ratio for 2021 on what are not yet fully recovered earnings. Market forecasts for earnings growth for smaller companies in 2021 and 2022 are for 23% and 24%.

For nearly 5 years, since the Referendum in 2016, the UK has been largely shunned by the global investor - Brexit, electoral uncertainty and more recently a global pandemic which hit our service-based economy especially hard all had a part in this. Viewpoints do not change overnight, but reality as we see it, has changed - the UK has a Brexit deal (comprehensive or not), a strong government majority and the vaccine roll out is progressing impressively well. Investors are slowly regaining interest in the UK stockmarket, and the domestic bias of the smaller companies arena should be a benefit to them as the economy rebounds and normality returns.

Georgina Brittain

Katen Patel

Investment Managers

25th March 2021

Interim Management Report

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

Principal Risks and Uncertainties

During 2020 and into 2021, the emergence of the virus COVID-19 (coronavirus) has created significant uncertainty for markets, and therefore risk to the value of investments and volatility. Other than this, the principal risks and uncertainties faced by the Company have not changed significantly and fall into the following broad categories: corporate strategy; investment and performance; discount; smaller company investment; political and economic; investment management team; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational and counterparty failure; cybercrime; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Financial Statements for the year ended 31st July 2020.

Related Parties Transactions

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

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio (including its liquidity) and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half year financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

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 with FRS 104 'Interim Financial Reporting' 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 31st January 2021, as required by the UK Listing Authority Disclosure 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 Listing Authority Disclosure 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 and explained in the financial statements; and

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

and the Directors confirm that they have done so.

For and on behalf of the Board

Andrew Impey
Chairman

25th March 2021

statement of comprehensive income

for the six months ended 31st January 2021

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

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

The net return after taxation represents the profit for the period and also the total comprehensive income.

Statement of changes in equity

for the six months ended 31st January 2021

¹ This reserve forms the distributable reserve of the Company and may be used to fund distributions to investors.

statement of financial position

at 31st January 2021

Company registration number: 2515996.

statement of cash flows

for the six months ended 31st January 2021

Notes to the financial statements

for the six months ended 31st January 2021

1.     Financial statements

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

The figures and financial information for the year ended 31st July 2020 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies including the report of the auditors which was unqualified and did not contain a 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 Reporting Standard 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 Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st January 2021.

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 financial statements for the year ended 31st July 2020.

3.     Return per share

4.     Dividend paid

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

No interim dividend has been declared in respect of the six months ended 31st January 2021 (2020: nil).

5.     Net asset value per share

25th March 2021

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

JPMORGAN FUNDS LIMITED

ENDS

A copy of the 2021 Half Year Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The half year will also shortly be available on the Company's website at www.jpmsmallercompanies.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.