Company Announcements

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC

HALF YEAR REPORT & FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30TH JUNE 2024

Legal Entity Identifier: 549300MDD7SOXDMBN667

Information disclosed in accordance with the DTR 4.1.3

The Directors of JPMorgan US Smaller Companies Investment Trust plc (the 'Company') announce the Company's results for the six months ended 30th June 2024.

CHAIR'S STATEMENT

Dear Shareholders,

I am delighted to present my first communication to you since taking over as Chair at the conclusion of the Company's Annual General Meeting ('AGM') in April. I would like to take this opportunity to thank my predecessor, David Ross, on behalf of the Board, for his strong contributions to the Company over the last nine years.

Performance

In the first half of 2024 US small caps struggled to make much progress in an environment of tight monetary policy. The Company's return on net assets for the reporting period was +1.0%, modestly underperforming the Company's benchmark, the Russell 2000 Index (the 'Benchmark'), which returned 2.5%. A full analysis of the performance of the Company's investment portfolio is set out in the Investment Manager's Report.

Discount management

The total return to shareholders was -2.5%. The discrepancy between the return on net assets and the share price total return was due to a widening of the share price discount to net asset value, from 7.9% at the end of 2023 to 11.1% on 30th June 2024. Over the six-month period to 30th June 2024, the discount averaged 10.5%.

For context, during the last 12 months discounts across the investment trust universe widened to levels not seen since the 2008 global financial crisis. The most extreme discounts of over 30% emerged for trusts focused on illiquid and interest rate sensitive assets such as private equity, infrastructure and property. The share prices of trusts focused on investment in small cap markets globally have suffered from similar concerns, albeit to a lesser extent.

Unsurprisingly, these valuation opportunities have provoked a notable response. Value-sensitive activist investors have become more prevalent on share registers, and wide discounts have, in part, contributed to the record number of investment trust mergers this year. Such developments are of course necessary for an efficient and well-functioning market. Against this backdrop the board remains proactive rather than reactive, ensuring that we fulfil our duty to protect the interests as shareholders. We therefore aim to minimise the share price discount whilst being aware that our ability to do so will depend on prevailing market conditions and the behaviour and risk appetite of investors. Such considerations are particularly important as we approach the Company's next continuation vote in 2025.

To this end, we have two key levers at our disposal to stimulate demand for the Company's shares: an active, value-enhancing share buyback programme, and effective ongoing marketing activities. We have taken action on both fronts.

On buybacks, the Company repurchased 2,000,197 of its own shares into Treasury at a weighted average discount of 11.4% during the review period. The Company has purchased an additional 100,000 shares into Treasury since the period end and at the time of writing, the Company's issued share capital consists of 65,406,275, including 3,836,313 shares in Treasury.

On marketing activities, we continue to improve the promotion of the Company to shareholders and the broader market. For example, the Board has recently engaged an adviser to support the Manager in promoting the attractive characteristics of the Company. Their primary focus is to maximise the impact of the compelling content generated by the investment team¹ under the evergreen tagline 'Invest in the Heart of America'. To improve access to this

¹ For example, the recent piece 'The Magnificent 2000.' To view the article, please visit tinyurl.com/magnificent-2000

content the Company's website has been upgraded and we would strongly recommend it as the primary source of information on the Company. The Board continues actively to work on improving the Company's shareholder communications and PR programme.

I am pleased to report that these actions, alongside the emerging recognition of the appeal of attractively-valued, high-quality US small cap stocks in a falling rate environment, mean that the Company's discount has narrowed since the end of the reporting period. As I write, the discount is in the region of 6%.

Gearing

The Board believes that structural gearing is a key advantage of investment trusts and should be used to enhance long-term returns. To this end the Manager has been given the flexibility by the Board to manage gearing tactically and remain invested within a maximum gearing limit set by the Board of 15% (±2.5% if as a result of market movements). The Company closed the six-month period with a gearing level of 3.1%.

During the reporting period, the Company continued to utilise its US$30 million loan facility (with an option to draw a further US$10 million) to maintain a meaningful but modest level of gearing. The two-year facility matured on 27th October 2023 but was extended (on the same terms) whilst certain points of the new facility were discussed and agreed. On 15th March 2024 the Board renewed the loan with Scotiabank, as a secured 364-day facility for a reduced amount of US$20 million (with an option to draw a further US$10 million).

Board and Succession planning

All of the Directors were re-appointed at the AGM in April this year, with the exception of David Ross who retired as Chair and Director of the Company. Therefore, the Board now consists of four non-executive directors, two female and two male, with diverse skills and a range of tenures from two to eight years. The Board believes that this is an appropriate number of directors given the size and complexity of the Company. The Board has a detailed succession plan in place.

Note on receiving marketing communications from the Company

I would like to highlight that current regulations require that shareholders and other interested parties must opt in, in order to receive promotional communications from the Company including our regular newsletter. If you would like to receive such communications, we would encourage you to opt in if you have not done so already. This can be done via the QR code in the Half Year Report, via the Company's website, or by contacting J.P. Morgan Asset Management directly via email at invtrusts.cosec@jpmorgan.com.

Outlook

The Board continues to have high confidence in the investment team, and their investment philosophy and process which have been applied consistently to generate strong long-term returns for the Company. There is no doubt that the valuations of US small cap stocks currently look extremely appealing relative to large caps. While the market impact of political and economic developments may affect the exact timing, it seems inevitable that this discrepancy will be addressed. We therefore believe that the patient shareholder who chooses to Invest in the Heart of America through our Company will be handsomely rewarded.

Dominic Neary

Chair                                                                                                                                                23rd August 2024

INVESTMENT MANAGER'S REPORT

Market Review

By the halfway mark of 2024, the S&P 500 Index had notched up returns of 15% (in US dollar terms) as US equity markets hit record highs. However, in this instance, the rising tide did not lift all boats. After showing signs of broadening out in the first quarter, market leadership reverted to the handful of large cap growth stocks that had propelled the market higher over much of 2023. The extreme polarisation of the market is evident in the outsized contribution the so-called 'Magnificent Seven' tech stocks made to total returns. More than 60% of index returns over the first six months of the year came from these seven names. Notably, Nvidia, a world leader in the production of the cutting-edge semiconductors required to power artificial intelligence (AI) tools, overtook Microsoft to become briefly the world's most valuable company, before relinquishing pole position at the end of June.

Meanwhile, much of the rest of the market declined in absolute terms, disappointed by developments on the monetary policy front. The US economy is still healthy overall but grew at an annualised rate of only 1.6% in the first quarter of 2024 - the slowest pace in two years. The labour market is also showing signs of weakness. The unemployment rate rose to 4.3% in July 2024, its highest level since January 2022. And importantly, inflation continued to trend downwards. However, despite these developments, the US Federal Reserve (the 'Fed') reiterated its position that rate decreases would remain on hold until it is confident that inflation is on a sustainable path towards 2%. US small caps were worst hit by the Fed's reluctance to cut rates, as this sector of the market tends to be relatively highly leveraged and is thus the most vulnerable to high rates.

In all, large cap stocks, as represented by the S&P 500 Index, returned 15% (in US dollar terms), outperforming the small cap Russell 2000 Index, which returned 2% on the same basis. Value stocks underperformed growth, as the Russell 3000 Value Index increased by 6%, while the Russell 3000 Growth Index increased by 20%.

Performance

Given this unconducive background, the portfolio's net asset value ('NAV') increased by 1.0% (in sterling terms) in the first half of 2024. The Company underperformed its benchmark, the Russell 2000 Index (Net) (the 'Benchmark'), which rose by 2.5% on the same basis. Stock selection was the primary driver of underperformance, with technology and industrial stocks being the largest detractors.

This near-term underperformance is disappointing. However, the longer-term investment case for US small caps remains compelling. This sector of the market is home to some of the world's most innovative, nimble businesses, and offers early access, at attractive valuations, to companies with the potential to grow very rapidly over the medium to longer term. Indeed, US small-caps have outperformed US large-caps by 2.85% per year on average since 1926 (the earliest date for which this dataset is available). They have also posted positive trailing 10-year returns for more than two-thirds of the same period.

It is clear from these statistics that investment in small cap companies does require some patience and a long-term perspective. Given this, it is more meaningful for investors to assess the Company's performance over longer timeframes. On this basis, the Company has delivered outright gains and outperformed the Benchmark in NAV terms over the three years ended 30th June 2024, almost matched the Benchmark over five years, and outpaced it over ten years.

During the six-month review period, our stock selection in the consumer staples and financial sectors contributed to performance. Within consumer staples, our overweight in Primo Water proved beneficial. This company is a leading provider of multi-gallon drinking water solutions for US businesses and consumers. The stock outperformed following strong results during the first quarter of 2024, with revenues and earnings beating estimates. Organic revenues grew by more than 8%, thanks to increases in both volumes and price. Cost controls also helped push up EBITDA margins. We believe Primo Water should continue to benefit from improving fundamentals, long-term secular trends towards water consumption (over sugary drinks) and an attractive valuation. As a result, while we reduced our position modestly on outperformance and to manage position sizes, we remain comfortable with our remaining holding.

Among our financial holdings, our overweight position in StepStone Group, a global private markets investment firm, enhanced returns. The company's shares rallied as the company reported strong fiscal results for the fourth quarter of 2024 with a fee-related earnings beat. The outperformance was driven by an improving fundraising and deployment environment, in addition to strengthening private markets sentiment. The company's undeployed fee-earning capital is at record levels, which management expects to be able to put to work at a good pace as capital markets loosen. We believe the company remains well positioned to capitalise on the secular growth in private markets, so we are happy to continue holding this name.

At the stock level, our exposure to BJ's Wholesale Club ('BJ's'), a warehouse club selling groceries, household items and gasoline, was the largest contributor, following strong results for the first quarter of 2024. Despite a challenged consumer environment, BJ's discount offering has attracted increasing online traffic, and sales slightly exceeded expectations. Our ongoing conviction in the stock is supported by the company's strong business model and the upward trend in its membership programme.

Within the tech sector, our decision not to own certain AI and cryptocurrency related names accounted for the bulk of the underperformance. Specifically, our lack of exposure to Super Micro Computer was the largest detractor. Super Micro Computer is a manufacturer of server solutions for data centres. Its shares outperformed as the company benefited from AI-related server purchases and overall investor optimism around the AI theme. Our decision to avoid this name is based on the company's failure to meet our quality threshold and the stock's extended valuation. As a result of elevated valuation levels, Super Micro Computer is no longer a small cap stock or member of the Russell 2000 Index.

In the industrials sector, our exposure to WillScot Mobile Mini proved lacklustre. The stock underperformed on macro concerns, given a weaker industrial backdrop. Additionally, delays around the McGrath RentCorp acquisition due to the US Federal Trade Commission deal scrutiny further weighted the stock. We continue to like the business and believe the company is a high-quality asset with favourable risk/reward, hence we maintain conviction in the stock.

At the security level, the two most significant detractors was our exposure to QuidelOrtho, and an overweight position in Shoals Technologies. QuidelOrtho is a medical devices company providing diagnostic testing solutions. The stock fell due to weak earnings and guidance for its 2024 financial year, including a significant reduction in expected COVID testing revenues that carry above-average margins. The company's longstanding CEO was removed as part of efforts to enhance operational efficiency and revenue growth and deliver shareholder value. We remain comfortable with our position in the stock, given its heavily discounted valuation, significant private equity ownership and the potential for better execution under the new leadership team.

Shoals Technologies is a leading US provider of solar system components. Its shares lagged on weak guidance for its 2024 financial year, driven by project delays and customer sensitivity to higher interest rates, which resulted in slower top-line growth. Legal uncertainty relating to the quality of a supplier, and a separate intellectual property infringement, also weighed on the stock price. Despite the disappointing near-term outlook, we maintain conviction in the stock, as its valuation is compelling and the longer-term fundamentals for utility scale solar energy remain constructive and should support demand for Shoals' products.

Portfolio Positioning

We have maintained our focus on quality stocks, as we continue to believe that quality companies with durable franchises, good management teams and stable earnings, that trade at a discount to their intrinsic value can add more stability in investors' portfolios over the long term. We continue to believe that smaller companies are worth investing in for long term investors as they include innovative companies that serve market niches and thereby can provide early access to exciting and innovative technologies and solutions.

During the first half of 2024, we initiated new, high-quality cyclical positions in the industrials and consumer discretionary sectors. Among industrial names, we initiated a position in AAON, a leading manufacturer of heating, ventilation, and air conditioning (HVAC) systems that primarily serves commercial and industrial markets. The company sells equipment to property owners and contractors that are looking for a higher quality and more energy efficient solution. Favourable secular tailwinds including decarbonisation, electrification, and government regulations are helping to accelerate growth as AAON shifts from a niche manufacturer into a premium mainstream equipment provider. We like the company for their attractive valuation, which screens reasonably well versus history and particularly versus peers.

Within consumer discretionary, we added Five Below to the portfolio. Five Below is a value retailer with a focus on tween/teen customers. We like the differentiated concept in retail that has a niche customer focus and provides good value with price points typically around US$5. The business model has historically proven durable through cycles and we see potential for the company to continue to expand its stores, which come with industry-leading unit economics as they tend to deliver attractive returns on invested capital. We also like the name for its low double-digit operating margins and high return on capital.

These acquisitions were funded by profit-taking on some of the Company's best performers. For example, we trimmed positions in the consumer staples name Primo Water as well as the technology firm Macom Technology Solutions. Primo Water is a water delivery company that has had a sizeable divestiture of its international operations, which repositioned the company as a domestic pure-play. The company recently announced a transformative merger of equals transaction with the next largest player in the space, hence we used that announcement, as well as its strong performance year to date, to trim back our position modestly.

Macom Technology Solutions is a designer and manufacturer of semiconductors that facilitate rapid and accurate movement of data for applications in the Telecom, Industrial & Defense and Data Centre end markets. The company benefited from its data centre exposure as the AI theme continued to drive markets in the second quarter. While Macom expressed confidence for further data centre growth in 2025 and we continue to like the company's market exposure, we have taken some profits as valuations have expanded with a healthy earnings recovery embedded in estimates. We also exited positions in the portfolio due to merger and acquisition activities. Stericycle, a medical waste disposal company announced being acquired by Waste Management, a provider of comprehensive waste management services. AssetMark, key asset management platform for financial advisers, announced an acquisition by GTCY, a private equity firm.

Our largest absolute and relative overweight position remains in industrials, followed by our second largest overweight in technology. Industrials have historically been our largest overweight, as we tend to find high quality businesses with solid market share in niche markets that offer stable growth and strong profitability. The sector is also benefitting from a strong US economy, generating close to 70% of their revenues domestically. Our technology overweight is driven by semiconductors, where we have a diverse exposure to several attractive end markets including autos, industrials and data centres with competitively advantaged businesses that generate solid free cash flows. Our largest underweights remain in the health care and energy sectors. While we have struggled to find high quality, attractively priced assets within healthcare, and most segments of the energy sector, the transition to renewable energy sources is creating some interesting investment opportunities within the alternative energy and midstream areas. Our position in Shoals Technologies, mentioned above, is a case in point.

Market Outlook

The performance of the US economy is crucial for smaller companies, as they tend to generate more of their earnings domestically than larger cap companies. Small cap companies also tend to be more exposed to the economic cycle and high interest rates, relative to larger caps, which tend to have stronger balance sheets and lower gearing.

Despite some recent slowing in growth and a weakening in labour market conditions, we expect the economy to remain in good shape, supported by eventual rate cuts and ongoing strong consumer demand. Households, that make up 70% of US GDP, continue to be in good shape with solid earnings power, which benefits corporate America. This should benefit consumer and business spending and provide support for small cap earnings, which appear poised to grow faster than large cap earnings, after two consecutive years of declines. Furthermore, small cap valuations are currently at historic lows relative to large caps, and institutional investors remain under allocated, so any improvement in sentiment towards this sector may encourage institutional investors to increase their exposure. In all, we see several reasons to be optimistic about the outlook for US small caps.

However, there is some risk that the US economic backdrop will become more volatile, especially given the forthcoming US presidential election. While we do not construct our portfolios based on top-down forecasts of macro or geopolitical factors, as these are beyond our and the investee companies' management teams' control, we are evaluating the impact that certain political decisions could have on company fundamentals. We will also continue monitoring incremental risks, which may create headwinds for US equities. That said, we maintain a balanced approach between cyclical and defensive companies, with a focus on fundamental bottom-up stock picking in the portfolio. It is important to remember that volatility also creates opportunities, and we remain ready to take advantage of any market dislocations to acquire innovative, high-quality companies with attractive investment cases, with a view to maintaining the Company's track record of capital growth and excess returns over the long term.

For and on behalf of the

Investment Manager

Don San Jose

Jon Brachle

Dan Percella

Portfolio Managers                                                                                                                     23rd August 2024

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its Half Year Report:

Principal and Emerging Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: underperformance; market and economic; discount control; shareholder demand; loss of investment team or portfolio manager; outsourcing; cyber crime; statutory and regulatory compliance; and climate change. In addition, the following were identified as emerging risks: political and economic; global pandemics; market risk; and ongoing shareholder demand. The Board continues to closely consider and monitor these risks. Information on each of these areas is given in the Strategic Report within the Annual Report and Financial Statements for the year ended 31st December 2023. In the view of the Board, these principal risks and uncertainties are as much applicable to the remaining six months of the financial year as they were to the six months under review.

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.

Going Concern

In accordance with The Financial Reporting Council's guidance on going concern and liquidity risk, the Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. The Board has, in particular, considered the impact of heightened market volatility since the Russian invasion of Ukraine and the unrest in the Middle East, the inflationary environment and other geopolitical and financial risks. However, it does not believe the Company's going concern status is affected. The Company's assets, the vast majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly under all stress test scenarios reviewed by the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Furthermore, the Directors are satisfied that the Company and its key third party service providers have in place appropriate business continuity plans. Accordingly, having assessed the principal and emerging risks and other matters, the Directors believe 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 yearly financial report.

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 year 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 30th June 2024 as required by the Disclosure Guidance 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 Disclosure Guidance 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

Dominic Neary

Chair 23rd August 2024

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30th June 2024

All revenue and capital items in the above statement derive from continuing operations.

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/(loss) after taxation represents the profit/(loss) for the period/year and also the total comprehensive income for the period/year.

CONDENSED STATEMENT OF CHANGES IN EQUITY

¹     These reserves form the distributable reserves of the Company and may be used to fund distributions to shareholders.

²     During the period, the Company undertook an Asset Reunification Programme to reunite inactive shareholders with their shares and unclaimed dividends. In accordance with the Company's Articles of Association, the Company exercised its right to forfeit the shares belonging to untraced shareholders for a period of 12 years or more. These shares were bought back by the Company and cancelled. The proceeds, net of costs, were returned to the Company. In addition, any unclaimed dividend for 12 years from the date of payment of such dividend were forfeited and returned to the Company.

CONDENSED STATEMENT OF FINANCIAL POSITION

At 30th June 2024

CONDENSED STATEMENT OF CASH FLOWS

For the six months ended 30th June 2024

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the six months ended 30th June 2024.

1.  Financial statements

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

The figures and financial information for the year ended 31st December 2023 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies, including the report of the Auditor 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 condensed 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 July 2022.

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 30th June 2024.

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 December 2023.

3.  Return/(loss) per share

4.  Dividends paid

The dividend paid in the period/year has been funded from the revenue earnings.

No interim dividend has been declared in respect of the six months ended 30th June 2024 (2023: nil)

5. Net asset value per share

6.  Fair valuation of instruments

The fair value hierarchy analysis for financial instruments held at fair value at the period end is as follows:

7.  Analysis of changes in net debt

Other non-cash charges relate to foreign currency exchange gains/(losses).

JPMORGAN FUNDS LIMITED

23rd August 2024

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Funds Limited

0800 20 40 20

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.

ENDS

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

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