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JPMorgan US Smaller Companies Investment Trust plc
Annual General Meeting
Fiona Harris
A tight knit team with a disciplined focus on delivering alpha
Source: J.P. Morgan Asset Management. Years of experience: Industry/Firm.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
DON SAN JOSEMANAGING DIRECTOR PORTFOLIO MANAGER
EXPERIENCE: 22/19
DAN PERCELLA,MANAGING DIRECTOR
EXPERIENCE: 17/11
JONATHAN BRACHLE,EXECUTIVE DIRECTOR
EXPERIENCE: 12/12
CO-PM/RESEARCH ANALYST CO-PM/RESEARCH ANALYST
Also leverages the insights of the J.P. Morgan Equity organization, which
includes over 40 research analysts in the U.S. and over 200 globally
CHRIS CARTER,VICE PRESIDENT
EXPERIENCE:13/4
RESEARCH ANALYST
Investment Philosophy
Don San JosePortfolio Manager “We believe that the analytical focus that we place on uncovering high quality
companies which are trading at attractive valuations is a differentiating characteristic
of our approach and one that serves to add value for our clients over the long term.”
Quality Business Quality Management Valuation
We focus on quality first:
durable business model
consistent earnings
clear competitive advantages
high return on invested capital
sustainable free cashflow
Management is key:
good stewards of capital
committed to increasing shareholder value
track record of success
Valuation is critical:
Price/earnings
Price/book value
Private market analysis
Free cashflow yield
Enterprise value analysis
JPMorgan US Smaller Companies Investment Trust plc: 2018 Performance
Past performance is not an indication of current and future results.The current portfolio management team assumed responsibility of the portfolio November 2008. 1Change in share price with net dividends, if any, reinvested (Source: Morningstar).2Change in net asset value per share with net dividends, if any, reinvested (Source: J.P. Morgan Asset Management).3Change in the Index with net income reinvested, in sterling terms. Comparison of the Company’s performance is made against this index. The benchmark is a recognized index of stocks which should
not be taken as wholly representative of the Company’s investment universe. The Company’s investment strategy does not follow or “track” this index and therefore there may be a degree of diversity in
performance from the main index stated. (Source: Russell Investments)4Arithmetic difference between the net asset value and the index
FY 2018
JPM US Smaller Companies IT share price1 -11.6%
JPM US Smaller Companies IT net asset value2 -5.8%
Russell 2000 Index Net (£)3 -5.7%
NAV Excess return4 -0.1%
As of 31 December 2018
Benchmark Russell 2000 Index
Absolute sector returns in GBP
Sector performance: 2018
Source: Wilshire. The above data excludes cash and gearing. Past performance is not an indication of current and future results.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 December 2018
20%
10%
2%
-2%
-7% -7%-9%
-15%
-35%
5%8%
-1%-3%
-9%
-23%
-5% -5%
-33%
Technology Utilities Health Care ConsumerDiscretionary
ProducerDurables
Materials &Processing
FinancialServices
ConsumerStaples
Energy
Portfolio Benchmark
One year performance attribution
Source: Wilshire, Factset, in GBP. 1The attribution summary approximates the gross excess returns of the portfolio and is calculated based on daily holdings which does not represent actual trading,
liquidity constraints, fee schedules and transaction costs. It is shown for illustrative purposes only and is not meant to be representative of actual results. *Indicates stock not held in the portfolio as of 31
December 2018. The portfolio is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager
without notice.
Past performance is not a reliable indicator of current and future results.
JPMorgan US Smaller Companies Investment Trust plc
For the 1 year period ending 31 December 2018
Stock attribution
Sector Attribution (%)
Attribution summary1 Stock: +2.98%
Sector: -1.12%
Benchmark Russell 2000 Index
Top ContributorsAvg. Relative
weight (%)
Stock
return (%)
Impact
(%)
POOL 2.73 23.18 0.68
Grubhub 0.86 100.27 0.58
Tableau Software 0.93 84.19 0.57
Q2 Holdings 1.20 42.82 0.53
Healthsouth 1.55 34.76 0.52
Top DetractorsAvg. Relative
weight (%)
Stock
return (%)
Impact
(%)
Patterson UTI Energy 1.61 -51.81 -0.96
Patrick Industries 1.30 -54.72 -0.84
Spectrum Brands Holdings* 0.61 -24.87 -0.48
LCI Industries 0.99 -43.93 -0.48
Evoqua Water Technologies* 0.47 -57.80 -0.45
1.2 1.10.4 0.1 0.1 0.0
0.0 -0.4 -0.8-2.0
0.0
2.0
4.0
Technology Materials &Processing
ProducerDurables
Energy ConsumerDiscretionary
Health Care Utilities ConsumerStaples
FinancialServices
Performance
1 Net asset value assumes that shares held in treasury (if any) have been re issued at the previous nights closing price.2 Comparison of the Company's performance is made with the benchmark. The benchmark is a recognised index of stocks which should not be taken as wholly representative of the Company's
investment universe. The Company's investment strategy does not follow or track this index and therefore there may be a degree of divergence between its performance and that of the Company3 Arithmetic difference between the net asset value and the index
Source: J.P. Morgan Asset Management. Performance data has been calculated on NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Please
note Benchmark Indices do not include fees or operating expenses and are not available for actual investment.
Past performance is not a reliable indicator of current and future results.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
Annualised performance (%)
Three
Months
One
Year
Two
Years
Three
Years
Five
Years
Ten
Years
JPM US Smaller Companies IT (Net Asset Value1) (%) 12.05 9.04 4.87 16.61 14.16 19.03
Russell 2000 Index Net2 (£) (%) 11.93 9.64 4.42 16.44 12.21 16.17
Excess return3 +0.12 -0.60 +0.45 +0.17 +1.95 +2.86
Calendar year performance (%)
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
JPM US Smaller Companies IT (Net Asset Value)1 -5.76 6.32 50.14 3.95 12.74 38.65 12.51 1.33 33.00 29.45
Russell 2000 Index Net (£)2 -5.67 4.52 44.37 0.92 11.12 35.91 10.87 -3.76 30.49 12.86
Excess return3 -0.09 +1.81 +5.77 +3.03 +1.62 +2.74 +1.64 +5.09 +2.51 +16.59
Benchmark Russell 2000 Index
Active and absolute sector positions
Sector positions
Source: Factset (excludes cash). This is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment
Manager without notice.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
5.35.0
0.70.2 0.0
-1.0 -1.0
-2.9
-6.3-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
ProducerDurables
Materials &Processing
ConsumerStaples
ConsumerDiscretionary
FinancialServices
Utilities Energy Technology Health Care
Portfolio
weight (%) 18.6 11.1 3.0 15.4 24.9 3.7 2.6 11.0 9.5
Relative to benchmark (%)
Portfolio Portfolio Index
Wgtd Avg Market Cap (USD mm) 3,882 2,384
Price / Earnings, 12-mth fwd1 17.2x 18.9x
Dividend Yield 1.5% 1.4%
EPS Growth, 5 yr average 13.2% 7.8%
EPS Growth, 12-mth forward 8.1% 8.8%
Predicted Beta 0.88 -
Predicted Tracking Error 4.36 -
Return on Equity, trailing 12-mth 12.6% 8.3%
Turnover2 27.3% -
Number of holdings 86 1992
Gearing 3.6%
Portfolio characteristics
Source: J.P. Morgan Asset Management, FactSet.1Including negative earners. 2Average 12-month turnover as of 31 March 2019. The portfolio is an actively managed portfolio, holdings, sector
weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Positioning data is based on a representative portfolio.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
Market capitalisation
Benchmark Russell 2000 Index
62.8
25.8
11.4
0.0
28.8
39.5
24.4
7.2
0%
20%
40%
60%
80%
100%
> USD3BN USD1.5- 3BN
USD500M- 1.5BN
<USD500M
Portfolio
Russell 2000 Index
Executive summary
Past performance is not a reliable indicator of current and future results.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
ExpertiseA tight knit portfolio management team with a focus on US small caps
Lead Portfolio Manager, Don San Jose, has 22 years of experience and has managed the Investment Trust since 2008
Leverages the insights of a dedicated team of 3 research analysts
PortfolioFundamental approach, focusing on high quality companies with attractive valuations
Emphasis on durable business models, consistent earnings, high return on invested capital and sustainable free cash flow
Diversified portfolio with disciplined approach to valuation in order to enhance long-term returns
ResultsPortfolio has delivered strong risk-adjusted performance
Consistent and disciplined in the execution of our strategy thus ensuring no style drift
Our approach has historically shown less volatility than the market and less exposure to downside risk
Market Outlook
The length of expansions
GTM – U.S. | Page 18
Economic growth and the composition of GDP
GTM – U.S. | Page 19
Consumer finances
GTM – U.S. | Page 20
Unemployment and wages
GTM – U.S. | Page 24
The US economy is in the late cycle, but the risk of a recession still looks moderate
Source: Bloomberg, US National Bureau of Economic Research, Federal Reserve Economic Data, Conference Board, Ned Davis Research, MKM Partners, Deutsche Bank. Data as of 31 March 2019.
The opinions and views expressed here are those held by the author at the date of publication which are subject to change and are not to be taken as or construed as investment advice.
Corporate Profit Peak
Change in Employment
Leading Economic Indicator
Yield Curve Inversion
High-Yield Spread
Yield curve and equities
GTM – U.S. | Page 33
Market volatility and pullbacks are normal
Source (Top): Standard & Poor’s, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Analysis based on each type (size) of drawdown being independent. For example, the
market does not typically see four 5% drawdowns and one 10% drawdowns in the same year, but rather those 5% drawdowns may compound into a single 10% drawdown for the year. Analysis based on each type (size) of
drawdown being independent. Data as of 31 December 2017. Source (Bottom): Guide to Retirement, J.P. Morgan Asset Management analysis using data from Bloomberg. *Refers to the total missed days during the entire period.
For illustrative purposes only.
Past performance is not a reliable indicator of current and future results.
$40,135
$20,030
$12,569 $8,331 $5,669 $3,965 $2,834
Fully Invested Missed 10best days
Missed 20best days
Missed 30best days
Missed 40best days
Missed 50best days
Missed 60best days
7.20% return
3.53% return
1.15% return-0.91% return
-2.80% return -4.52% return -6.11% return
Number of 5% drawdowns experienced each year
Impact of being out of the market*
Returns of the S&P 500
Performance of a $10,000 investment between January 1, 1998 and December 29, 2017
0
5
10
15
20
25
30
35
1928 1938 1948 1958 1968 1978 1988 1998 2008
Six of the best 10 days
occurred within two weeks
of the 10 worst days
Bear markets and subsequent bull runs
GTM – U.K. | Page 54
Executive summary: US market outlook
Source: J.P. Morgan Asset Management. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute
our judgment and are subject to change without notice. There can be no guarantee they will be met.
Economy
Consumers
Earnings
Valuations
Expect slow but steady economic growth
US consumer remains in good shape
US earnings continue to grow
Market valuation looks reasonable
As of 31 March 2019
Appendix
QTD performance attribution
Source: Factset, Wilshire, in GBP. 1The attribution summary approximates the gross excess returns of the portfolio and is calculated based on daily holdings which does not represent actual trading,
liquidity constraints, fee schedules and transaction costs. It is shown for illustrative purposes only and is not meant to be representative of actual results. The portfolio is an actively managed portfolio,
holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.
Past performance is not a reliable indicator of current and future results.
JPMorgan US Smaller Companies Investment Trust plc
For the QTD period ending 31 March 2019
Stock attribution
Sector Attribution (%)
Attribution summary1 Stock: +0.00%
Sector: -0.40%
Benchmark Russell 2000 Index
Top ContributorsAvg. Relative
weight (%)
Stock
return (%)
Impact
(%)
Patrick Industries 1.19 49.60 0.33
Patterson-UTI 1.33 32.81 0.24
Q2 Holdings 1.07 36.62 0.22
Catalent 1.57 27.24 0.21
HFF 0.70 46.67 0.20
Top DetractorsAvg. Relative
weight (%)
Stock
return (%)
Impact
(%)
Encompass Health 1.44 -7.06 -0.27
RBC Bearings 1.41 -5.19 -0.25
US Ecology 0.91 -12.88 -0.24
Valvoline 1.19 -5.72 -0.21
Prestige Consumer Healthcare 0.85 -5.33 -0.18
0.8
0.3 0.3 0.2 0.1
-0.1 -0.2-0.5
-1.3-1.8
-0.8
0.2
1.2
FinancialServices
ConsumerStaples
Utilities ConsumerDiscretionary
ProducerDurables
Materials &Processing
Energy Technology Health Care
Top 5 overweights¹Portfolio
weight (%)
Relative position
(%)
Toro 2.8 2.8
POOL 2.8 2.8
AptarGroup 2.7 2.7
Performance Food Group 2.4 2.2
Douglas Dynamics 2.1 2.1
Top 10 HoldingsPortfolio
weight (%)
Toro 2.8
POOL 2.8
AptarGroup 2.7
Performance Food Group 2.4
Douglas Dynamics 2.1
Portland General Electric 2.0
National Retail Properties 1.9
Quaker Chemical 1.9
EastGroup Properties 1.8
West Pharmaceutical 1.7
Portfolio positions
Source: J.P. Morgan Asset Management, Wilshire (excludes cash). ¹Compared to Russell 2000 Index. *Indicates stock not held in the portfolio as of 31 March 2019. This is an actively managed
portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.
JPMorgan US Smaller Companies Investment Trust plc
As of 31 March 2019
Top 5 underweights¹Portfolio
weight (%)
Relative position
(%)
Etsy* 0.0 -0.4
Five Below* 0.0 -0.3
The Trade Desk* 0.0 -0.3
HubSpot* 0.0 -0.3
Planet Fitness* 0.0 -0.3
Benchmark Russell 2000 Index
JPMorgan US Smaller Companies IT: Performance attribution in GBP
Source: J.P. Morgan Asset Management, Wilshire. Attribution is annualized, gross of fees and also excludes cash. The Trust is an actively managed portfolio, holdings, sector weights, allocations and
leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.
Past performance is not a reliable indicator of current and future results.
Annualized performance attribution from 31 March 2009 through 31 March 2019
Stock Selection Sector Selection Total
Financial Services 1.23 -0.02 1.20
Consumer Discretionary 0.82 -0.06 0.76
Producer Durables 0.67 -0.01 0.65
Materials & Processing 0.46 -0.08 0.38
Technology 0.48 -0.13 0.36
Energy 0.16 0.11 0.27
Health Care 0.22 -0.12 0.11
Consumer Staples 0.09 -0.06 0.03
Utilities -0.12 0.02 -0.10
Total 4.00 -0.36 3.65
Investment objective and risk profile
JPMorgan US Smaller Companies Investment Trust plc
Please refer to the Trust’s documents for more information relating to the Trust.
Risk Profile
The value of investments and the income from them can go down and up, and you may not get back as much as you paid in. Past performance is not a guide
to the future.
Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.
Investments in smaller companies may involve a higher degree of risk as these are usually more sensitive to price movements.
External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds could decline at the same time.
This trust may utlilise gearing (borrowing) which will exaggerate market movements both up and down.
Investment Objective
The Company aims to provide investors with capital growth by investing in US smaller companies that have a sustainable competitive advantage and to focus
on owning equity stakes in businesses that trade at a discount to their intrinsic value, with strong management teams. The company has the ability to use
borrowing to gear the portfolio to up to 15% of net assets where appropriate.
Biographies
Jon Brachle
Jon Brachle, Executive Director, is an analyst with the U.S. Small Cap Core Equity Group. An employee since 2007, Jon was previously a research assistant covering software and
IT services companies for the U.S. Large Cap Equity Group. Jon holds a B.S. in finance from the University of Colorado’s Leeds School of Business and is a CFA charterholder.
Don San Jose
Don San Jose, Managing Director, is an analyst and portfolio manager of the JPMorgan Small Cap Active Core Strategy which includes the JPM US Smaller Companies Fund. An
employee since 2000, Don was an analyst in JPMorgan Securities' equity research department covering capital goods companies before joining the small cap group. Prior to joining
the firm, he was an equity research associate at ING Baring Furman Selz. Don holds a B.S. in finance from The Wharton School of the University of Pennsylvania and is a member of
both the New York Society of Security Analysts and The CFA Institute. He is a CFA charterholder
Chris Carter
Chris Carter, Vice President, is an analyst on the Small Cap Active Core Team. He joined the team in 2015 from Credit Suisse where he spent 5 years covering the Healthcare
Managed Care and Facilities sectors, including primary coverage of three SMID Cap stocks. He also previously worked on the sell side at Citigroup and as a buy side equity analyst
for Columbus Investment Advisory, a boutique asset management firm in Columbus, Ohio. Chris holds a B.B.A. in finance from Ohio University.
Dan Percella
Dan Percella, Managing Director, is an analyst on the U.S. Small Cap Core Equity Team. An employee since 2008, Dan was previously a member of Institutional Investor-ranked
equity research teams covering the transportation sector at Bear Stearns, Bank of America and Citigroup. Prior to equity research, Dan worked as an analyst at NERA, an economic
consulting firm. Dan holds a B.S. in economics from Georgetown University’s Walsh School of Foreign Service and is a member of both the New York Society of Security Analysts and
The CFA Institute. He is also a CFA charterholder.
Biographies
Fiona Harris
Fiona Harris, Executive Director, is a US Equity Specialist in J.P. Morgan Asset Management’s US Equity Group. An employee since 1997, she is responsible for communicating
investment strategy, portfolio information and results to non-US domiciled clients. Previously, Fiona was a client portfolio manager in the firm’s New York office, where she provided
support on the mid cap value strategy. She joined the firm as a marketing associate focusing on servicing the needs of clients in the U.K. and continental Europe. She had previously
worked in the personal financial planning department of KPMG as a national marketing and communications associate. Fiona holds a B.S. in Marketing from GMIT in Ireland. She
holds the Series 7 license.
Christian Preussner
Christian Preussner, Managing Director, is a member of the US Equity Group and co-head of the US Equity Investment Specialist team. An employee since 2004, Christian covers
non-US domestic institutional and funds clients as a product specialist for US Equities. In that capacity, he is responsible for communicating investment performance, outlook and
strategy positioning on behalf of the US Equity portfolio management team. Previously, he worked as a Senior Investment Specialist within J.P. Morgan Asset Management’s
Equity/Balanced Portfolio Management Group in Frankfurt (Germany) covering both Emerging Markets Equities and US Equities. Christian holds a diploma in Business Administration
(MBA equivalent) from the European Business School Oestrich-Winkel (Germany) and is a CFA charterholder.
J.P. Morgan Asset Management
This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest
thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset
Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any
forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of
this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or
notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get
back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are
not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the
investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and
its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal
policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is
subject to documentation. The Investor Disclosure Document, Key Features and Terms and Conditions and Key Information Document can be obtained free of charge from JPMorgan Funds Limited or
www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.
Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP. Front page image source: Shutterstock.
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