JMI.L Regulatory News (JMI)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN UK SMALLER COMPANIES INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED31ST JANUARY 2021

Legal Entity Identifier: 549300PXALXKUMU9JM18

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Investment Performance

The Board is sure that the appalling situation in the Ukraine is at the forefront of everyone's minds and we share the concerns over this unfolding humanitarian disaster. We earnestly hope that our leaders will be willing and strong enough to stand up to Putin in support of the Ukrainian people without triggering all out-war.

After several years of strong outperformance the Company has had a more challenging first half producing a return to shareholders of -12.2% in the six months period. The total return on net assets at par value was -9.0%, underperforming the Numis Smaller Companies plus AIM (excluding Investment Trusts) Index which fell by -4.5%. The lesser return for shareholders reflects a widening of the share price discount to net asset value from 8.0% at the start of the financial year to 11.5% at the end of the half year. The Investment Managers explain the reasons for this weak period in their report. However, this disappointing performance should be viewed in the context of the strong returns produced over longer time periods. The managers do not follow short term market trends but focus on investing in good quality companies with sound longer term prospects. The Board fully supports this approach.

Since the end of the reporting period, from 31st January 2022 to 23rd March 2022, the Company's total return on net assets was -5.37%, marginally underperforming the Company's benchmark index which declined by -5.28% as at 23rd March 2022. Over the same period, the Company delivered a return to ordinary shareholders of -5.38%

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

Loan Facility and Gearing

As noted in the previous Annual Report, on 1st October 2021 the Board renewed and increased the borrowing facility with Scotiabank to £50 million for a period of 24 months. The current facility will expire on 1st October 2023. There is a further option to increase borrowings to £60 million subject to certain conditions. As at 31st January 2022, £40 million was drawn on the loan facility.

During a period of low interest rates, the use of gearing is an attractive way of amplifying the effect of rising markets, but inevitably increases the risk of loss if markets fall. The Company has maintained a fairly constant level of gearing, with the Board giving the Investment Managers flexibility to adjust the gearing tactically within guidelines. During the reporting period, the Company's gearing ranged from 7.9% to 10.5%, ending the half year at 9.5% geared as the managers took advantage of perceived attractive valuations. As at 23rd March 2022 the Company's gearing was 9.0%, with total borrowings of £40 million.

Share buybacks

During the six months to 31st January 2022, it was not necessary for the Company to repurchase any shares. However, the Board's objective remains to reduce the volatility of the discount, acting in the best interests of shareholders by making purchases should supply and demand for shares become unbalanced. As at the end of the reporting period there were 79,611,410 shares in issue (including 1,559,741 shares held in Treasury).

Board Succession

As previously stated in the last Annual Report, Frances Davies will retire from the Board at the Annual General Meeting (AGM) in November 2022 having completed nine years of service as a Director. The Board, via the Nomination Committee, has recently appointed a recruitment consultant to commence the search for a new candidate who will succeed her, with the intention to appoint the new Director ahead of the 2022 AGM. All other Directors will stand for annual re-appointment at the AGM. The Board is also mindful that the size of the Board may need to be increased in light of the forthcoming, much delayed, corporate governance reviews.

Outlook

The situation in Ukraine and its evolution will clearly continue to have an enormous impact on global economies. The unpredictability of Putin adds a further frightening dimension and also increased uncertainty for policy makers and the markets. Furthermore, the effects will also be felt directly by ordinary citizens the world over particularly those who are less well off. The advent of globalisation, just in time supply chains and the unfortunate geographic concentration of hydrocarbons, raw materials and some food production makes sanctions a double-edged sword. None of us can predict what will happen but we can hope that our governments rethink some of the unsound policies that have set us down this path and that the electorate allow them to do so.

Whilst the short-term prospects for equity markets are uncertain, human ingenuity will eventually rise to the challenge as it has in the past and new opportunities and business models will be created. Smaller, agile companies are well placed to capitalise on this and it is the Investment managers job to seek them out. The Board believes that the Company's focus on high quality companies and the longer term is the best strategy and we are fortunate to have highly experienced managers investing the assets.

Andrew Impey

Chairman

25th March 2022

INVESTMENT MANAGERS' REPORT

Performance and Market Background

Stockmarkets continued to perform strongly until the end of the calendar year, but January saw significant market declines, with our index down over 6% in the month. The cause of these sharp declines was twofold. Inflation started to increase significantly, caused by the re-opening of the global economy and the ensuing supply side shortages ranging from semi-conductor chips to energy to labour. While initially deemed transitory, it brought to the fore the inevitable rise in interest rates in the USA and the UK from their abnormally low levels. In December, the UK was first to increase interest rates (by 15bp) from the 0.1% set at the start of the pandemic, followed by a further 25bp rise in February. Markets reacted swiftly to this change in outlook, dramatically selling off growth stocks. In addition, concerns over the rising cost of living brought about by inflationary pressures led to a fairly indiscriminate sell off in consumer facing stocks in the UK.

Against this backdrop, the Company produced a total return on net asset value of -9.0% in the six month period, compared to a return of -4.5% for the Numis Smaller Companies plus AIM (ex Investment Companies) Index. This underperformance was almost entirely due to the January sell-off. The share price total return was lower at -12.2%, as the discount of the share price relative to net assets widened significantly.

Portfolio

A number of our key holdings continued to produce very strong outperformance in the six months, including Watches of Switzerland (retailer), Next Fifteen Communications (a consultancy company), Dunelm (value retailer) and our gas play, Serica Energy. On the negative side, the main detractors were CMC (a spreadbetting company) and Games Workshop (a manufacturer and retailer of war gaming figurines), and a recent IPO, Victorian Plumbing (bathware). 2021 saw a huge boom in IPOs, and while a large number have undoubtedly disappointed and are trading significantly below float price, our highly disciplined approach meant that we avoided many of those. The two most recent IPOs that we participated in have performed well to date, namely Ashtead Technology, a subsea equipment rental provider to the offshore energy sector, and Devolver, a video gaming company.

Other changes to the portfolio saw us adding new investments such as the bowling company Hollywood Bowl as a re-opening beneficiary, and Clarkson, the provider of shipping services, which is benefitting from increased trade and higher shipping rates. We also sold out of certain positions. These included Marston's and Restaurant Group on concerns over numerous inflationary headwinds in bars and restaurants, and Auction Technology, a very successful IPO, on valuation grounds. In addition, we exited both Sumo and Augean post their bids in order to take advantage of volatile markets by reinvesting the cash.

Outlook

At the end of 2021 we were feeling confident in the outlook. The Covid pandemic appeared to be nearing its end, and normal life was close to resuming. The Company was performing very strongly, and we held a portfolio of high quality high performing companies, in which we had (and continue to have) strong conviction, despite the known headwinds of inflation, rising interest rates and to a much lesser extent, Covid.

As described in the Market Background above, stockmarkets declined significantly in January of this year. Then, as we all know, the situation between Russia and Ukraine took a dramatic turn, culminating in the invasion of a sovereign country neighbouring Europe. Our hearts go out to the citizens of Ukraine, but our minds must focus on the economic impact here in the UK and how our investments will be impacted. We none of us can know the endgame of Russia's invasion. So it is likely stockmarkets will remain highly volatile in the near term driven by macro factors, but we continue to focus on company fundamentals which drive stock markets over the longer-term.

There are some economic positives. The important Purchasing Managers' Indices for February points to strong growth at 59.9 (where anything above 50 is expansionary). The UK economy is forecast by the IMF and OECD to grow 4.7% in 2022, as it continues to recover from the historic decline in 2020, and normal life resumes. Unemployment is lower than expected, job vacancies stand at over one million, and overall for the UK consumer household deposits (savings as a proportion of disposable income) remain extremely high. The JP Morgan estimate of excess household savings from the pandemic over the last two years is over 10% of GDP.

The small cap arena is undoubtedly attractively valued. Our portfolio is comprised of companies that are growing faster than our market, are delivering better results than the market, are cheaper on both a P/E and notably a free cash flow yield basis (5.8% for the fund versus 2.9% for the index at the time of writing) and are higher quality as measured by both Return on Equity and Return on Invested Capital. None of this has assisted performance in the short term, but value will out. Indeed, in the month of February, we have had approaches for two of our companies, and we continue to expect M&A to be an ongoing theme. The long term profitable and cash-generative winners in which we seek to invest are largely weathering the inflationary and supply chain issues and continue to produce strong results. We believe the emphasis we have always placed on quality within the portfolio, in addition to our focus on earnings momentum and valuations will stand them, and you, our investors, in good stead.

Georgina Brittain

Katen Patel

Investment Managers

25th March 2022

INTERIM MANAGEMENT REPORT

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

Principal and Emerging Risks and Uncertainties

During 2021 and into 2022, the virus COVID-19 (coronavirus) has continued to create significant uncertainty for markets, and therefore risk to the value of investments and volatility. In addition, the Board also now considers the risk of war to be an emerging risk following the recent crisis in Ukraine. Other than this, the principal and emerging risks and uncertainties faced by the Company have not changed significantly and fall into the following broad categories: corporate strategy; investment and performance; discount; smaller company investment; political and economic; investment management team; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational and counterparty failure; cybercrime; financial; global pandemics and climate change. Information on each of these areas is given in the Strategic Report within the Annual Report and Financial Statements for the year ended 31st July 2021.

Related Parties Transactions

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

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio (including its liquidity) and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least 12 months from the date of the approval of this half year financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the financial statements.

Directors' Responsibilities

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

(i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st January 2022, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

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

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

• select suitable accounting policies and then apply them consistently;

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

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

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

and the Directors confirm that they have done so.

For and on behalf of the Board

Andrew Impey

Chairman

25th March 2022

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST JANUARY 2022

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

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

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

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST JANUARY 2022

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

STATEMENT OF FINANCIAL POSITION

AT 31ST JANUARY 2022

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31ST JANUARY 2022

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31ST JANUARY 2022

1. Financial statements

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

The figures and financial information for the year ended 31st July 2021 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in April 2021.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st January 2022.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st July 2021.

3. Return/(loss) per share

4. Dividend paid

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

No interim dividend has been declared in respect of the six months ended 31st January 2022 (2021: nil).

5. Net asset value per share

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

JPMORGAN FUNDS LIMITED

25th March 2021

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

ENDS

A copy of the 2022 Half Year Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The 2022 Half Year Report will also shortly be available on the Company's website at www.jpmuksmallercompanies.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.