Annual Report JPMorgan US Smaller Companies Investment Trust … · 2017-02-03 · At 31st December...

Annual Report2011JPMorgan US Smaller Companies Investment Trust plc

Annual Report & Accounts for the year ended 31st December 2011

Features

Contents

About the Company

1 Financial Results2 Chairman’s Statement

Investment Review

5 Investment Manager’s Report7 Summary of Results8 Performance10 Ten Year Financial Record11 Ten Largest Investments12 Investment Activity12 Sector Analysis13 List of Investments

Directors’ Report

15 Board of Directors17 Directors’ Report17 Business Review23 Corporate Governance28 Directors’ Remuneration Report

Accounts

29 Statement of Directors’Responsibilities

30 Independent Auditor’s Report31 Income Statement32 Reconciliation of Movements in

Shareholders’ Funds33 Balance Sheet34 Cash Flow Statement35 Notes to the Accounts

Shareholder Information

53 Notice of Annual General Meeting56 Glossary of Terms and Definitions57 Information about the Company

Objective

Capital growth from investing in US smaller companies.

Investment Policy

The portfolio is a product of the investment team’s bottom-up investmentapproach and disciplined portfolio construction. The investment philosophy issimple and straightforward; to invest in companies that have a sustainablecompetitive advantage, run by competent management teams who have a trackrecord of success and are good stewards of capital; and to focus on owning equitystakes in businesses that trade at a discount to their intrinsic value.

Benchmark

The Russell 2000 Index total return with net dividends reinvested, expressed insterling terms. This index is a smaller companies’ index and is rebalanced annually torepresent the bottom 10% by market capitalisation of all quoted companies in the US.Comparison of the Company’s performance is made with this benchmark.

Capital Structure

At 31st December 2011, the Company’s share capital comprised 5,163,623 Ordinaryshares of 25p each.

Continuation Vote

In accordance with the Company’s Articles of Association, the Directors are required topropose a resolution that the Company continue as an investment trust at the AnnualGeneral Meeting in 2015 and every fifth year thereafter.

Management Company

The Company employs JPMorgan Asset Management (UK) Limited to manage its assetsand act as Company Secretary. The investment team is situated in New York. Theportfolio manager, Glenn Gawronski, has been managing JPMAM’s US small cap coreactive strategy since September 2004. He worked on JPMAM’s micro cap investmentteam from 1999 to 2004. Mr Gawronski is supported by four experienced investmentprofessionals dedicated to US micro and small cap strategies as well as the widerJPMAM investment management team.

JPMorgan US Smaller Companies Investment Trust plc. Annual Report & Accounts 2011 1

Financial ResultsTotal returns (includes dividends reinvested)

Performancefor 3, 5 and 10 year periods ended 31st December 2011

–1.8%Return to shareholders

(2010: +32.3%)

+1.3%Return on net assets1

(2010: +33.2%)

–3.8%Benchmark return2

(2010: +30.5%)

A glossary of terms and definitions is provided on page 56.

1Source: J.P.Morgan.2Source: Russell Investments. The Company’s benchmark is the Russell 2000 Index total return with net dividendsreinvested, expressed in sterling terms.3Source: Morningstar.

JPMorgan US Smaller Companies share price3

JPMorgan US Smaller Companies net asset value3

Benchmark2

0

10

20

30

40

50

60

70

80

90

10 Year Performance5 Year Performance3 Year Performance

82.2

74.4

41.7

11.9 11.0

25.0

37.232.9

57.1

%

JPMorgan US Smaller Companies Investment Trust plc. Annual Report & Accounts 20112

Chairman’s Statement

Performance

In a year in which most asset classes had negative returns and US small capexperienced one of its worst quarters on record, I am pleased to report that our netasset value (NAV) per share rose by 1.3% in 2011. This return also comparedfavourably with our benchmark index, the Russell 2000, which fell by 3.8% in sterlingterms. Our share price fell by 1.8% over this same period, reflecting a small wideningof the discount.

These figures mask some difficult periods during 2011 for equity markets asgovernment finances on both sides of the Atlantic caused concern. In August anagreement was reached to raise the US debt ceiling but, without the offset of taxincreases or budget cuts, Standard & Poor’s downgraded the US credit rating andmarkets reacted badly. During the three month period to 30th September 2011 themore volatile small cap stocks were hit particularly hard, with the Russell 2000 indexfalling by 19.5% (in sterling terms) which was the fourth worst quarter on record forthe index. During the fourth quarter of 2011 equity markets rallied to recover somelost ground as investors were attracted by valuations on companies with strong cashflows and sound balance sheets. US markets also benefited from the flight of capitalfrom Europe as well as signs of economic recovery in the US.

This report marks the third anniversary of Glenn Gawronski and his team assumingresponsibility for managing the portfolio and it is a great pleasure to be able to reportthat over this three year period our NAV has increased by over 74.4% whichcompares with the Russell 2000 index increase of 41.7%.

Discount Management

Your Board is pleased to report that we were able to maintain a relatively stable shareprice discount to NAV (see Glossary of Terms and Definitions on page 56) for the yearas a whole by using our share buyback authority. During the latter part of 2011 asmarkets became more turbulent (as also occurred in the latter part of 2010) the dailymanagement of the discount proved difficult as both markets and currencies werevolatile and more importantly our shares lacked liquidity. As a result the discountwidened on very low volumes in September, before narrowing back to 9.5% at theyear end.

For the past several years, your Board has been authorised at the AGM to repurchasethe Company’s shares for cancellation. Your Board continues to seek this authority sothat we can maintain support of a stable discount. During the year the Companyrepurchased 100,987 shares for cancellation, representing 1.9% of the shares in issueat the beginning of the year.


Currency Hedging

Our underlying assets are denominated in US dollars and, through the fact we reportall valuations in sterling for calculating the NAV, we are exposed to fluctuations in theUS dollar/sterling exchange rate. The Board has the authority to reduce or eliminatethe exposure to fluctuating currencies through the use of currency hedging. Wereview our policy on this matter regularly but to date we have not carried out anyhedging and have no plans to do so in the immediate future.

Gearing

In April 2011 an agreement was signed with Scotiabank to provide a revolving creditfacility of US$10 million. As at 31st December 2011, this had all been drawn and theportfolio was 105% geared.

Auditor Review

During the year the Board undertook a competitive tender process to review theprovision of audit services. Following this process it was agreed that Grant ThorntonUK LLP should replace Ernst & Young LLP.

Company Broker

The Board has recently undertaken a comprehensive review of its brokingarrangements. Following this review, the Board has appointed Numis as Companybroker as it was felt that Numis, as a research-based firm, would have a goodunderstanding of our Company’s investment philosophy and assist in broadening theshareholder base.

Manager

Annually the Management Engagement Committee carries out a formal review of theManager. This review covers investment management, company secretarial,administrative and marketing services provided to the Company by JPMorgan AssetManagement (UK) Limited (‘JPMAM’) and includes the investment performancerecord, fee structure, management processes, investment style, resources and riskcontrol mechanisms. After full consideration, the Board has concluded that thecontinued appointment of the Manager on the terms agreed for provision of thoseservices is in the interests of shareholders as a whole.


Annual General Meeting

We are changing the location of our AGM to, we hope, a more convenient location forour shareholders. It will be held at 20 Moorgate, London EC2R 6DA on Tuesday,1st May 2012 at 2.30 p.m. The Investment Manager will give a presentation toshareholders in which he will review the past year and comment on the outlook forthe current year. Following the meeting some refreshments will be served which willprovide shareholders with the opportunity to meet the Directors and the InvestmentManager and ask any questions on the portfolio and performance.

If you have any detailed or technical questions, it would be helpful if you could raisethem in advance of the meeting by writing to the Company Secretary atFinsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. Shareholders who are unableto attend the AGM are encouraged to use their proxy votes. Shareholders arereminded that they are able to lodge their proxy votes electronically.

Outlook

The immediate outlook for US markets will be influenced by the forthcoming USPresidential elections in November as the recent failure of the bi-partisan ‘supercommittee’ to agree on budget cuts triggered automatic cuts in spending ofUS$100 billion. These automated cuts are deferred until after the election but itmeans that in the immediate aftermath the new US administration will need toaddress the burgeoning budget deficit, something it has failed to do on countlessoccasions.

Longer term the biggest issue facing investors will be sub-par economic growth andthe process of de-leveraging (debt repayment) that many of the developedeconomies, in particular the US, need to undergo; the challenge will be to figure outhow that impacts economies and markets. We continue to believe that GlennGawronski and his team are well equipped to cope with these challenges throughtheir disciplined investment process and focus on balance sheet strength. With such ahuge economy and large consumer base in the US the small cap sector will continueto create exciting growth opportunities and we believe that the team will be able toexploit opportunities produced by volatile markets.

Davina WalterChairman 21st March 2012

Chairman’s Statement continued


Investment Manager’s Report

Market Review

2011 was a challenging, up-and-down year, with the Russell 2000 Index ultimatelyfinishing down 3.8%, in sterling terms, for the year. The start to the year waspromising, as the Russell 2000 index found itself slightly above its pre-financial crisispeak at the end of April. Much of the strength early in the year reflected strongeconomic data points which reinforced confidence that both a US and global recoverywas taking place. A reversal ensued as the precarious state of government financeson both sides of the Atlantic dominated the headlines in August and September,resulting in steep declines in global markets. European politicians continued towrangle over the proper steps to resolve the solvency challenge faced by crisis-stricken countries, while Standard & Poor’s downgrade of the US credit rating to AA+from AAA set off speculation that a US and global recession was more likely. As of the3rd October low in the US equity market, the Russell 2000 was off 30% from its lateApril highs and down 22% in the calendar year, on pace to see its second worstannual drop on record. Beginning in early October, investors regained an appetite forrisk, as US data suggested that the crisis in Europe had yet to affect the domesticeconomy. Additionally, it became more evident that Eurozone countries were likely towork together, although a timeline and exact steps for resolution remained uncertain.The Russell 2000 Index bounced 22% from its 2011 low through year end, bringingthe full year decline to just under 4%.

Investment Performance

For the year to 31st December 2011, the total return on net assets was 1.3%, whichcompares with our benchmark, the Russell 2000 Index, which fell 3.8%, both insterling terms. The Company’s outperformance was driven almost entirely by stockselection. Most sectors contributed positively to the outperformance for the year,most notably Consumer Discretionary and Technology. Gains across sectors wereonly modestly offset by underperformance in Energy and Utilities.

2011 was a tough year for small cap investors, as the small caps lagged the large capswith a loss of 4.2% versus a rise of 1.5% for the Russell 1000, both in US dollar terms,marking the first year since 2007 that larger caps performed better than smaller.Within the Russell 2000 Index, higher market caps and higher quality names tendedto outperform for the year, aiding active managers in their pursuit of outperformancerelative to their benchmarks.

Portfolio Positioning

Throughout 2011, we meaningfully increased our exposure to the ConsumerDiscretionary sector, resulting in a sizeable overweight position relative to thebenchmark. We also increased our exposure to the Health Care sector, but remainunderweight in that sector. Additions to these sectors have been at the expense ofmost other sectors, especially Consumer Staples and Energy. We continue to beunderweight Technology, which in some ways is indicative of our investment processand style. Within Technology, we have a difficult time finding companies that possessa sustainable competitive advantage, particularly in light of the rapid change inthis sector.

Glenn GawronskiGlenn Gawronski has been with J.P. Morgan for13 years and has been responsible for managingthe Company’s assets since November 2008. Heworked for 5 years as a senior analyst in the USmicro cap team until 2004 when he waspromoted to be the portfolio manager forJPMorgan Asset Management’s US small capcore active strategy. Glenn’s investmentphilosophy was honed during his time as ananalyst on the USmicro cap team and isconsistent with the investment process that hadmade the strategy successful in prior years.

Glenn is supported by a team of four investmentprofessionals:

Don San JoseDon San Jose has been with J.P. Morgan for11 years, first as a research analyst and for thepast 8 years as Glenn’s partner on the US smallcap core active strategy.

Justin HowellJustin has been with J.P. Morgan since 2003.He aids in the management of the JPMorgansmall cap active core strategy and waspreviously a research associate coveringhealthcare services, biotech and industrialcyclical companies.

Dan PercellaDan has been with J.P. Morgan since 2008.Hewas previously a member of institutionalinvestor-ranked equity research teams coveringthe transportation sector at other investmentfirms. Prior to equity research, Dan worked asan analyst at an economic consulting firm.

Jon BrachleJon has been with J.P. Morgan since 2007. Hewas previously a research assistant coveringsoftware and IT services companies for the USLarge Cap Equity Group.


Our sector weights remain a by-product of our bottom-up investment analysis andour disciplined approach to portfolio construction. We adhere to a consistentinvestment process, which focuses on identifying companies that possess asustainable competitive advantage, have a durable business model and are overseenby a competent management team with a track record of success. Finally, we seek toacquire equity stakes in these businesses when they trade at a discount to what wewould deem to be their intrinsic value.

Portfolio Highlights

The most significant contributors to performance were Epoch Holding Corp. andPapa Johns International. Epoch, an investment advisory and investmentmanagement company, contributed positively to overall results with a return of 48%during the year. Its shares outperformed as the company grew its assets undermanagement by 34% during the year, despite declines in most global equitymarkets. Papa John’s, which operates and franchises pizza delivery and carry-outrestaurants in the United States and international markets, contributed positivelywith a return of 36% during the year. The company’s shares outperformed as itposted strong results throughout the year, including solid same-store sales gains.

The significant detractors to performance were Greenhill & Co. and Janus CapitalGroup. Greenhill, an independent investment bank that provides financial adviceon mergers, acquisitions and restructurings to corporations, partnerships andgovernments around the world, contributed negatively as the shares fell 55%during the year. Full year results disappointed relative to initial expectations givena weak overall advisory environment. Janus Capital, a global asset managementfirm offering individual investors and institutional clients asset managementservices, contributed negatively with a fall of 51% over the year. Results werenegatively impacted by a 13% drop in assets under management and challengingrelative investment performance in key fundamental equity strategies.

Market Outlook

Looking forward, we suspect macro economic events will continue to dominateheadlines and the trajectory of the market will take several twists and turns.A resolution to the European debt crisis continues to unfold and global marketsare still susceptible to any news that veers away from forward progress. We areencouraged that US GDP forecasts continue to move upwards, supported by animproving trend in leading economic indicators. The upcoming US Presidentialelections are a wildcard, which could result in high-profile politicalmanoeuvrering or government inaction. Fundamentals for most companiescontinue to improve, albeit at a more muted pace and the risk/reward trade-offon most stocks remains fairly balanced. We continue to believe that stockselection remains critical and plan to stay disciplined with regards to ourinvestment strategy.

Glenn GawronskiInvestment Manager 21st March 2012

Performance attribution for theyear ended 31st December 2011

% %

Contributions to total returns

Benchmark return –3.8

Asset allocation –0.1Stock selection 8.6Gearing/cash –1.0

Investment manager’scontribution 7.5

Portfolio total return 3.7

Management fee/other expenses –1.9

Share repurchases 0.2Performance fee –0.7

Other effects –2.4

Return on net assets +1.3

Effect of increasein discount –3.1

Return to shareholders –1.8

Source: Xamin, JPMAM and Morningstar.

All figures are on a total return basis.

Performance attribution analyses howthe Company achieved its recordedperformance relative to the benchmark.

A glossary of terms and definitions isprovided on page 56.

Investment Manager’s Reportcontinued


2011 2010

Total returns for the year ended 31st DecemberReturn to shareholders –1.8% +32.3%Return on net assets1 +1.3% +33.2%Benchmark return2 –3.8% +30.5%

% change

Net asset value, share price anddiscount at 31st DecemberNet asset value per share 1,019.2p 1,005.8p +1.3Share price 922.0p 939.0p –1.8Share price discount to net asset value per share 9.5% 6.6%Shareholders’ funds (£’000) 52,630 52,950 –0.6

Revenue for the year ended 31st DecemberNet revenue return attributable to shareholders (£’000) 187 383Return per share 3.57p 7.09pShares in issue 5,163,623 5,264,610

Actual Gearing Factor 105.0% 100.9%

Total Expense Ratio3 1.79% 1.66%

Total Expense Ratio including performance fee payable4 2.19% 1.88%


1Source: J.P. Morgan.2Source: Russell Investments. The Company’s benchmark is the Russell 2000 Index total return with net dividends reinvested, expressed in sterling terms. 3The Total Expense Ratio (‘TER’) is the ratio, expressed in percentage terms, of the management fee plus all other operating expenses, but excluding finance costs and anyperformance fee payable, to the average of the month end net assets during the year. The TER is calculated in accordance with guidance issued by the Association of InvestmentCompanies.4The Total Expense Ratio including performance fee payable is the ratio, expressed in percentage terms, of the management fee plus all other operating expenses and anyperformance fee payable, but excluding finance costs, to the average of the month end net assets during the year.

Summary of Results


Performance

Performance Relative to BenchmarkFigures have been rebased to 100 at 31st December 2001

Source: Morningstar/Russell.

JPMorgan US Smaller Companies – share price.

JPMorgan US Smaller Companies – net asset value.

The benchmark is represented by the grey horizontal line.

Ten Year PerformanceFigures have been rebased to 100 at 31st December 2001




Benchmark.

50

75

100

125

150

175

20112010200920082007200620052004200320022001

60

70

80

90

100

110

20112010200920082007200620052004200320022001


Discount Performance

Source: Datastream (using monthly data).

JPMorgan US Smaller Companies – discount.

%

–25

–20

–15

–10

–5

0

20112010200920082007200620052004200320022001


At 31st December 2001 2002 20031 20041 2005 2006 2007 2008 2009 2010 2011

Shareholders’ funds (£’000) 90,403 59,879 78,826 81,454 96,028 93,192 67,911 34,475 41,399 52,950 52,630

Net asset value per share (p) 767.5 508.3 706.0 795.5 945.2 917.3 865.1 586.2 755.2 1,005.8 1,019.2

Share price (p) 672.0 452.0 603.0 651.5 834.5 824.0 761.0 506.0 710.0 939.0 922.0

Shares in issue2 11,779,480 11,779,480 11,164,480 10,239,480 10,159,480 10,159,480 7,850,480 5,881,367 5,482,110 5,264,610 5,163,623

Year ended 31st December 2001 2002 20031 20041 2005 2006 2007 2008 2009 2010 2011

Gross revenue (£’000) 334 270 250 318 385 300 285 297 322 853 719

(Loss)/return per share (p) (12.01) (10.89) (1.33) (1.35) (0.97) (1.49) (1.72) 2.53 (0.62) 7.09 3.57

Dividends per share (p) nil nil nil nil nil nil nil nil nil nil nil

Discount (%)3 12.4 11.1 14.6 18.1 11.7 10.2 11.3 13.6 6.0 6.6 9.5

Actual gearing (%) 104.2 106.0 108.3 101.2 104.8 112.5 103.2 93.2 98.7 100.9 105.0

Total expense ratio (%)4 1.27 1.42 1.43 1.43 1.38 1.30 1.40 1.49 1.75 1.66 1.79

Total expense ratio including performance fee payable (%)5 2.33 1.89 2.66 2.40 2.56 2.02 1.40 1.49 1.94 1.88 2.19

US dollar/sterling exchange rate 1.46 1.61 1.79 1.92 1.73 1.96 1.99 1.44 1.61 1.57 1.55

Annual returns to 31st December 2001 2002 20031 20041 2005 2006 2007 2008 2009 2010 2011

Return to shareholders (%)5 +11.2 –32.7 +33.4 +8.0 +28.1 –1.3 –7.6 –33.5 +40.3 +32.3 –1.8

Return on net assets (%)3,5 +11.9 –33.8 +38.9 +12.7 +19.0 –3.0 –6.4 –32.1 +29.0 +33.2 +1.3

Benchmark return (%)6 +4.9 –28.3 +32.1 +10.0 +16.6 +3.5 –3.5 –8.6 +12.9 +30.5 –3.8


1With effect from 1st January 2004, 90% of management fees and finance costs have been charged to capital. Figures prior to 2003 have not been restated.2Excludes any shares held in Treasury.3Calculated on the assumption that any shares held in Treasury have been reissued in accordance with the Board’s policy on the reissuance of Treasury shares.4The Total Expense Ratio is the ratio, expressed in percentage terms, of the management fee plus all other operating expenses, but excluding finance costs and any performance feepayable, to the average of the month end net assets during the year (2008 and prior years: the average of the opening and closing net assets).5The Total Expense Ratio including performance fee payable is the ratio, expressed in percentage terms, of the management fee plus all other operating expenses plus anyperformance fee payable, but excluding finance costs, to the average of the month end net assets during the year (2008 and prior years: the average of the opening and closing netassets).6Source: J.P.Morgan.7Source: Russell Investments.

Ten Year Financial Record


At At 31st December 2011 31st December 2010

Valuation Portfolio Valuation PortfolioCompany2 Sector £’000 %3 £’000 %3

Jarden Consumer 1,464 2.8 1,116 2.1Jarden provides a broad range of consumer products. The company sells branded products Discretionarythrough a variety of distribution channels, including club, department store, drug, grocery, massmerchant, sporting goods and speciality retailers, as well as direct to consumers.

Penn National Gaming4 Consumer 1,416 2.7 891 1.7Penn National Gaming owns and operates Charles Town Races in West Virginia which features Discretionaryslot machines, casinos in Mississippi, and a riverboat gaming facility in Louisiana. The company alsoowns racetracks and off-track wagering facilities in Pennsylvania, as well as managing a gaming facilityin the Province of Ontario, Canada.

Coventry Healthcare Health Care 1,359 2.6 1,115 2.1Coventry Healthcare is a managed health care company operating health plans and insurancecompanies under a variety of names. The company provides health maintenance organisation,preferred provider organisation, point of service, Medicare and Medicaid and Network Rental tomembers in markets throughout the Midwest, Mid-Atlantic, and Southeast United States.

Calamos Asset Management Financial Services 1,334 2.5 1,431 2.7Calamos Asset Management provides investment advisory services to institutions and individualsprimarily in the United States. The company applies an investment process centred on riskmanagement across investment strategies within the equity, balanced, convertible, high yield, andalternative asset classes.

Silgan Materials & 1,322 2.5 947 1.8Silgan manufactures consumer goods packaging products. The company produces steel and Processingaluminium containers for human and pet food, custom designed plastic containers for variousmarkets, plastic closures and caps, thermoformed plastic tubs and speciality packaging items.Silganmarkets its products in North America.

ProAssurance Financial Services 1,309 2.5 1,208 2.3ProAssurance is a risk management and claims defence company with a licence to write businessacross the United States. The company provides medical professional liability insurance to policyholders throughout the United States.

Team Industrial Services Producer Durables 1,210 2.3 931 1.8Team Industrial Services provides specialised industrial services, including leak repair, hot tapping,emissions control, concrete repair, energy management and mechanical inspection services. Thecompany has 40 customer service locations throughout the United States, the UK, Trinidad andSingapore. The company also manufactures industrial equipment.

Douglas Dynamics4 Producer Durables 1,172 2.2 912 1.7Douglas Dynamics designs and manufactures snow and ice control equipment. The company producessnow ploughs and sand and salt spreaders.

RBC Bearings Materials & 1,111 2.1 920 1.7RBC Bearings designs, manufactures and markets a broad portfolio of bearing products including Processingprecision, plain, roller, and ball bearings.

First Republic Bank5 Financial Services 1,088 2.0 — —First Republic Bank provides private banking, private business banking and private wealth managementin urban and coastal markets in the US. The company delivers relationship-based services by providing asingle point of contact for its clients.

Total 12,785 24.2

1Excludes the holding in the JPMorgan US Dollar Liquidity Fund. 2All companies shown are listed in the USA. 3Based on total assets less current liabilities of £52.9m (2010: £53.1m). 4Not Included in the ten largest investments at 31st December 2010. 5Not held in the portfolio at 31st December 2010. At 31st December 2010, the value of the ten largest investments amounted to £10.8m representing 20.3% of total assets less current liabilities.

Ten Largest Investments1


31st December 2011 31st December 2010Active Active

Portfolio1 Benchmark Position* Portfolio1 Benchmark Position*% % % % % %

Financial Services 25.0 23.2 1.8 25.2 21.2 4.0 Consumer Discretionary 23.1 14.4 8.7 20.4 15.1 5.3 Producer Durables 15.8 14.1 1.7 14.3 14.1 0.2 Health Care 10.3 12.7 (2.4) 8.7 12.4 (3.7)Technology 8.1 14.6 (6.5) 9.0 16.7 (7.7)Materials & Processing 6.8 6.9 (0.1) 7.4 8.1 (0.7)Oils and Other Energy 6.1 6.4 (0.3) 7.2 6.0 1.2 Utilities 3.1 4.5 (1.4) 2.2 3.8 (1.6)Consumer Staples 1.4 3.2 (1.8) 3.3 2.6 0.7 Telecommunication Services 0.3 — 0.3 2.3 — 2.3

Total 100.0 100.0 100.0 100.0

1Based on investments, excluding liquidity funds, at fair value of £55.2m (2010: £53.4m).

*A glossary of terms and definitions is provided on page 56.

Sector Analysis

Investment Activity

Value at Value at31st December Net changes 31st December

2010 Purchases Sales in value 2011£’000 £’000 £’000 £’000 £’000

Total Equity Portfolio (all USA)1 53,444 23,374 23,036 1,459 55,241

1Excludes investment in JPMorgan US Dollar Liquidity Fund.


List of Investmentsat 31st December 2011

ValuationCompany £’000

Financial ServicesCalamos Asset Management 1,334ProAssurance 1,309First Republic Bank 1,088HFF 801TD Ameritrade 792Epoch 748Associated Banc-Corp 748First of Long Island 717RLJ Lodging 678JMP 661Umpqua 658Diamond Hill Investor 603First Financial 566KBW 565FirstService 540Iberiabank 441Western Alliance Bancorp 431Greenhill 400Janus Capital 361Glacier Bancorp 241Zillow 140

Total Financial Services 13,822

Consumer DiscretionaryJarden 1,464Penn National Gaming 1,416Harley Davidson 1,073Papa John’s International 985American Eagle Outfitters 890Drew Industries 874Dicks Sporting Goods 799Cracker Barrel 750Williams-Sonoma 642Monarch Casino & Resort 617Pool 558Iconix Brand 549Shuffle Master 487Brunswick 439Cinemark 417Travelzoo 352Archipelago Learning 225Einstein Noah Restaurant 209

Total Consumer Discretionary 12,746


Producer DurablesTeam Industrial Services 1,210Douglas Dynamics 1,172Waste Connections 1,027Altra 925Acco Brands 737Toro 710Herman Miller 641Knight Transportation 622KAR Auction Services 576Dice 393Joy Global 371Forward Air 353

Total Producer Durables 8,737

Health CareCoventry Healthcare 1,359PSS World Medical 893Laboratory 841Omnicell 814MWI Veterinary Supply 675Wellcare Health Plans 652VCA Antech 346Cumberland Pharmaceuticals 131

Total Health Care 5,711

TechnologyMonotype Imaging 796MICROS Systems 773Solera 765Solar Winds 480Vocus 473Intersil 428NetSuite 368Active Network 295Soundbite Communications 91

Total Technology 4,469



Materials & ProcessingSilgan 1,322RBC Bearings 1,111Interline Brands 558Comfort Systems 505NCI 244

Total Materials & Processing 3,740

Oils and Other EnergyCimarex Energy 860Patterson-Uti Energy 858Approach Resources 674Tidewater 561Resolute Energy 398

Total Oils and Other Energy 3,351

UtilitiesNorthwestern 905Northwest Natural Gas 667Lumos Networks 142

Total Utilities 1,714


Consumer StaplesJ & J Snack Foods 763

Total Consumer Staples 763

Telecommunication ServicesnTelos 188

Total Telecommunication Services 188

Liquidity FundsJPMorgan US Dollar Liquidity Fund 2,700

Total Liquidity Funds 2,700

Total Portfolio1 57,941

1Comprises the following: £’000

Equity shares 55,241

Liquidity fund 2,700

57,941

List of Investments continued


Board of Directors

Davina Walter (Chairman since 2008)

A Director since 2002.

Last reappointed to the Board: 2011.

Remuneration: £29,400.*

She has been employed in the investment business in the City of London since 1974,having spent over 11 years involved in US equity research at Cazenove & Co. and morethan 16 years as an investment manager of US equity portfolios. Most recently she wasa Managing Director at Deutsche Asset Management Limited, and has been involvedin investment trusts since 1985. She was a Director of Henderson Strata InvestmentTrust plc and is currently employed as an Investment Consultant.

Connections with Manager: None.

Shared directorships with other Directors: None.

Shareholding in Company: 4,210.

Mark Ansell




He has wide experience of negotiating and completing acquisitions and disposals andimproving performance in engineering businesses, including in the USA. He wasformerly Chief Executive of the Flow Group Limited, which manufactured specialist flowcontrol equipment for the global energy industry.




Chrisopher Galleymore




He is a board level investment professional with 30 years experience of managing USequity portfolios, including several years working in New York. He has worked for avariety of major international investment companies, most recently as senior portfoliomanager and Head of the North American Desk at Henderson Global Investors from 1991to 2002 where he was actively involved in running investment trusts.





Board of Directors continued

Alan Kemp (Chairman of the Audit Committee)




He has been involved in investment management since 1970 and with investment trustssince 1972. During his career as Deputy Manager of the Edinburgh Investment Trust plche was responsible for the management of its US portfolio for a number of years. He wassubsequently Deputy Chief Executive of Dunedin Fund Managers Limited and is aDirector of Aberdeen Asian Smaller Companies Investment Trust plc.




All Directors are members of the Audit, Nomination and Management EngagementCommittees and are considered independent of the Manager.

*Current remuneration (with effect from 1st January 2012).


The Directors present their report and the audited financialstatements for the year ended 31st December 2011.

Business ReviewBusiness of the CompanyThe Company carries on business as an investment trust andwas approved by HM Revenue & Customs as an investmenttrust in accordance with Section 1158 of the Corporation TaxAct 2010 for the year ended 31st December 2010. In theopinion of the Directors, the Company has subsequentlyconducted its affairs so that it should continue to qualify as aninvestment trust under HM Revenue & Customs’ qualifyingrules.

Approval for the year ended 31st December 2010 is subject toreview should there be any subsequent enquiry underCorporation Tax Self Assessment.

The Company is an investment company within the meaning ofSection 833 of the Companies Act 2006. The Company is not aclose company for taxation purposes.

A review of the Company’s activities and prospects is given inthe Chairman’s Statement on pages 2 to 4 and in theInvestment Manager’s Report on pages 5 and 6.

ObjectiveThe Company’s objective is to achieve capital growth frominvesting in US smaller companies.

Investment Policies and Risk ManagementIn order to achieve its objective, the Company invests in adiversified portfolio and employs a manager with a strongfocus on research and company visits in order to identify themost attractive stocks in the US smaller companies universe.

The Board has sought to manage the Company’s risk byimposing various investment restrictions and guidelines. Theserestrictions and guidelines may be varied at any time by theBoard at its discretion.

Investment Restrictions and Guidelines• No individual investment in the portfolio will be greater

than 15% of the Company’s gross assets at the time ofinvestment.

• The Company will invest no more than 5% of theCompany’s gross assets in JPMorgan liquidity funds.

• The Company will invest no more than 5% of theCompany’s gross assets at the time of investment inunquoted investments.

• The Company will not normally invest in derivativeinstruments, although it can undertake derivative actionsto hedge against risk exposure of existing holdings in theportfolio subject to Board approval.

• The Company will utilise liquidity and borrowings to remaininvested within the range 95%-115% (+/–2.5%).

• The Company will not invest more than 15% of its grossassets in other UK listed investment companies (includinginvestment trusts).

• The Company will not invest more than 10% of its grossassets in companies that themselves may invest more than15% of their gross assets in UK listed investmentcompanies.

PerformanceIn the year to 31st December 2011, the Company’s return toshareholders was –1.8% and the return on net assetswas +1.3%. This compares with the return on the Company’sbenchmark of –3.8%. As at 31st December 2011, the value ofthe Company’s investment portfolio was £57.9 million. TheInvestment Manager’s Report on pages 5 and 6 includes areview of developments during the year as well asinformation on investment activity within the Company’sportfolio.

Total Return, Revenue and Dividends Gross total return for the year amounted to £2,018,000 (2010:£14,257,000). Net total return after a performance feeprovision and deducting the management fee, administrativeexpenses, finance costs and taxation, amounted to £524,000(2010: £13,180,000). The return after taxation in the revenuecolumn of the Income Statement amounted to £187,000(2010: £383,000). No dividend has been declared in respectof the financial year or is intended to be declared (2010: nil).

Key Performance Indicators (‘KPIs’) The Board uses a number of financial KPIs to monitor andassess the performance of the Company. The principal KPIs are:

• Performance against the benchmark This is the most important KPI by which performance isjudged.

Directors’ Report


Performance Relative to Benchmark IndexFigures have been rebased to 100 at 31st December 2001




The benchmark is represented by the grey horizontal line.

Ten Year PerformanceFigures have been rebased to 100 at 31st December 2001




Benchmark.

• Performance against the Company’s peers The principal objective is to achieve capital growth relativeto the benchmark. However, the Board also monitors theperformance relative to a broad range of competitor funds.

• Performance attributionThe purpose of performance attribution analysis is toassess how the Company achieved its performance relativeto its benchmark, i.e. to understand the impact on theCompany’s relative performance of the variouscomponents such as sector selection and stock selection.Details of the attribution analysis for the year ended31st December 2011 are given in the Investment Manager’sReport on page 6.

• Share discount to net asset value (‘NAV’) per shareThe Board has a share repurchase and re-issue policywhich seeks to address imbalances in supply of anddemand for the Company’s shares within the market. Thisaims to manage the volatility and absolute level of thediscount to NAV per share at which the Company’s sharestrade in relation to its peers in the sector. In the year to31st December 2011, the shares traded between a discountof 4.4% and 15.1% and averaged 9.4% (using monthend data).

Discount Performance

Source: Datastream (using month end data).

JPMorgan US Smaller Companies discount.

• Total expense ratio (‘TER’)The TER is the ratio, expressed in percentage terms, of themanagement fee plus all other operating expenses,excluding finance costs and any performance fee payable,to the average of the month end net assets during the year.The TER for the year ended 31st December 2011 is 1.79%(2010: 1.66%). The TER including performance fee payableis the ratio, expressed in percentage terms, of themanagement fee plus all other operating expenses plus anyperformance fee payable, but excluding finance costs, tothe average of the month end net assets during the year.The TER including performance fee payable for the yearended 31st December 2011 is 2.19% (2010: 1.88%). TheBoard reviews the TER of the Company regularly and on anannual basis compares its TER against other companieswith similar investment objectives and policies.

Share CapitalThe Company has authority to repurchase shares in the marketfor cancellation. The Company repurchased 100,987 (2010:217,500) shares for cancellation during the year for a totalconsideration of £844,000. The Company has not held anyshares in Treasury during the year.

The Company has not issued or repurchased any shares sincethe year end.

60

70

80

90

100

110

20112010200920082007200620052004200320022001

50

75

100

125

150

175

20112010200920082007200620052004200320022001

%

–25

–20

–15

–10

–5

0

20112010200920082007200620052004200320022001

Directors’ Report continued


Principal RisksWith the assistance of the Manager, JPMorgan AssetManagement (UK) Limited (‘JPMAM’), the Board has drawn upa risk matrix, which identifies the key risks to the Company.These key risks fall broadly under the following categories:

• Investment and Strategy: an inappropriate investmentstrategy, for example excessive concentration of sectorselection or the level of gearing, may lead tounderperformance against the Company’s benchmarkindex and peer companies, which may result in theCompany’s shares trading on a wider discount. The Boardmanages these risks by diversification of investmentsthrough its investment restrictions and guidelines whichare monitored and reported on. JPMAM provides theDirectors with timely and accurate managementinformation, including performance data and attributionanalyses, revenue estimates, liquidity reports andshareholder analyses. The Board monitors theimplementation and results of the investment process withthe Investment Manager, who attends all Board meetings,and reviews data which show statistical measures of theCompany’s risk profile. The Investment Manager employsthe Company’s gearing tactically, within a strategic rangeset by the Board. In addition to regular Board reviews ofinvestment strategy, the Board holds a separate meetingdevoted to strategy each year.

• Market: market risk arises from uncertainty about thefuture prices of the Company’s investments. It representsthe potential loss that the Company might suffer throughholding investments in the face of negative marketmovements. The Board considers asset allocation, stockselection and levels of gearing on a regular basis and hasset investment restrictions and guidelines, which aremonitored and reported on by JPMAM. The Board monitorsthe implementation and results of the investment processwith the Manager.

• Accounting, Legal and Regulatory: in order to qualify asan investment trust, the Company must comply withSection 1158 of the Corporation Tax Act 2010 (‘Section 1158’).Details of the Company’s approval are given under ‘Businessof the Company’ above. Should the Company breachSection 1158, it may lose investment trust status and, as aconsequence, gains within the Company’s portfolio could besubject to Capital Gains Tax. The Section 1158 qualificationcriteria are continually monitored by JPMAM and the resultsreported to the Board each month. The Company must alsocomply with the provisions of the Companies Act 2006 and,

since its shares are listed on the London Stock Exchange, theUKLA Listing Rules and Disclosure and Transparency Rules(‘DTRs’). A breach of the Companies Act could result in theCompany and/or the Directors being fined or the subjectof criminal proceedings. Breach of the UKLA Listing Rules orDTRs could result in the Company’s shares being suspendedfrom listing which in turn would breach Section 1158. TheBoard relies on the services of its Company Secretary,JPMAM, and its professional advisers to ensure compliancewith the Companies Act 2006 and the UKLA Listing Rulesand DTRs.

• Corporate Governance and Shareholder Relations: detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out in the Corporate Governancereport on pages 23 to 27.

• Operational: disruption to, or failure of, JPMAM’s accounting,dealing or payments systems or the custodian’s records mayprevent accurate reporting and monitoring of theCompany’s financial position. Details of how the Boardmonitors the services provided by JPMAM and its associatesand the key elements designed to provide effective internalcontrol are included within the Internal Control section ofthe Corporate Governance report on pages 25 and 26.

• Foreign currency: the Company has exposure to foreigncurrency as part of the risk reward inherent in a companythat invests overseas. The income and capital value of theCompany’s investments can be affected by exchange ratemovements as the majority of the Company’s assets andincome are denominated in currencies other than sterlingwhich is the reporting currency. The Company’s loan facilityis denominated in US dollars.

The Company may be exposed to currency risk due toexchange rate movement in the period between investmenttrade date and the date of settlement. This exposure is shortterm and therefore the risk is not significant.

The Board has the authority to reduce or eliminate theexposure to fluctuating currencies through the use ofcurrency hedging. It reviews its policy on this matterregularly; to date no hedging has been carried out and thereare no plans to do so in the immediate future.

• Financial: The financial risks faced by the Company includemarket risk (comprising currency risk, interest rate risk andother price risk), liquidity risk and credit risk. Further detailsare disclosed in note 21 to the accounts on pages 45 to 51.


Future Developments Clearly, the future development of the Company is muchdependent upon the success of the Company’s investmentstrategy in the light of economic and equity marketdevelopments. The Investment Manager discusses the outlookin his report on page 6.

Management

The Manager and Secretary is JPMorgan Asset Management(UK) Limited. JPMAM is employed under a contract terminableon six months’ notice without penalty. If the Company wishes toterminate the contract on shorter notice, the balance ofremuneration is payable by way of compensation.

JPMAM is a wholly-owned subsidiary of JPMorgan Chase Bankwhich, through other subsidiaries, also provides banking,dealing, marketing and custodian services to the Company.

The Board conducts a formal evaluation of the Manager onan annual basis. The evaluation includes consideration ofthe investment strategy, process and performance of theInvestment Manager and the support that the Companyreceives from JPMAM. As a result of the evaluation process,the Board confirms that it is satisfied that the continuingappointment of the Manager on the terms agreed is in thebest interests of shareholders as a whole.

Management and Performance Fees

For the year ended 31st December 2011, the management feewas charged at 1% per annum of gross assets, calculated andpaid monthly, excluding investments in any funds on whichJPMAM earns a management fee. In addition to the basicannual management fee, a performance fee is payable toJPMAM. This is calculated at 15% of the amount by which thechange in the capital net asset value over the relevant periodexceeds that of the change in the value of the capital onlyRussell 2000 Index (expressed in sterling terms), increased bya 2% hurdle. Payment of any amount earned under theperformance fee in any relevant period will be spread equallyover three years. No payment is made in any year unless thenet asset value per share has risen during the year.

Any performance fee accrued but not paid will be reduced bythe extent of any underperformance in subsequent years. Anyadjustment in respect of underperformance will be deductedat the first opportunity from any amount payable in respect ofprevious years’ outperformance. The total amount of anyperformance and management fee paid in any one year will becapped at 2.0% of the total net assets of the Company at theend of the relevant period.

The results for the year give rise to an entitlement of £348,000which, when added to the balance brought forward of£130,000, gives a provision of £478,000. Of this amount,£214,000 becomes immediately payable and the balance of£264,000 is carried forward to be paid or reduced by futureunderperformance.

Details of Performance Fee CalculationYear ended 31/12/09 31/12/10 31/12/11

£ £ £

Performance fee calculated for the year 1,006,706 94,792 348,423

Phased paymentsYear ended 31st December 2009 66,701 66,701 66,701Year ended 31st December 2010 — 31,597 31,597Year ended 31st December 2011 — — 116,141

Performance fee payable 66,701 98,298 214,439

Provision carried forward at the year end 133,4001 129,894 263,878

1A negative provision amounting to £806,605 was brought forward at 1st January 2008, which when offset against the £1,006,706provision for the year ended 31st December 2009, left a provision of £133,400 carried forward.

2Further details of the performance fee are given in notes 11 and 12 on page 41.



Going Concern

The Directors believe that having considered the Company’sinvestment objective (see page 17), risk management policies(see pages 45 to 51), capital management policies andprocedures (see page 52), the nature of the portfolio andexpenditure projections, that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theyconsider that there is reasonable evidence to continue to adoptthe going concern basis in preparing the accounts.

Payment Policy

It is the Company’s policy to obtain the best terms for allbusiness and therefore there are no standard payment terms.In general, the Company agrees with its suppliers the terms onwhich business will take place and it is the Company’s policy toabide by these terms. As at 31st December 2011, the Companyhad no outstanding trade creditors (2010: none).

Directors

The Directors of the Company who held office at the end of theyear, together with their beneficial interests in the Company’sordinary share capital, are given below:

31st December 1st January2011 2011

Number of shares Number of shares

M Ansell 6,452 4,452CJ Galleymore 5,000 5,000AS Kemp 7,500 6,000DJ Walter 4,210 4,210

There have been no changes in the Directors’ shareholdings inthe Company since the year end.

In accordance with corporate governance best practice, allDirectors will retire at the forthcoming Annual GeneralMeeting and being eligible, will offer themselves forreappointment.

Director Indemnification and Insurance

As permitted by the Company’s Articles of Association, theDirectors have the benefit of a deed of indemnity which is aqualifying third party indemnity, as defined by Section 234 ofthe Companies Act 2006. The deeds of indemnity were in placeduring the year and as at the date of this report.

An insurance policy is maintained by the Company whichindemnifies the Directors of the Company against certainliabilities arising in the conduct of their duties. There is nocover against fraudulent or dishonest actions.

Disclosure of information to Auditors

In the case of each of the persons who are Directors of theCompany at the time when this report was approved:

(a) so far as each of the Directors is aware, there is no relevantaudit information (as defined in the Companies Act 2006)of which the Company’s Auditors are unaware; and

(b) each of the Directors has taken all the steps that he/sheought to have taken as a Director in order to make himself/herself aware of any relevant audit information and toestablish that the Company’s auditors are aware of thatinformation.

The above confirmation is given and should be interpreted inaccordance with the provision of 418(2) of the Companies Act2006.

The following disclosures are made in accordance with Part 6,Schedule 7 of The Large and Medium Sized Companies andGroups (Accounts and Reports) Regulations 2008:

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

Voting Rights in the Company’s sharesDetails of the voting rights in the Company’s shares as at thedate of this report are given in Note 16 to the Notice of AGM onpage 55.


Environmental Matters, Social and Community Issues

Information on environmental matters, social and communityissues is set out in page 27. The Company has no employees.

Notifiable Interests in the Company’s Voting RightsAt the financial year end the following had declared a notifiableinterest in the Company’s voting rights:

Shareholders Number of voting rights %

Chase Nominees1,2 957,554 18.5JPMorgan Asset Management2 752,988 14.5Included within this is the following:JPMorgan Elect 327,687 6.3F&C Asset Management Limited 467,978 9.1West Yorkshire Pension Fund 420,000 8.1Investec Wealth & Investment Limited 367,115 7.0Rathbone Investment Management 240,436 4.7Prudential plc 207,188 4.0

1Held on behalf of JPMAM Investment Account, ISA and SIPP participants.2Non-beneficial.

As at the date of this report the Company had been notifiedthat JPMorgan Asset Management’s notifiable interest hadfallen to 668,988 shares (12.9%); Investec Wealth & InvestmentLimited’s notifiable interest had fallen to 236,685 shares (4.6%)and that Prudential plc no longer had a notifiable interest.

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

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

Independent Auditor

Following the resignation of Ernst & Young LLP during the yearunder review, the Board appointed Grant Thornton UK LLP asthe Company’s auditor. Grant Thornton UK LLP have expressedthe willingness to continue in office as auditor to the Company

and a resolution proposing the reappointment and authorisingthe Directors to determine the remuneration for the ensuingyear will be put to shareholders at the forthcoming AnnualGeneral Meeting.

Annual General Meeting

NOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOURIMMEDIATE ATTENTION. If you are in any doubt as to the actionyou should take, you should seek your own personal financialadvice from your stockbroker, bank manager, solicitor or otherfinancial adviser authorised under the Financial Services andMarkets Act 2000.

Resolutions relating to the following items of special businesswill be proposed at the forthcoming Annual General Meeting:

(i) Authority to issue new shares/disapplication of pre-emptionrights (resolutions 8 and 9)

The Directors will seek authority at the Annual General Meetingto issue up to 516,362 new ordinary shares for cash up to anaggregate nominal amount of £129,091, such amount beingequivalent to 10% of the present issued share capital. Thisauthority will expire at the Annual General Meeting in 2013.The full text of Resolutions 8 and 9 is set out in the Notice ofMeeting on page 53.

It is advantageous for the Company to be able to issue newshares (or to sell Treasury shares) to participants purchasingshares through the JPMorgan savings products and also toother investors when the Directors consider that it is in the bestinterests of shareholders to do so. As such issues are only madeat prices greater than the net asset value, they increase theassets underlying each share and spread the Company’sadministrative expenses, other than the management feewhich is charged on the value of the Company’s assets, over agreater number of shares. The issue proceeds are available forinvestment in line with the Company’s investment policies.

(ii) Authority to repurchase the Company’s shares (resolution 10) At the Annual General Meeting held on 27th April 2011,shareholders gave authority to the Company to purchase upto 14.99% of its then issued share capital. At that timeshareholders were informed that this authority would expireon 26th October 2012 and could be renewed by shareholders atany time at a General Meeting of the Company. The Boardremains committed to a stable discount, targeting a figure of nowider than around 9%, but there is a need to balance the shortterm of buying shares back for cancellation with the long termliquidity implications. It will seek shareholder approval to



renew the authority at the forthcoming Annual GeneralMeeting.

The full text of the resolution (to be proposed as a specialresolution) to renew the share repurchase authority is set outas Resolution number 10 in the Notice of Meeting onpages 53 and 54.

Recommendation (resolutions 8 to 10)

The Board considers that resolutions 8 to 10 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole. TheDirectors unanimously recommended that you vote in favourof the resolutions as they intend to do in respect of their ownbeneficial holdings which amount in aggregate to 23,162 sharesrepresenting approximately 0.45% of the existing issuedordinary share capital of the Company.

Corporate Governance

Compliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 29, indicates how theCompany has applied the principles of good governance of theFinancial Reporting Council’s UK Corporate Governance Code2010 (the ‘UK Corporate Governance Code’) and the AIC’s Codeof Corporate Governance (the ‘AIC Code’), which complementsthe UK Corporate Governance Code and provides a frameworkof best practice for investment trusts.

The Board is responsible for ensuring the appropriate level ofCorporate Governance and considers that the Company hascomplied with the best practice provisions of the UK CorporateGovernance Code and the AIC Code, insofar as they arerelevant to the Company’s business, throughout the year underreview.

Role of the Board

A management agreement between the Company and JPMAMsets out the matters over which the Manager has authority.This includes management of the Company’s assets and theprovision of accounting, company secretarial, administrativeservices and some marketing services. All other matters arereserved for the approval of the Board. A formal schedule ofmatters reserved to the Board for decision has been approved.

This includes determination and monitoring of the Company’sinvestment objectives and policy and its future strategicdirection, gearing policy, management of the capital structure,appointment and removal of third party service providers,review of key investment and financial data and the Company’scorporate governance and risk control arrangements.

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

The Board meets on at least six occasions during the year andadditional meetings are arranged as necessary. Full and timelyinformation is provided to the Board to enable it to functioneffectively and to allow Directors to discharge theirresponsibilities.

There is an agreed procedure for Directors to take independentprofessional advice if necessary and at the Company’s expense.This is in addition to the access that every Director has to theadvice and services of the Company Secretary, JPMAM, which isresponsible to the Board for ensuring that applicable rules andregulations are complied with and that Board procedures arefollowed.

Board Composition

The Board consists of four non-executive Directors, chairedby Davina Walter, all of whom are regarded by the Board asindependent of the Company’s Manager. The Chairman’sindependence was assessed upon her appointment andannually thereafter.

The Directors have a breadth of investment, business andfinancial skills and experience relevant to the Company’sbusiness and brief biographical details of each Director are setout on pages 15 and 16.

The Board does not feel that it would be appropriate to adopta policy whereby Directors serve for a limited period of time,given the specialist nature of the Company’s investmentuniverse. However, in order to provide a balance of skills,experience, length of service and ages, it is the Board’s policyto introduce new Directors to provide an orderly successionover time. As a result, the Board has decided to recruit anadditional Director this year and will employ an external searchconsultant for this purpose.


A review of Board composition and balance is included as partof the annual performance evaluation of the Board, details ofwhich may be found below. The Board has considered whethera senior independent director should be appointed and hasconcluded that, as the Board comprises entirely non-executivedirectors, this is unnecessary. However, the Chairman of theAudit Committee leads the evaluation of the performance ofthe Chairman and is available to shareholders if they haveconcerns that cannot be resolved through discussion with theChairman.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be appointed byshareholders. The Board has agreed that, in accordance withcorporate governance best practice, all Directors must seekannual reappointment.

The Board does not believe that length of service in itselfnecessarily disqualifies a Director from seeking reappointmentbut, when making a recommendation, the Board will take intoaccount the ongoing requirements of the UK CorporateGovernance Code, including the need to refresh the Board andits committees. The Board has adopted corporate governancebest practice and all Directors must stand for annualreappointment.

The Board recommends the reappointment of each of theDirectors, following a performance review conducted by theNomination Committee which concluded that they continue tobe effective and demonstrate commitment to their roles.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment, copies of which areavailable for inspection on request at the Company’s registeredoffice and at the Annual General Meeting.

Induction and Training

On appointment, the Manager and Company Secretary provideall Directors with induction training. Thereafter, regularbriefings are provided on changes in law and regulatoryrequirements that affect the Company and the Directors.Directors are encouraged to attend industry and other

seminars covering issues and developments relevant toinvestment trust companies. Regular reviews of the Directors’training needs are carried out by the Chairman by means of theevaluation process described below.

Meetings and Committees

The Board delegates certain responsibilities and functions tocommittees. Details of membership of committees are shownwith the Directors’ profiles on pages 15 and 16. Directors whoare not members of committees may attend at the invitation ofthe Chairman.

The table below details the number of meetings attended byeach Director. During the financial year there were seven Boardmeetings, including a private meeting of the Directors toevaluate the Manager and a separate meeting devoted tostrategy, five Audit Committee meetings, one NominationCommittee meeting and one Management EngagementCommittee meeting.

ManagementAudit Nomination Engagement

Board Committee Committee CommitteeMeetings Meetings Meetings Meeting

Director Attended Attended Attended Attended

M Ansell 7 5 1 1CJ Galleymore 7 5 1 1AS Kemp 7 5 1 1DJ Walter 7 5 1 1

Board Committees

Nomination Committee The Nomination Committee, chaired by Davina Walter, consistsof all of the Directors and meets at least annually to ensure thatthe Board has an appropriate balance of skills and experienceto carry out its fiduciary duties and to select and proposesuitable candidates for appointment when necessary. Theappointment process takes account of the benefits of allaspects of diversity.

The Committee conducts an annual performance evaluation ofthe Board, its committees and individual Directors to ensurethat all Directors have devoted sufficient time and contributedadequately to the work of the Board and its Committees. The



evaluation of the Board considers the balance of experience,skills, independence, corporate knowledge, its diversity,including gender, and how it works together. Questionnaires,drawn up by the Board with the assistance of JPMAM, arecompleted by each Director. The responses are collated andthen discussed by the Committee. The evaluation of individualDirectors is led by the Chairman who also meets with eachDirector. The Chairman of the Audit Committee leads theevaluation of the Chairman’s performance. As a result of theevaluation process, the Nomination Committee concluded thatthe Directors continue to be effective and demonstratecommitment to their roles and the Board recommends theirreappointment. To ensure effective succession planning, theBoard has also agreed to recruit an additional Director in 2012.

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

Management Engagement Committee The Management Engagement Committee, chaired byDavina Walter, consists of all the Directors, and meets atleast annually to review the performance of, and thecontractual arrangements with, the Manager, JPMAM.

Audit Committee The Audit Committee, chaired by Alan Kemp, comprises all ofthe Directors, and meets at least twice each year. The membersof the Committee consider that they have the requisite skillsand experience to fulfil the responsibilities of the Committee.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the UK Corporate GovernanceCode. It examines the effectiveness of the Company’s internalcontrol systems, receives information from the Manager’sCompliance department and reviews the scope and results ofthe external audit, its cost effectiveness, the balance of auditand non-audit services and the independence and objectivityof the external auditors. No non-audit work was undertaken bythe auditors in the year under review. In the opinion of theDirectors the auditors are considered independent.Representatives of the Company’s auditors attend theCommittee meeting at which the draft Annual Report andAccounts is considered. The Directors’ statement on theCompany’s system of risk management and internal control isset out overleaf.

Terms of Reference

The Nomination, Management Engagement and AuditCommittees have written terms of reference which defineclearly their respective responsibilities, copies of which areavailable for inspection on the Company’s website and onrequest at the Company’s registered office and at the AnnualGeneral Meeting.

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performanceand reports formally to shareholders four times a year by wayof the Annual Report and Accounts, Half Year Report and twoInterim Management Statements. This is supplemented by thedaily publication, through the London Stock Exchange, of thenet asset value of the Company’s shares.

All shareholders have the opportunity, and are encouraged,to attend the Company’s Annual General Meeting at which theDirectors and representatives of the Manager are available inperson to meet with shareholders and answer questions.In addition, a presentation is given by the Investment Managerwho reviews the Company’s performance. During the year theCompany’s brokers and JPMAM hold regular discussions withlarger shareholders. The Directors are made fully aware of theirviews. The Chairman and Directors make themselves availableas and when required to address shareholder queries. TheDirectors may be contacted through the Company Secretarywhose details are shown on page 57.

The Company’s Annual Report and Accounts is published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders wishing to raisequestions in advance of the meeting are encouraged to writeto the Company Secretary at the address shown on page 57.

Details of the proxy voting position on each resolution will bepublished on the Company website shortly after the AnnualGeneral Meeting.

Risk Management and Internal Control

The UK Corporate Governance Code requires the Directors, atleast annually, to review the effectiveness of the Company’s


system of risk management and internal control and to reportto shareholders that they have done so. This encompasses areview of all controls, which the Board has identified asincluding business, financial, operational, compliance and riskmanagement.

The Directors are responsible for the Company’s system of riskmanagement and internal control which is designed tosafeguard the Company’s assets, maintain proper accountingrecords and ensure that financial information used within thebusiness, or published, is reliable. However, such a system canonly be designed to manage rather than eliminate the risk offailure to achieve business objectives and therefore can onlyprovide reasonable, but not absolute, assurance against fraud,material misstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMAM and its associates, the Company’s system of riskmanagement and internal control mainly comprisesmonitoring the services provided by JPMAM and its associates,including the operating controls established by them, to ensurethey meet the Company’s business objectives. There is anongoing process for identifying, evaluating and managingsignificant risks faced by the Company (see Principal Risks onpage 19). This process has been in place for the year underreview and up to the date of approval of the Annual Report &Accounts, and it accords with the Turnbull guidance. Whilst theCompany does not have an internal audit function of its own,the Board considers that it is sufficient to rely on the internalaudit department of JPMAM. This arrangement is kept underreview. The key elements designed to provide effective internalcontrol are as follows:

Financial Reporting – Regular and comprehensive review bythe Board of key investment and financial data, includingmanagement accounts, revenue projections, analysis oftransactions and performance comparisons.

Management Agreement – Appointment of a manager andcustodian regulated by the Financial Services Authority (‘FSA’),whose responsibilities are clearly defined in a writtenagreement.

Management Systems – The Manager’s system of riskmanagement and internal control includes organisationalagreements which clearly define the lines of responsibility,delegated authority, control procedures and systems. Theseare monitored by JPMAM’s Compliance department whichregularly monitors compliance with FSA rules and reports tothe Board.

Investment Strategy – Authorisation and monitoring of theCompany’s investment strategy and exposure limits by theBoard.

The Board, either directly or through the Audit Committeekeeps under review the effectiveness of the Company’s systemof risk management and internal control by monitoring theoperation of the key operating controls of the Manager and itsassociates as follows:

• the Board, through the Audit Committee, reviews the termsof the management agreement and receives regularreports from JPMAM’s Compliance department;

• the Board reviews the report on the risk management andinternal controls and the operations of its custodian,JPMorgan Chase Bank, which is itself independentlyreviewed; and

• the Directors review every six months an independentreport on the risk management and internal controls andthe operations of JPMAM.

By the means of the procedures set out above the Boardconfirms that it has reviewed the effectiveness of theCompany’s system of risk management and internal control forthe year ended 31st December 2011 and to the date of approvalof this Annual Report and Accounts.

During the course of its review of the system of riskmanagement and internal control, the Board has not identifiednor been advised of any failings or weaknesses which it hasdetermined to be significant.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to JPMAM.The following is a summary of JPMAM’s policy statements oncorporate governance, voting policy and social andenvironmental issues, which has been reviewed and noted bythe Board.

Corporate Governance JPMAM believes that corporate governance is integral to our investmentprocess. As part of our commitment to delivering superior investmentperformance to our clients, we expect and encourage the companies inwhich we invest to demonstrate the highest standards of corporategovernance and best business practice. We examine the share structureand voting structure of the companies in which we invest, as well as theboard balance, oversight functions and remuneration policy. Theseanalyses then form the basis of our proxy voting and engagementactivity.



Proxy Voting JPMAM manages the voting rights of the shares entrusted to it as it wouldmanage any other asset. It is the policy of JPMAM to vote in a prudent anddiligent manner, based exclusively on our reasonable judgement of whatwill best serve the financial interests of our clients. So far as is practicable,we will vote at all of the meetings called by companies in which we areinvested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clients as amajor asset owner. To this end, we support the introduction of the FRCStewardship Code, which sets out the responsibilities of institutionalshareholders in respect of investee companies. Under the Code,managers should:

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

– disclose their policy on managing conflicts of interest;

– monitor their investee companies;

– establish clear guidelines on how they escalate engagement;

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

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

– report to clients.

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

Social & EnvironmentalJPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interestsof our clients, we recognise that, increasingly, non-financial issues suchas social and environmental factors have the potential to impact theshare price, as well as the reputation of companies. Specialists withinJPMAM’s environmental, social and governance (‘ESG’) team are taskedwith assessing how companies deal with and report on social andenvironmental risks and issues specific to their industry. This analysis isthen used to identify outliers which require further engagement.

JPMAM is also a signatory to the United Nations Principles of ResponsibleInvestment, which commits participants to six principles, with the aim ofincorporating ESG criteria into their processes when making stockselection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request. JPMAM is also

a signatory to Carbon Disclosure Project. JPMorgan Chase is a signatoryto the Equator Principles on managing social and environmental risk inproject finance.

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

By order of the Board Jonathan Latter, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 21st March 2012


The Board presents this report, which has been prepared inaccordance with the requirements of Sections 420–422 of theCompanies Act 2006. An ordinary resolution to approve thisreport will be put to the members at the forthcoming AnnualGeneral Meeting.

The law requires the Company’s auditors to audit certain of thedisclosures provided. Where disclosures have been auditedthey are indicated as such. The auditors’ opinion is included intheir report on page 30.

In the year under review, Directors’ fees were paid at thefollowing rates: Chairman £28,000; Chairman of the AuditCommittee £23,000; and other Directors £20,000. With effectfrom 1st January 2012, fees have been increased to £29,400,£24,150 and £21,000 respectively.

Directors’ Remuneration1

2011 2010Directors’ Name £ £

DJ Walter 28,000 25,000M Ansell 20,000 18,000CJ Galleymore 20,000 18,000AS Kemp 23,000 20,000

Total 91,000 81,000

1Audited information.

The total Directors’ fees of £91,000 (2010: £81,000) were allpaid to Directors and £nil (2011: £nil) paid to third parties.

The Board’s policy for this and subsequent years is thatDirectors’ fees should properly reflect the time spent by theDirectors on the Company’s business and should be at a levelto ensure that candidates of a high calibre are recruited to theBoard. The Chairman of the Board and the Chairman of theAudit Committee are paid higher fees than the other Directors,reflecting the greater time commitment involved in fulfillingthese roles.

As all of the Directors are non-executive, the Board has notestablished a Remuneration Committee. Instead, theNomination Committee reviews Directors’ fees on a regularbasis and makes recommendations to the Board as and whenappropriate. Reviews are based on information provided by the

Manager, JPMAM, and relevant third parties on the level of feespaid to the directors of the Company’s peers and within theinvestment trust industry generally. The Directors’ fees are notperformance-related. The Company’s Articles currentlystipulate that aggregate fees must not exceed £150,000 perannum. Directors’ fees are reviewed regularly and any increasein the maximum aggregate amount requires both Board andshareholder approval.

The Company does not operate any type of incentive orpension scheme and therefore no Directors receive bonuspayments or pension contributions from the Company or holdoptions to acquire shares in the Company. Directors are notpaid compensation for loss of office. No other payments aremade to Directors, other than the reimbursement ofreasonable out-of-pocket expenses incurred in connection withattending to the Company’s business.

A graph showing the Company’s share price compared with itsbenchmark, the Russell 2000 Index in sterling terms, over thelast five years is shown below.

Five Year Share Price and Benchmark TotalReturn Performance to 31st December 2011

Source: Morningstar/Russell Investments.

Share price.

Benchmark.

By order of the Board Jonathan Latter, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 21st March 2012

60

80

100

120

140

201120102009200820072006

Directors’ Remuneration Report


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

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, the Directorshave elected to prepare the financial statements in accordancewith United Kingdom Generally Accepted Accounting Practice(United Kingdom Accounting Standards and applicable law).Under Company law the Directors must not approve thefinancial statements unless they are satisfied that they give atrue and fair view of the state of affairs of the Company and ofthe return or loss of the Company for that period. In preparingthese financial statements, the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and estimates that are reasonable andprudent; and

• state whether applicable UK Accounting Standards havebeen followed, subject to any material departures disclosedand explained in the financial statements.

The Directors are responsible for keeping adequateaccounting records that are sufficient to show and explain theCompany’s transactions and disclose with reasonableaccuracy at any time the financial position of the Companyand to enable them to ensure that the financial statementscomply with the Companies Act 2006. They are alsoresponsible for safeguarding the assets of the Company andhence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

The accounts are published on thewww.jpmussmallercompanies.co.uk website, which ismaintained by the Company’s Manager, JPMorgan AssetManagement (UK) Limited (‘JPMAM’). The maintenance and

integrity of the website maintained by JPMAM is, so far as itrelates to the Company, the responsibility of JPMAM. Thework carried out by the auditors does not involveconsideration of the maintenance and integrity of thiswebsite and, accordingly, the auditors accept noresponsibility for any changes that have occurred to theaccounts since they were initially presented on the website.The accounts are prepared in accordance with UK legislation,which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report and Directors’Remuneration Report that comply with that law and thoseregulations.

Each of the Directors, whose names and functions are listed inthe Directors’ Report confirm that, to the best of theirknowledge:

• the financial statements, which have been prepared inaccordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom AccountingStandards and applicable law), give a true and fair view ofthe assets, liabilities, financial position and return or loss ofthe Company; and

• the Directors’ Report includes a fair review of thedevelopment and performance of the business and theposition of the Company, together with a description of theprincipal risks and uncertainties that it faces.

For and on behalf of the Board Davina Walter Chairman 21st March 2012

Statement of Directors’Responsibilities


Independent Auditor’s Report to the members of JPMorganUS Smaller Companies Investment Trust plc

We have audited the financial statements of JPMorgan US SmallerCompanies Investment Trust plc (the ‘Company’) for the yearended 31st December 2011 which comprise the Income Statement,Reconciliation of Movements in Shareholders’ Funds, BalanceSheet, Cash Flow Statement, and the related notes. The financialreporting framework that has been applied in their preparation isapplicable law and United Kingdom Accounting Standards (UnitedKingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body,in accordance with Chapter 3 of Part 16 of the Companies Act2006. Our audit work has been undertaken so that we mightstate to the Company’s members those matters we are requiredto state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law, we do not accept orassume responsibility to anyone other than the Company and theCompany’s members as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective Responsibilities of Directors and AuditorsAs explained more fully in the Statement of Directors’Responsibilities set out on page 29, the Directors are responsiblefor the preparation of the financial statements and for beingsatisfied that they give a true and fair view. Our responsibility isto audit the financial statements in accordance with applicablelaw and International Standards on Auditing (UK and Ireland).Those standards require us to comply with the Auditing PracticesBoard’s (APB’s) Ethical Standards for Auditors.

Scope of the Audit of the Financial StatementsA description of the scope of an audit of financial statements isprovided on the APB’s website atwww.frc.org.uk/apb/scope/private.cfm

Opinion on the Financial StatementsIn our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairsas at 31st December 2011 and of its net return for the yearthen ended;

• have been properly prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice; and

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

Opinion on other matters prescribed by the Companies Act 2006 In our opinion:

• the part of the Directors’ Remuneration Report to be auditedhas been properly prepared in accordance with theCompanies Act 2006; and

• the information given in the Directors’ Report for thefinancial year for which the financial statements are preparedis consistent with the financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to youif, in our opinion:

• adequate accounting records have not been kept, or returnsadequate for our audit have not been received frombranches not visited by us; or

• the financial statements and the part of the Directors’Remuneration Report to be audited are not in agreementwith the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified bylaw are not made; or

• we have not received all the information and explanations werequire for our audit.

Under the Listing Rules we are required to review:

• the Directors’ statement, set out on page 21, in relation togoing concern;

• the part of the Corporate Governance Statement relating tothe Company’s compliance with the nine provisions of the UKCorporate Governance Code specified for our review; and

• certain elements of the report to shareholders by the Boardon Directors’ remuneration.

Marcus Swales (Senior Statutory Auditor)for and on behalf ofGrant Thornton UK LLPChartered Accountants and Statutory AuditorLondon

21st March 2012

Independent Auditor’s Report


Income Statementfor the year ended 31st December 2011

2011 2010Revenue Capital Total Revenue Capital Total

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

Gains on investments held at fair value through profit or loss 2 — 1,493 1,493 — 13,106 13,106

Net foreign currency (losses)/gains — (194) (194) — 298 298Income from investments 3 719 — 719 847 — 847Other interest receivable and similar income 3 — — — 6 — 6

Gross return 719 1,299 2,018 853 13,404 14,257Management fee 4 (58) (522) (580) (48) (429) (477)Peformance fee 4 — (348) (348) — (95) (95)Other administrative expenses 5 (357) — (357) (286) — (286)

Net return on ordinary activities before finance costs and taxation 304 429 733 519 12,880 13,399

Finance costs 6 (10) (92) (102) (9) (83) (92)

Net return on ordinary activities before taxation 294 337 631 510 12,797 13,307

Taxation 7 (107) — (107) (127) — (127)

Net return on ordinary activities after taxation 187 337 524 383 12,797 13,180

Return per share 8 3.57p 6.42p 9.99p 7.09p 236.89p 243.98p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired ordiscontinued in the year.

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columnsrepresent supplementary information prepared under guidance issued by the Association of Investment Companies. The Totalcolumn represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses(‘STRGL’). For this reason a STRGL has not been presented.

The notes on pages 35 to 52 form an integral part of these accounts.


Called up Capitalshare redemption Capital Revenue

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

At 31 December 2009 1,371 1,771 42,987 (4,730) 41,399Repurchase and cancellation of the Company’s own shares (55) 55 (1,629) — (1,629)Net return on ordinary activities — — 12,797 383 13,180

At 31 December 2010 1,316 1,826 54,155 (4,347) 52,950Repurchase and cancellation of the Company’s own shares (25) 25 (844) — (844)Net return on ordinary activities — — 337 187 524

At 31 December 2011 1,291 1,851 53,648 (4,160) 52,630


Reconciliation of Movements inShareholders’ Funds


2011 2010Notes £’000 £’000

Fixed assets Investments held at fair value through profit or loss 9 55,241 53,444Investments in liquidity funds held at fair value through profit or loss 9 2,700 2,911

57,941 56,355

Current assets 10Debtors 126 181Cash and short term deposits 1,655 1,225

1,781 1,406

Creditors: amounts falling due within one year 11 (6,828) (4,681)

Net current liabilities (5,047) (3,275)

Total assets less current liabilities 52,894 53,080Provisions for liabilities and charges 12 (264) (130)

Net assets 52,630 52,950

Capital and reserves Called up share capital 13 1,291 1,316Capital redemption reserve 14 1,851 1,826Capital reserves 14 53,648 54,155Revenue reserve 14 (4,160) (4,347)

Total equity shareholders’ funds 52,630 52,950

Net asset value per share 15 1,019.2p 1,005.8p

The accounts on pages 31 to 52 were approved and authorised for issue by the Directors on 21st March 2012 and were signed ontheir behalf by:

Christopher GalleymoreDirector


The Company’s registration number is 552775.

Balance Sheetat 31st December 2011


2011 2010Notes £’000 £’000

Net cash outflow from operating activities 16 (497) (117)

Returns on investments and servicing of finance Interest paid (94) (82)

Net cash outflow from returns on investments and servicing of finance (94) (82)

Capital expenditure and financial investment Purchases of investments (33,895) (43,042)Sales of investments 33,994 41,692Other capital charges – handling fees (3) (5)

Net cash inflow/(outflow) from capital expenditure and financial investment 96 (1,355)

Net cash outflowbefore financing (495) (1,554)

Financing Draw down of short term bank loan 1,835 4,779Repurchase and cancellation of the Company’s own shares (844) (2,031)

Net cash inflow from financing activity 991 2,748

Increase in cash 17 496 1,194


Cash Flow Statementfor the year ended 31st December 2011


Notes to the Accountsfor the year ended 31st December 2011

1. Accounting policies

(a) Basis of accountingThe accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companiesand Venture Capital Trusts’, issued by the Association of Investment Companies in January 2009. All of the Company’soperations are of a continuing nature.

The disclosures on going concern on page 21 of the Directors’ Report form part of these accounts.

The policies applied in these accounts are consistent with those applied in the preceding year.

(b) Valuation of investments The Company’s business is investing in financial assets with a view to profiting from their capital growth. This portfolio offinancial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investmentstrategy and information is provided internally on that basis to the Company’s Board of Directors. Accordingly, upon initialrecognition the investments are designated by the Company as ‘held at fair value through profit or loss’. They are includedinitially at fair value which is taken to be their cost. Subsequently the investments are valued at fair value, which are quotedbid prices for investments traded in active markets.

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

(c) Accounting for reserves Gains and losses on sales of investments including the related foreign exchange gains and losses, realised gains and losses onforeign currency, any performance fee realised, management fee and finance costs allocated to capital and any other capitalcharges, are included in the Income Statement and dealt with in capital reserves within ‘Gains and losses on sales ofinvestments’. Increases and decreases in the valuation of investments held at the year end including the related foreignexchange gains and losses, unrealised gains and losses on forward foreign currency contracts and any performance feeprovision, are included in the Income Statement and dealt with in capital reserves within ‘Holding gains and losses oninvestments’.

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

Overseas dividends are included gross of any withholding tax.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount ofthe cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of thecash dividend is recognised in capital.

Deposit interest receivable is taken to revenue on an accruals basis.


1. Accounting policies continued

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

– any performance fee is allocated 100% to capital.

– the management fee is allocated 10% to revenue and 90% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company’s investment portfolio.

– expenses incidental to the purchase of an investment are included within the cost of the investment and those incidental tothe sale are deducted from the sale proceeds. These expenses are commonly referred to as transaction costs and comprisemainly brokerage commission. Details of transaction costs are given in note 9 on page 40.

(f) Finance costs Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on anaccruals basis in profit or loss using the effective interest method.

Finance costs are allocated 10% to revenue and 90% to capital in line with the Board’s expected long term split of revenue andcapital return from the Company’s investment portfolio.

(g) Financial instruments Cash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount ofcash and are subject to an insignificant risk of changes in value.

Other debtors and creditors do not carry any interest, are short term in nature and are accordingly stated at nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

Any performance fee provision is not discounted.

Interest bearing bank loans and overdrafts are classified as loans and receivables and measured at amortised cost. They arerecorded at the proceeds received net of direct issue costs. Finance costs, are accounted for using the effective interestmethod.

(h) Foreign currency In accordance with FRS 23: ‘The effects of changes in Foreign Exchange Rates’ the Company is required to nominate afunctional currency, being the currency in which the Company predominantly operates. The Board, having regard to thecurrency of the Company’s share capital and the predominant currency in which its shareholders operate, has determined thatsterling is the functional currency. Sterling is also the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates as at the date of the transaction.Assets and liabilities denominated in foreign currencies at the year end are translated at the rates of exchange prevailing atthe year end.

Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchangegain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capital nature.

Notes to the Accounts continued


(i) Taxation Current tax is provided at the amounts expected to be paid or received.

Deferred tax is accounted for in accordance with FRS 19: ‘Deferred Tax’.

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

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

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

(j) Value Added Tax (‘VAT’) Irrecoverable VAT is included in the expense on which it has been suffered. Recoverable VAT is calculated using the partialexemption method based on the proportion of zero rated supplies to total supplies.

(k) Repurchases of ordinary shares for cancellation The cost of repurchasing ordinary shares including the related stamp duty and transactions costs is charged to capital reservesand dealt with in the Reconciliation of Movement in Shareholders’ Funds. Share repurchase transactions are accounted for ona trade date basis. The nominal value of ordinary share capital repurchased and cancelled is transferred out of called up sharecapital and into the capital redemption reserve.

2011 2010£’000 £’000

2. Gains on investments held at fair value through profit or loss Gains on sales of investments held at fair value through profit or loss based on historical cost 4,513 7,698

Amounts recognised as investment holding gains in the previous year in respect of investments sold during the year (3,430) (3,194)

Gains on sales of investments based on the carrying value at theprevious balance sheet date 1,083 4,504

Net movement in investment holding gains and losses 413 8,607Other capital charges – handling fees (3) (5)

Total capital gains on investments held at fair value through profit or loss 1,493 13,106


2011 2010£’000 £’000

3. Income Income from investments:Dividends 719 847

Other interest receivable and similar income:Deposit interest — 6

Total income 719 853

2011 2010Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

4. Management and performance fee1

Management fee 58 522 580 48 429 477Performance fee — 348 348 — 95 95

58 870 928 48 524 572

1Details of the management fee and performance fee are given in the Directors’ Report on page 20.

2011 2010£’000 £’000

5. Other administrative expensesAdministration expenses 202 147Directors’ fees1 91 81Savings scheme costs2 40 35Auditors’ remuneration for audit services 24 23

Total administrative expenses 357 286

1Full disclosure is given in the Directors’ Remuneration Report on page 28.2These fees were paid to JPMAM for themarketing and administration of savings scheme products.


6. Finance costs Interest on bank loans and overdrafts 10 92 102 9 83 92



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

2011 2010£’000 £’000

Overseas withholding tax 107 127

Current tax charge for the year 107 127

(b) Factors affecting current tax charge for the yearThe tax assessed for the year is lower (2010: lower) than the Company’s applicable rate of corporation tax for the year of 26.5%(2010: 28%). The factors affecting the current tax charge for the year are as follows:


Net return on ordinary activities before taxation 294 337 631 510 12,797 13,307

Net return on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of 26.5% (2010: 28%) 78 89 167 143 3,583 3,726

Effects of:Non taxable capital gains — (344) (344) — (3,753) (3,753)Non taxable overseas dividends (185) — (185) (237) — (237)Unrelieved expenses 109 255 364 94 170 264Income taxed in different years (2) — (2) — — —Overseas withholding tax 107 — 107 127 — 127

Current tax charge for the year 107 — 107 127 — 127

(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £3,997,000 (2010: £3,946,000) based on a prospective corporationtax rate of 25% (2010: 27%). The reduction in the standard rate of corporation tax was substantively enacted on 5th July 2011and is effective from 1st April 2012. The deferred tax asset has arisen due to the cumulative excess of deductible expenses overtaxable income. Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in theforeseeable future and therefore no asset has been recognised in the accounts.

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


8. Return per share

The revenue return per share is based on the earnings attributable to the ordinary shares of £187,000 (2010: £383,000) and onthe weighted average number of shares in issue during the year of 5,245,193 (2010: 5,402,148).

The capital return per share is based on the capital return attributable to the ordinary shares of £337,000 (2010: £12,797,000)and on the weighted average number of shares in issue during the year of 5,245,193 (2010: 5,402,148).

The total return per share is based on the total return attributable to the ordinary shares of £524,000 (2010: £13,180,000) andon the weighted average number of shares in issue during the year of 5,245,193 (2010: 5,402,148).

2011 2010£’000 £’000

9. Investments Investments listed on a recognised stock exchange 55,241 53,444Investments in liquidity funds 2,700 2,911

Total investments held at fair value 57,941 56,355

Opening book cost 43,815 34,881Opening investment holding gains 12,540 7,127

Opening valuation 56,355 42,008

Movements in the year:Purchases at cost 33,988 43,036Sales – proceeds (33,898) (41,800)Gains on sales of investments based on the carrying value at the previous balance sheet date 1,083 4,504

Net movement in investment holding gains and losses 413 8,607

Closing valuation 57,941 56,355

Closing book cost 48,418 43,815Closing investment holding gains 9,523 12,540

Total investments held at fair value through profit or loss 57,941 56,355

During the year, prior year investment holding gains amounting to £3,430,000 have been transferred to gains on sales ofinvestments as disclosed in note 14.

Transaction costs on purchases during the year amounted to £30,000 (2010: £40,000) and on sales during the year amountedto £27,000 (2010: £45,000). These costs comprise mainly brokerage commission.



2011 2010£’000 £’000

10. Current assetsDebtors Securities sold awaiting settlement 16 112Dividends and interest receivable 77 32Other debtors 33 37

126 181

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

Cash and short term depositsCash and short term deposits comprises bank balances and cash held by the Company, including short term bank deposits.The carrying amount of these represents their fair value. Cash balances in excess of a predetermined amount are placed onshort term deposit at market rates of interest.

2011 2010£’000 £’000

11. Creditors: amounts falling due within one yearBank loan 6,434 4,471Securities purchased awaiting settlement 93 —Performance fee payable 214 98Other creditors and accruals 87 112

6,828 4,681

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

The loan is unsecured and is drawn down on the Company’s floating rate loan facility with Scotiabank. Details of the facility aregiven in note 21(a)(ii) on page 48.

2011 2010£’000 £’000

12. Provisions for liabilities and charges Performance feeProvision brought forward at the beginning of the year 130 133Performance fee provision for the year 348 95Amount payable in respect of the year (214) (98)

Provision carried forward at the end of the year 264 130

Details of the performance fee are given in the Directors’ Report on page 20.


2011 2010£’000 £’000

13. Called up share capital Allotted and fully paidOpening balance of 5,264,610 (2010: 5,482,110) shares of 25p each 1,316 1,371Repurchase of 100,987 (2010: 217,500) shares for cancellation (25) (55)

Closing balance of 5,163,623 (2010: 5,264,610) shares of 25p each 1,291 1,316

During the year, the Company repurchased 100,987 shares, nominal value £25,247, for cancellation, representing 1.9% of theshares outstanding at the beginning of the year. The total consideration paid for these shares was £844,000 and the reason forthe purchases was to seek to manage the volatility and absolute level of the share price discount to net asset value per share.

Capital reservesGains and Holding

Capital losses on gains andredemption sales of losses on Revenue

reserve investments investments reserve£’000 £’000 £’000 £’000

14. Reserves Opening balance 1,826 41,437 12,718 (4,347)Repurchase and cancellation of the Company’s own shares 25 (844) — —Gains on sales of investments based on the carrying value at the previous balance sheet date — 1,083 — —

Foreign currency losses on cash and short term deposits — (66) — —Performance fee provision for the year — — (348) —Performance fee payable — (214) 214 —Net movement in investment holding gains and losses — — 413 —Transfer on disposal of investments — 3,430 (3,430) —Unrealised foreign currency losses on loans — — (128) —Unrealised foreign currency gains on loans now realised — 308 (308) —Management fee and finance cost charged to capital — (614) — —Other capital charges – handling fees — (3) — —Retained revenue for the year — — — 187

Closing balance 1,851 44,517 9,131 (4,160)

Net asset value per share Net assets attributable

2011 2010 2011 2010pence pence £’000 £’000

15. Net asset value per shareOrdinary shares 1,019.2 1,005.8 52,630 52,950

The net asset value per share is based on the net assets attributable to the ordinary shareholders of £52,630,000 (2010:£52,950,000) and on the 5,163,623 (2010: 5,264,610) shares in issue at the year end.



2011 2010£’000 £’000

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

Total return on ordinary activities before finance costs and taxation 733 13,399Add back capital return before finance costs and taxation (429) (12,880)Increase in accrued income (45) (12)Decrease/(increase) in other debtors 4 (2)(Decrease)/increase in accrued expenses (33) 1Management fee charged to capital (522) (429)Overseas withholding tax (107) (127)Performance fee paid (98) (67)

Net cash outflow from operating activities (497) (117)

At At31st December Exchange 31st December

2010 Cash flow movements 2011£’000 £’000 £’000 £’000

17. Analysis of changes in net debtCash and short term deposits 1,225 496 (66) 1,655Bank loans falling due within one year (4,471) (1,835) (128) (6,434)

Closing net debt (3,246) (1,339) (194) (4,779)

18. Contingent liabilities and capital commitments

At the balance sheet date there were no capital commitments or contingent liabilities (2010: none).

19. Transactions with the Manager

Details of the management and performance fee agreements are set out in the Directors’ Report on page 20. Themanagement fee payable to JPMorgan Asset Management (UK) Limited (‘JPMAM’) for the year was £580,000 (2010: £477,000),of which £nil (2010: £nil) was outstanding at the year end. A performance fee amounting to £348,000 (2010: £98,000) ispayable for the year, of which £214,000 (2010: £98,000) was outstanding at the year end.

During the year, £40,000 (2010: £35,000) was payable to JPMAM for the marketing and administration of savings schemeproducts, of which £nil (2010: £3,000) was outstanding at the year end.

Included in administration expenses in note 5 on page 38 are safe custody fees amounting to £531 (2010: £454) payable toJPMorgan Chase of which £217 (2010: £115) was outstanding at the year end.

Handling fees on dealing transactions amounting to £3,000 (2010: £5,000) were payable to JPMorgan Chase during the yearof which £1,000 (2010: £1,000) was outstanding at the year end.

The Company holds an investment in the JPMorgan US Dollar Liquidity Fund which is managed by JPMAM. At 31st December2011 this investment was valued at £2.7 million (2010: £2.9 million). During the year the Company made purchases of thisinvestment amounting to £10.6 million (2010: £17.0 million) and sales amounting to £10.9 million (2010: £15.2 million). Incomeamounting to £7,000 (2010: £5,000) was receivable from this investment during the year and was reinvested in the fund.

At the year end, a bank balance of £1,655,000 (2010: £1,225,000) was held with JPMorgan Chase. A net amount of interest of£342 (2010: £175) was receivable by the Company during the year from JPMorgan Chase of which £29 (2010: £nil) wasoutstanding at the year end.


20. Disclosures regarding financial instruments measured at fair valueThe Company’s financial instruments that are held at fair value comprise its investment portfolio.

The investments are categorised into a hierarchy consisting of the following three levels:

Level 1 – valued using quoted prices.

Level 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices includedwithin Level 1.

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset. Details of the valuation techniques used by the Company are given in note 1(b) onpage 35.

The following table sets out the fair value hierarchy at 31st December:

2011Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss at 31st December 2011

Equity investments 55,241 — — 55,241Liquidity funds 2,700 — — 2,700

Total 57,941 — — 57,941

2010Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss at 31st December 2010

Equity investments 53,444 — — 53,444Liquidity funds 2,911 — — 2,911

Total 56,355 — — 56,355

There have been no transfers into or out of Level 3 during the year.


US Smaller Co_pp35_52_US Smaller Co_pp35_52 22/03/2012 18:26 Page 44


21. Financial instruments’ exposure to risk and risk management policies

As an investment trust the Company invests in equities and other securities for the long term so as to secure its investmentobjective stated on the ‘Features’ page. In pursuing this objective, the Company is exposed to a variety of risks that couldresult in a reduction in the Company’s net assets or a reduction in the profits available for dividends.

These risks include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.The Directors’ policy for managing these risks is set out below. The Company Secretary, in close cooperation with the Boardand the Manager, coordinates the Company’s risk management strategy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set outbelow, have not changed from those applying in the comparative year.

The Company’s financial instruments may comprise:

– investments in the shares of US companies and a US Dollar liquidity fund, which are held in accordance with theCompany’s investment objective;

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

– short term forward currency contracts for the purpose of settling short term liabilities; and

– bank loans and overdrafts, the purpose of which is to finance the Company’s operations.

(a) Market risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in marketprices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. Information to enablean evaluation of the nature and extent of these three elements of market price risk is given in parts (i) to (iii) of this note,together with sensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks andthese policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure tomarket risk when making each investment decision and monitors the overall level of market risk on the whole of theinvestment portfolio on an ongoing basis.

(i) Currency risk Most of the Company’s assets, liabilities and income are denominated in currencies other than sterling which is theCompany’s functional currency and the currency in which it reports. As a result, movements in exchange rates will affectthe sterling value of those items.

Management of currency risk The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, whichmeets on at least six occasions each year. The Manager measures the risk to the Company of the foreign currencyexposure by considering the effect on the Company’s net asset value and income of a movement in the rates of exchangeto which the Company’s assets, liabilities, income and expenses are exposed. Foreign currency borrowing may be used tolimit the Company’s exposure to anticipated changes in exchange rates which might otherwise adversely affect the valueof the portfolio of investments. This borrowing is limited to currencies and amounts commensurate with the assetexposure to those currencies. Income denominated in foreign currencies is converted to sterling on receipt. The Companymay use short term forward currency contracts to manage working capital requirements.


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

(a) Market risk continued(i) Currency risk continued

Foreign currency exposure The fair value of the Company’s monetary items that have foreign currency exposure at 31st December are shown below.Where the Company’s equity investments, which are not monetary items, are priced in a foreign currency, they have beenincluded separately in the analysis so as to show the overall level of exposure.

2011 2010US$ US$

£’000 £’000

Investments held at fair value through profit and loss that are monetary items 2,700 2,911Debtors – securities sold awaiting settlement, dividends and interest receivable 94 144Cash and short term deposits 1,655 1,219Creditors – securities purchased awaiting settlement (308) —Bank loans (6,434) (4,471)

Foreign currency exposure on net monetary items (2,293) (197)Investments held at fair value through profit or loss that are equities 55,241 53,444

Total net foreign currency exposure 52,948 53,247

The above year end amounts are broadly representative of the exposure to foreign currency risk during the year.

Foreign currency sensitivityThe following tables illustrate the sensitivity of the return after taxation for the year and net assets with regard to theCompany’s monetary financial assets and financial liabilities and exchange rates.

The sensitivity analysis is based on the Company’s monetary currency financial instruments held at each balance sheetdate and the income receivable in foreign currency, and assumes a 10% (2010: 10%) appreciation or depreciation ofsterling against the US dollar which is deemed a reasonable illustration based on the volatility of exchange rates duringthe year.

If sterling had weakened by 10% (2010: 10%) this would have had the following effect:

2011 2010£’000 £’000

Income statement – return after taxation:Revenue return 72 85Capital return (229) (20)

Total return after taxation for the year (157) 65

Net assets (157) 65



Conversely if sterling had strengthened by 10% (2010: 10%) this would have had the following effect:

2011 2010£’000 £’000

Income statement – return after taxationRevenue return (72) (85)Capital return 229 20

Total return after taxation for the year 157 (65)

Net assets 157 (65)

In the opinion of the Directors, the above sensitivity analysis with respect to monetary financial assets and financialliabilities is broadly representative of the whole year. The sensitivity with regard to the Company’s investments and foreigncurrency is subsumed into other price risk sensitivity on page 49.

(ii) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the liquidity fund, and the interestpayable on the Company’s variable rate cash borrowings. The Company has no exposure to fair value interest rate risk as ithas no fixed interest investments or borrowings.

Management of interest rate risk The Company does not normally hold significant cash balances. The Company may finance part of its activities throughborrowings at levels approved and monitored by the Board. The Board’s policy is to limit gearing within the range 95% to115% (+/–2.5%).

Derivatives are not used to hedge against the exposure to interest rate risk.

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

2011 2010£’000 £’000

Exposure to floating interest rates:Cash and short term deposits 1,655 1,225JPMorgan US Dollar Liquidity Fund 2,700 2,911

Creditors: amounts falling due within one yearBank loan (6,434) (4,471)

Total exposure (2,079) (335)



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

Interest rate exposure continuedInterest receivable is at the following rates:

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

– The target interest earned on the JPMorgan US Dollar Liquidity Fund is the 7 day US$ London Interbank Bid Rate.

During the year, the Company arranged a US$10.0 million 364 day floating rate loan facility with Scotiabank, which expireson 11th April 2012. Interest is payable at a 1.20% margin over LIBOR as offered in the market for the loan period plus the‘mandatory costs’ rate, which is the lender’s cost of complying with certain regulatory requirements. This facility isunsecured and is subject to covenants which are customary for a credit agreement of this nature. At the year end, theCompany had drawn down the whole US$10.0 million (£6.4 million) on this facility at a weighted average interest rate of1.64% per annum. At the comparative year end, the Company had drawn down US$7.0 million (£4.5 million) on a similarfacility with ING Bank, which expired during the year.

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

2011 2010£’000 £’000

Maximum credit interest rate exposure to floating rates – net cash and liquidity fund balances 54 1,842

Maximum debit interest rate exposure to floating rates – net loan balances (4,406) (2,527)

Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.5% (2010: 0.5%)increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This levelof change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivityanalysis is based on the Company’s monetary financial instruments held at the balance sheet date, with all other variablesheld constant.

2011 20100.5% increase 0.5% decrease 0.5% increase 0.5% decrease

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

Income statement – return after taxationRevenue return 19 (19) 18 (18)Capital return (29) 29 (20) 20

Total return after taxation for the year and net assets (10) 10 (2) 2

In the opinion of the Directors, the above sensitivity may not be representative of the Company’s future exposure tointerest rate changes due to fluctuations in the level of cash balances, investments in liquidity funds and borrowings.



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

Management of other price risk The Board meets on at least six occasions each year to consider the asset allocation of the portfolio and the risk associatedwith particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which isselected in accordance with the Company’s investment objectives and seeks to ensure that individual stocks meet anacceptable risk/reward profile.

Other price risk exposure The Company’s total exposure to other changes in market prices at 31st December comprises its holdings in equityinvestments as follows:

2011 2010£’000 £’000

Equity investments held at fair value through profit or loss 55,241 53,444

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

Concentration of exposure to other price risk A list of the Company’s investments is given on pages 13 and 14. This shows that all of the investments are listed in the USA.Accordingly there is a concentration of exposure to that country. However it should be noted that an investment may notbe entirely exposed to the economic conditions in its country of listing.

Other price risk sensitivity The following table illustrates the sensitivity of the return after tax and net assets to an increase or decrease of 10%(2010: 10%) in the fair value of equity investments. This level of change is considered to be a reasonable illustration basedon observation of current market conditions. The sensitivity analysis is based on the Company’s equities and adjusting forchange in the management fee, but with all other variables held constant.

2011 201010% Increase 10% Decrease 10% Increase 10% Decreasein fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Income statement – return after taxation:Revenue return (6) 6 (5) 5Capital return 5,474 (5,474) 5,296 (5,296)

Total return after taxation for the year 5,468 (5,468) 5,291 (5,291)

Net assets 5,468 (5,468) 5,291 (5,291)



(b) Liquidity risk This is the risk that the Company will encounter difficulty in meeting its obligations associated with financial liabilities that aresettled by delivering cash or another financial asset.

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

The Board’s policy is for the Company to remain fully invested in normal market conditions and that short term borrowings beused to manage short term liabilities and working capital and to gear the Company as appropriate.

Liquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be requiredare as follows:

2011 2010More than More than

Three three months Three three monthsmonths but not more months but not moreor less than one year Total or less than one year Total£’000 £’000 £’000 £’000 £’000 £’000

Bank loan (including interest) 25 6,434 6,459 15 4,471 4,486Securities purchased awaiting settlement 93 — 93 — — —Performance fee payable 214 — 214 98 — 98Other creditors and accruals 69 — 69 102 — 102

401 6,434 6,835 215 4,471 4,686

The liabilities shown above represent future contractual payments and therefore differ from the amounts shown in thebalance sheet.

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

Management of credit risk Portfolio dealing The Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates therisk of losing the principal of a trade during the settlement process. The Manager regularly monitors dealing activity to ensurebest execution, a process that involves measuring various indicators including the quality of trade settlement and incidence offailed trades. Counterparty lists are maintained and adjusted accordingly.



Cash Counterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties that havea minimum rating of A1/P1 from Standard & Poor’s and Moody’s, respectively.

Exposure to JPMorgan Chase JPMorgan Chase is the custodian of the Company’s assets. The custody agreement grants a general lien over the securitiescredited to the securities account. The Company’s assets are segregated from JPMorgan Chase’s own trading assets. Therefore,these assets are designed to be protected from creditors in the event that JPMorgan Chase were to cease trading. However, noabsolute guarantee can be given on the protection of all the assets of the Company.

Credit risk exposure The following amounts shown in the Balance Sheet represent the maximum exposure to credit risk at the current andcomparative year end.

2011 2010Balance Maximum Balance Maximumsheet exposure sheet exposure £’000 £’000 £’000 £’000

Fixed assets – investments held at fair value through profit or loss 57,941 2,700 56,355 2,911Current assetsDebtors – amount due from brokers, dividends and interest receivable 126 126 181 181

Cash and short term deposits 1,655 1,655 1,225 1,225

59,722 4,481 57,761 4,317

The fixed asset exposure to credit risk comprises the Company’s investment in the JPMorgan US Dollar Liquidity Fund. Thisfund has been given an AAA credit rating by Standard & Poor’s. The fund’s investments comprise mainly certificates ofdeposit, commercial paper and floating rate notes with a weighted average maturity of 45 days.

Cash and short term deposits comprises balances held at banks with an AA credit rating or higher (2010: same).

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



22. Capital management policies and procedures

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

2011 2010£’000 £’000

DebtShort term bank loan 6,434 4,471

EquityShare capital 1,291 1,316Reserves 51,339 51,634

Total equity 52,630 52,950

Total capital 59,064 57,421

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

The Board’s policy is to limit gearing within the range 95% to 115% (+/– 2.5%). Gearing for this purpose is defined asinvestments, excluding holdings in liquidity funds, expressed as a percentage of net assets.

2011 2010£’000 £’000

Investments 55,241 53,444Net assets 52,630 52,950

Gearing 105.0% 100.9%

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

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

– the need to buy back equity shares, either for cancellation or to hold in Treasury, which takes into account the share pricediscount or premium; and

– the opportunity for issues of new shares, including issues from Treasury.


Notice is hereby given that the fifty fifth Annual GeneralMeeting of JPMorgan US Smaller Companies Investment Trustplc will be held at 20 Moorgate, London EC2R 6DA on Tuesday,1st May 2012 at 2.30 p.m. for the following purposes:

1. To receive the Directors’ Report, the Annual Accounts andthe Auditor’s Report for the year ended 31st December2011.

2. To approve the Directors’ Remuneration Report for theyear ended 31st December 2011.

3. To reappoint Mark Ansell as a Director of the Company.

4. To reappoint Christopher Galleymore as a Director of theCompany.

5. To reappoint Alan Kemp as a Director of the Company.

6. To reappoint Davina Walter as a Director of the Company.

7. To reappoint Grant Thornton UK LLP as Auditor to theCompany and to authorise the Directors to determine theirremuneration.

Special Business

To consider the following resolutions:

Authority to allot new ordinary shares – Ordinary Resolution 8. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors),pursuant to and in accordance with Section 551 of the Actto exercise all the powers for the Company to allot shares inthe Company and to grant rights to subscribe for, or convertany security into, shares in the Company (‘Rights’) up to anaggregate nominal amount of £129,091, representingapproximately 10% of the Company’s issued ordinary sharecapital as at the date of the passing of this Resolution,provided that this authority shall expire at the AnnualGeneral Meeting of the Company to be held in 2013, unlessrenewed at a general meeting prior to such time, save thatthe Company may before such expiry make offers oragreements which would or might require shares to beallotted or Rights to be granted after such expiry and sothat the Directors of the Company may allot shares andgrant Rights in pursuance of such offers or agreements asif the authority conferred hereby had not expired.

Authority to disapply pre-emption rights on allotment of newordinary shares – Special Resolution 9. THAT, subject to the passing of Resolution 8 set out above,

the Directors of the Company be and they are herebyempowered pursuant to Sections 570 and 573 of the Act toallot equity securities (within the meaning of Section 560 ofthe Act) for cash pursuant to the authority conferred byResolution 8 or by way of a sale of Treasury shares as ifSection 561(1) of the Act did not apply to any suchallotment, provided that this power shall be limited to theallotment of equity securities for cash up to an aggregatenominal amount of £129,091, representing approximately10% of the issued ordinary share capital as at the date ofthe passing of this resolution at a price of not less than thenet asset value per share and shall expire upon the expiryof the general authority conferred by Resolution 8 above,save that the Company may before such expiry make offersor agreements which would or might require equitysecurities to be allotted after such expiry and so that theDirectors of the Company may allot equity securities inpursuant of such offers or agreements as if the powerconferred hereby had not expired.

Authority to repurchase the Company’s shares – Special Resolution 10. THAT the Company be generally and subject as hereinafter

appears unconditionally authorised in accordance withSection 701 of the Companies Act 2006 (the ‘Act’) to makemarket purchases (within the meaning of Section 693 of theAct) of its issued ordinary shares on such terms and in suchmanner as the Directors may from time to time determine

PROVIDED ALWAYS THAT

(i) the maximum number of ordinary shares herebyauthorised to be purchased shall be 774,027 or, if less,that number of ordinary shares which is equal to14.99% of the Company’s issued share capital as at thedate of the passing of this resolution;

(ii) the minimum price which may be paid for an ordinaryshare shall be 25p;

(iii) the maximum price which may be paid for an ordinaryshare shall be an amount equal to: (a) 105% of theaverage of the middle market quotations for anordinary share taken from and calculated by referenceto the London Stock Exchange Daily Official List for the

Notice of Annual General Meeting


Notice of Annual General Meetingcontinued

five business days immediately preceding the day onwhich the ordinary share is purchased; or (b) the priceof the last independent trade; or (c) the highest currentindependent bid;

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

(v) the authority shall expire on 31st October 2013 unlessthe Authority is renewed at the Company’s AnnualGeneral Meeting in 2013 or at any other generalmeeting prior to such time; and

(vi) the Company may make a contract to purchaseordinary shares under the authority hereby conferredprior to the expiry of such authority and may make apurchase of ordinary shares pursuant to any suchcontract notwithstanding such expiry.

By order of the Board Jonathan Latter, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 28th March 2012

Notes

These notes should be read in conjunction with the notes on the reverse ofthe proxy form.

1. A member entitled to attend and vote at the Meeting may appointanother person(s) (who need not be a member of the Company) toexercise all or any of his rights to attend, speak and vote at the Meeting.A member can appoint more than one proxy in relation to the Meeting,provided that each proxy is appointed to exercise the rights attachingto different shares held by him.

2. A proxy does not need to be a member of the Company but must attendthe Meeting to represent you. Your proxy could be the Chairman,another Director of the Company or another person who has agreed toattend to represent you. Details of how to appoint the Chairman oranother person(s) as your proxy or proxies using the proxy form are setout in the notes to the proxy form. If a voting box on the proxy form isleft blank, the proxy or proxies will exercise his/their discretion both asto how to vote and whether he/they abstain(s) from voting. Your proxymust attend the Meeting for your vote to count. Appointing a proxy orproxies does not preclude you from attending the Meeting and votingin person.

3. Any instrument appointing a proxy, to be valid, must be lodged inaccordance with the instructions given on the proxy form no later than2.30 p.m. two business days prior to the Meeting (i.e. excludingweekends and bank holidays).

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments alsoapplies in relation to amended instructions. Any attempt to terminateor amend a proxy appointment received after the relevant deadline willbe disregarded. Where two or more valid separate appointments ofproxy are received in respect of the same share in respect of the sameMeeting, the one which is last received (regardless of its date or thedate of its signature) shall be treated as replacing and revoking theother or others as regards that share; if the Company is unable todetermine which was last received, none of them shall be treated asvalid in respect of that share.

5. To be entitled to attend and vote at the Meeting (and for the purpose ofthe determination by the Company of the number of votes they maycast), members must be entered on the Company’s register of membersas at 6.00 p.m. two business days prior to the Meeting (the ‘specifiedtime’). If the Meeting is adjourned to a time not more than 48 hoursafter the specified time applicable to the original Meeting, that time willalso apply for the purpose of determining the entitlement of membersto attend and vote (and for the purpose of determining the number ofvotes they may cast) at the adjourned Meeting. If, however, the Meetingis adjourned for a longer period then, to be so entitled, members mustbe entered on the Company’s register of members as at 6.00 p.m. twobusiness days prior to the adjourned Meeting or, if the Company givesnotice of the adjourned Meeting, at the time specified in that notice.Changes to entries on the register after this time shall be disregarded indetermining the rights of persons to attend or vote at the Meeting oradjourned Meeting.


6. Entry to the Meeting will be restricted to shareholders and their proxyor proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s) toact as its representative(s) and to vote in person at the Meeting (seeinstructions given on the proxy form). In accordance with the provisionsof the Companies Act 2006, each such representative may exercise (onbehalf of the corporation) the same powers as the corporation couldexercise if it were an individual member of the Company, provided thatthey do not do so in relation to the same shares. It is therefore nolonger necessary to nominate a designated corporate representative.Representatives should bring to the Meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of the CompaniesAct 2006 can require the Company to publish a statement on itswebsite setting out any matter relating to: (a) the audit of theCompany’s accounts (including the Auditors’ report and the conductof the audit) that are to be laid before the AGM; or (b) anycircumstances connected with Auditors of the Company ceasing tohold office since the previous AGM, which the members propose toraise at the Meeting. The Company cannot require the membersrequesting the publication to pay its expenses. Any statement placedon the website must also be sent to the Company’s Auditors no laterthan the time it makes its statement available on the website. Thebusiness which may be dealt with at the AGM includes any statementthat the Company has been required to publish on its websitepursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Companymust cause to be answered at the AGM any question relating to thebusiness being dealt with at the AGM which is put by a memberattending the Meeting except in certain circumstances, including if it isundesirable in the interests of the Company or the good order of theMeeting or if it would involve the disclosure of confidential information.

10. Under Sections 338 and 338A of the 2006 Act, members meeting thethreshold requirements in those sections have the right to require theCompany: (i) to give, to members of the Company entitled to receivenotice of the Meeting, notice of a resolution which those membersintend to move (and which may properly be moved) at the Meeting;and/or (ii) to include in the business to be dealt with at the Meeting anymatter (other than a proposed resolution) which may properly beincluded in the business at the Meeting. A resolution may properly bemoved, or a matter properly included in the business unless: (a) (in thecase of a resolution only) it would, if passed, be ineffective (whether byreason of any inconsistency with any enactment or the Company’sconstitution or otherwise); (b) it is defamatory of any person; or (c) it isfrivolous or vexatious. A request made pursuant to this right may be inhard copy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business mustbe accompanied by a statement setting out the grounds for the request,must be authenticated by the person(s) making it and must be receivedby the Company not later than the date that is six clear weeks beforethe Meeting, and (in the case of a matter to be included in the businessonly) must be accompanied by a statement setting out the grounds forthe request.

11. A copy of this notice has been sent for information only to persons whohave been nominated by a member to enjoy information rights underSection 146 of the Companies Act 2006 (a ‘Nominated Person’). Therights to appoint a proxy can not be exercised by a Nominated Person:they can only be exercised by the member. However, a NominatedPerson may have a right under an agreement between him and themember by whom he was nominated to be appointed as a proxy for theMeeting or to have someone else so appointed. If a Nominated Persondoes not have such a right or does not wish to exercise it, he may havea right under such an agreement to give instructions to the member asto the exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this notice of meeting, details of the total number of sharesin respect of which members are entitled to exercise voting rights at theAGM, the total voting rights members are entitled to exercise at theAGM and, if applicable, any members’ statements, members’resolutions or members’ matters of business received by the Companyafter the date of this notice will be available on the Company’s websitewww.jpmussmallercompanies.co.uk.

13. The register of interests of the Directors and connected persons in theshare capita of the Company and the Directors’ letters of appointmentare available for inspection at the Company’s registered office duringusual business hours on any weekday (Saturdays, Sundays and publicholidays excepted). it will also be available for inspection at the AnnualGeneral Meeting. No Director has any contract of service with theCompany.

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

15. As an alternative to completing a hardcopy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies electronically byvisiting www.sharevote.co.uk. You will need your Voting ID, Task ID andShareholder Reference Number (this is the series of numbers printedunder your name on the Form of Proxy/ Voting Direction Form).Alternatively, if you have already registered with Equiniti Limited’sonline portfolio service, Shareview, you can submit your Form of Proxyat www.shareview.co.uk. Full instructions are given on both websites.

16. As at 20th March 2012 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capital consistsof 5,163,623 ordinary shares, carrying one vote each. Therefore thetotal voting rights in the Company are 5,163,623.

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


Return to Shareholders

Share price return, on a mid-market price to mid-market pricebasis.

Return on Net Assets

Return on net asset value per share, on a bid value to bid valuebasis.

Benchmark Return

Total return on the benchmark assuming that all dividendsreceived were reinvested into the shares of the underlyingcompanies at the time the shares were quoted ex-dividend.

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

Actual Gearing Factor

Investments, excluding holdings in liquidity funds, expressed asa percentage of shareholders’ funds. This shows the effect ofgearing on the net asset value if the market value of theportfolio were to increase by 100%.

Total Expense Ratio (‘TER’)

The TER is the ratio, expressed in percentage terms, of themanagement fee plus all other operating expenses, butexcluding finance costs and any performance fee payable, tothe average of the month end net assets during the year. TheTER is calculated in accordance with guidance issued by theAssociation of Investment Companies.

The TER including performance fee payable is the ratio,expressed in percentage terms, of the management fee plus allother operating expenses plus any performance fee payable,but excluding finance costs, to the average of the month endnet assets during the year.

Active Position

The active position shows the difference between theCompany’s holding of an individual stock or sector comparedwith that stock or sector’s weighting in the Company’sbenchmark index. A positive number indicates an activedecision by the manager to own more of (i.e. be overweight) a

particular stock or sector versus the benchmark and a negativenumber indicates a decision to hold less of (i.e. beunderweight) a particular stock or sector versus thebenchmark.

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

if the share price of an investment trust is lower than the NAVper share, the Company’s shares are said to be trading at adiscount. The discount is shown as a percentage of the NAVper share. The opposite of a discount is a premium. It is morecommon for an investment trust’s shares to trade at a discountthan at a premium.

Performance Attribution

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

Performance Attribution Definitions:

Asset Allocation

The impact of allocating assets differently from those in thebenchmark, via the portfolio’s weighting in different sectors orasset types.

Stock Selection

The effect of investing in securities to a greater or lesser extentthan their weighting in the benchmark, or of investing insecurities which are not included in the benchmark.

Gearing/Cash

The impact of borrowings or cash balances on the Company’sperformance relative to the benchmark, which includes nosuch balances.

Management Fee/Other Expenses

The negative effect on performance relative to the benchmarkarising from the management fee and other expenses.

ShareRepurchases

The enhancement to net asset value (‘NAV’) per share arisingfrom the repurchase and cancellation of the Company’s ownshares at a share price discount to NAV per share.

Performance Fee

Measures the effect of a performance fee charge or writeback.

Glossary of Terms and Definitions

Financial CalendarFinancial year end 31st DecemberHalf year results announced AugustFull year results announced MarchInterim Management Statements April and OctoberAnnual General Meeting April/May

Information about the Company

HistoryJPMorgan US Smaller Companies Investment Trust plc wasincorporated in 1955 as Atomic Securities Trust Limited. It was dormantuntil 1962 when it changed its name to Fledgeling Investments Limitedand began operations as an unquoted investment company.

The trust was wholly owned by a number of JPMorgan investmenttrusts and invested in listed and unlisted companies in the UK and USwhich for reasons of small size, illiquidity or risk, were unsuitable fordirect investment. In 1982, with assets of £9.2 million, it obtained alisting on the London Stock Exchange and gained investment truststatus. At that time it changed its name to The Fleming FledgelingInvestment Trust plc and gradually broadened its investment scopeinto Europe and the Asian markets. In April 1998, the Companychanged its name to The Fleming US Discovery Investment Trust plcand then again to JPMorgan Fleming US Discovery Investment Trustplc in May 2002. The Company adopted its present name in April2010.

Continuation Vote At the Annual General Meeting of the Company held in April 2010 aresolution of the shareholders approved the continuation of theCompany until the Annual General Meeting to be held in 2015.

Company NumbersCompany registration number: 552775 London Stock Exchange Code: JUSC LNISIN: GB0003417101 Bloomberg: JUSC LN

Market InformationThe shares are listed on the London Stock Exchange and are quoteddaily in the Financial Times, The Times, The Daily Telegraph, TheScotsman, The Independent and The Herald and on the JPMorganinternet site at www.jpmussmallercompanies.co.uk, where the shareprice is updated every 15 minutes during trading hours.

Websitewww.jpmussmallercompanies.co.uk .

Share TransactionsThe Company’s shares may be dealt in directly through a stockbrokeror professional adviser acting on an investor’s behalf. They may alsobe purchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all availableon the online wealth manager service, J.P. Morgan WealthManager+available at www.jpmorganwealthmanagerplus.co.uk

Manager and Company SecretaryJPMorgan Asset Management (UK) Limited

Company’s Registered OfficeFinsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone: 020 7742 6000

For company secretarial and administrative matters, please contactJonathan Latter.

CustodianJPMorgan Chase Bank, N.A.125 London WallLondon EC2Y 5AJ

RegistrarsEquiniti LimitedReference 1084Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone: 0871 384 2326

Calls to this number cost 8p per minute from a BT landline. Otherproviders’ costs may vary. Lines open 8.30 a.m. to 5.30 p.m., Mondayto Friday. The overseas helpline number is +44 (0)121 415 7047.

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrar quoting reference 1084.

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

Independent AuditorGrant Thornton UK LLPChartered Accountants and Statutory Auditor30 Finsbury SquareLondon EC2P 2YU

BrokersNumis Securities Limited10 Paternoster Square London EC4M 7LT

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

A member of the AIC


J.P. Morgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmussmallercompanies.co.uk

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