JPMorgan European Smaller Companies Trust plc · JPMorgan European Smaller Companies Trust plc...

JPMorgan European Smaller Companies Trust plc

November 2017Francesco Conte - Portfolio Manager

0 | FOR PROFESSIONAL CLIENTS ONLY | NOT FOR RETAIL USE OR DISTRIBUTION

1

European smaller companies

Source: J.P. Morgan Asset Management, Thomson Reuters Datastream. All series are rebased to 100 as at 31 December 1992 to 30 September 2017. All indices in GBP and include reinvested dividends. Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not necessarily a reliable indicator of current and future performance.

… European small caps have produced long term equity returns amongst the best in the world

Cumulative returns

0

200

400

600

800

1000

1200

1400

1600

1800

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Euromoney Smaller European Companies (ex UK) IndexRussell 2000 IndexS&P 500 IndexFTSE All Share IndexMSCI Asia (ex Japan) IndexMSCI Emerging Markets IndexMSCI Europe (ex UK) IndexTopix Index

A compelling long asset class


2

Small cap investing rationale

High Active Share

Large investment universe IPOs / M&A

Limited analyst coverage

Stock picking opportunities

Entrepreneurial management

Strong earnings growth


3

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Asian financial crisis

Russian financial crisis

.com bubble bursting

Global financial crisis

Eurozone sovereigndebt crisis

Calendar year excess returns Euromoney Smaller European Companies (ex UK) Index vs. MSCI Europe (ex UK) Index

Source: J.P. Morgan Asset Management, Thomson Reuters Datastream, data from 31 December 1993 to 31 December 2017. All indices in EUR and include reinvested dividends. Indices do not includefees or operating expenses and are not available for actual investment. Past performance is not necessarily a reliable indicator for current and future performance.

Mexican financial crisis

Generally outperform in up markets

European smaller companies


4

51,0 51,0 50,7 50,9 50,0 50,6 50,2 50,1 50,4 51,0 50,8 51,1 52,0 52,1 52,7 52,8 53,0 53,0 52,7 52,6 52,6 52,7 53,2 53,2

52,5 52,3 52,0 52,1 50,8 50,9 50,5 50,4 51,2 51,5 51,2 51,5 52,6 53,0 53,8 54,2 54,1 53,9 54,1 54,1 53,9 54,0 54,2 54,6

49,0 49,2 49,0 49,4 48,9 50,2 49,6 49,5 49,3 50,3 50,1 50,3 51,0 50,8 51,1 50,8 51,3 51,6 50,9 50,6 50,8 50,9 51,7 51,3

52,3 52,8 53,2 52,3 51,2 51,6 51,7 51,5 52,8 52,0 51,7 52,6 53,5 53,7 54,9 55,2 55,4 56,2 56,7 57,0 57,4 56,6 57,4 58,150,6 50,6 51,4 50,0 50,2 49,6 48,0 48,4 48,3 48,6 48,3 49,7 51,8 51,7 53,5 53,6 52,2 53,3 55,1 53,8 54,8 54,9 55,8 56,152,1 52,9 53,2 52,3 50,5 50,7 51,8 52,1 54,5 53,8 53,6 54,3 55,0 54,3 55,6 56,4 56,8 58,3 58,2 59,5 59,6 58,1 59,3 60,654,1 54,9 55,6 53,2 52,2 53,5 53,9 52,4 53,5 51,2 49,8 51,0 50,9 52,2 53,2 53,0 55,0 55,7 56,2 55,1 55,2 55,1 56,3 56,351,3 53,1 53,0 55,4 54,1 53,4 53,5 51,8 52,2 51,0 51,0 52,3 53,3 54,5 55,3 55,6 54,8 53,9 54,5 55,4 54,7 54,0 52,4 54,347,3 48,1 50,2 50,0 48,4 49,0 49,7 48,4 50,4 48,7 50,4 49,2 48,6 48,3 49,3 46,6 47,7 46,7 48,2 49,6 50,5 50,5 52,2 52,853,6 53,3 54,2 54,3 52,9 54,9 52,6 51,5 53,0 50,2 51,7 51,3 52,1 53,7 55,7 55,5 53,8 53,6 55,0 55,9 56,0 54,6 56,1 55,453,4 54,9 55,9 55,3 51,6 53,0 53,9 54,1 52,9 55,5 51,1 54,9 58,5 57,4 60,3 62,1 60,9 65,1 62,5 58,7 62,3 60,4 54,7 63,749,6 49,0 49,9 50,2 51,1 53,0 53,1 55,3 51,5 51,5 51,6 54,4 55,2 55,9 56,2 54,6 57,8 58,6 57,4 55,6 60,1 60,9 61,2 61,754,5 52,4 51,2 52,2 50,9 51,3 49,6 50,5 53,1 48,4 53,0 55,6 54,2 53,4 55,8 55,4 54,6 54,3 57,2 56,4 54,2 55,2 56,7 55,954,1 52,8 51,2 52,4 51,3 51,5 50,8 50,7 51,3 52,9 52,0 51,5 53,4 54,1 54,3 55,0 54,2 53,3 52,8 52,7 52,0 53,3 52,8 53,150,2 52,5 51,9 51,5 53,5 58,1 53,4 51,0 51,8 56,4 46,9 49,8 50,9 54,2 55,4 51,2 59,3 57,5 59,2 54,8 55,0 56,0 59,8 54,252,4 52,6 52,6 52,3 50,1 49,1 48,2 47,7 48,1 49,3 49,5 50,4 51,4 51,3 52,4 52,7 53,3 52,4 52,7 53,1 52,4 52,1 52,2 52,948,3 48,6 48,2 48,4 48,0 49,7 49,4 49,2 48,6 50,6 50,0 50,1 51,2 50,9 51,9 51,0 51,7 51,2 50,3 49,6 50,4 51,1 51,6 51,047,8 46,9 47,8 48,9 48,7 50,6 50,9 50,6 51,9 48,4 50,4 50,9 48,7 49,7 49,0 50,4 49,3 50,5 51,2 50,6 49,5 48,6 50,7 50,449,1 49,1 50,7 49,5 48,7 49,5 50,0 50,1 50,5 50,1 48,6 47,6 48,0 48,0 49,4 49,0 49,2 48,4 49,4 49,2 50,1 49,1 49,9 50,647,8 49,5 51,7 50,6 49,4 51,1 49,7 48,5 50,5 51,0 51,8 52,2 52,7 54,7 56,2 55,6 54,5 56,2 54,4 53,1 53,3 53,6 54,3 54,250,7 50,3 49,1 51,1 51,1 52,4 50,5 50,7 51,7 51,8 52,6 52,1 54,4 52,3 49,6 50,4 50,7 52,5 52,5 51,6 50,9 47,9 51,2 51,244,1 43,8 45,6 47,4 44,5 46,0 42,6 41,6 43,2 46,0 45,7 46,0 46,3 46,2 45,2 44,0 46,9 49,6 50,1 52,0 50,5 50,0 50,9 50,953,0 53,0 52,4 52,2 53,1 53,2 52,4 53,6 51,1 50,6 50,9 51,9 51,8 51,1 50,2 50,8 50,6 51,5 50,7 51,2 52,3 51,2 52,2 52,850,2 50,1 48,7 49,8 49,3 48,3 48,0 49,6 51,5 49,5 50,8 51,1 52,4 53,6 53,7 54,7 52,5 52,4 50,8 52,4 50,3 52,7 51,6 51,9

Global Purchasing Managers’ Index (PMI) for manufacturing

Source: FactSet, Markit, J.P. Morgan Asset Management. The Global Purchasing Managers’ Index (PMI) assesses the economic health of the manufacturing sector by surveying output and employment intentions. The results are rebased such that a score of 50 means that economic conditions are neither accelerating nor deteriorating. Guide to the Markets - Europe. Data as of 30 September 2017.

GTM –Europe |

Glo

bal e

cono

my

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India

Indonesia

Greece

Germany

USUK

EurozoneFrance

ItalySpain

Ireland

AustraliaJapanChina

Korea

GlobalDevelopedEmerging

Taiwan

MexicoBrazil

Russia

SwitzerlandSweden

Euro

zone

Dev

elop

edEm

ergi

ng

Lowest relative to 50 PMI Highest relative to 50 PMI50

Jan

Mar

Nov

Dec May

Jul

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Nov

Dec

Jan

Feb

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May

2015 2016

Jun

Jul

Aug

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2017

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5

European small capitalisation equities

GTM – Europe | Page 43

6

German 10 year government bond yield

Source: Bloomberg from September 2012 to September 2017. Past performance is not necessarily a reliable indicator for current and future performance.

Yields and currency


1

1.1

1.2

1.3

1.4

1.5

Oct 12 Oct 13 Oct 14 Oct 15 Oct 16

EUR vs USD

-0.5

0

0.5

1

1.5

2

2.5

Oct 12 Oct 13 Oct 14 Oct 15 Oct 16

7 | FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION

European small cap equities – not just domestic Europe

Source: FactSet and J.P. Morgan Asset Management. As at 30 September 2017.

JPMorgan European Smaller Companies Trust plc revenue exposure (%)

North America, 18.54

Europe ex UK, 47.45

United Kingdom, 6.39

Pacific ex Japan, 2.24

Japan, 2.31

Emerging Markets, 24.18

8

27.6

23.0

26.3

23.7

10.7

14.2

20.8

24.6

19.7 20.0

7.99.9

16.6

22.4

13.715.0

6.47.5

YTD. 1 year 3 years (pa) 5 years (pa) 10 years (pa) 20 years (pa)

JPM European Smaller Companies Trust NAV (net of fees)Euromoney Smaller European Companies (ex UK) IndexMSCI Europe ex UK

Annualised returns 30 September 2017 (%)

Source: J.P. Morgan Asset Management, Thomson Reuters Datastream. NAV returns are net of fees, in GBP, with income reinvested. All indices in sterling and include reinvested dividends. Indicesdo not include fees or operating expenses and are not available for actual investment. Performance is provisional. Past performance is not necessarily a reliable indicator for current and future performance.

Long term returns

...asset class offers opportunity for significant alpha generation



9

Source: J.P. Morgan Asset Management 30 September 2017. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not hold positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator for current and future performance.

VALUE QUALITY MOMENTUM

We believe that attractively valued, high quality stocks with positive momentum outperform the market

- Cyclical recovery- Restructuring opportunities- High yielding stocks

- Market leaders- High return of capital- Disciplined capital allocation- Shareholder returns

- Structurally growing end markets

- Disruptive technology- Bolt-on acquisition strategy

Our investment philosophy


AltenIpsosHella

IMAFinecobank

Royal Unibrew

DatalogicMaisons Du

MondeTemenos

10

Classic growth stocks


Amplifon

Share price (EUR) EPS (EUR)

Source: Datastream. J.P. Morgan Asset Management. Data from 30 September 2014 to 30 September 2017. The companies/securities above shown are for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not have positions on behalf of its clients in any or all of the aforementioned securities. Past performance is not necessarily a reliable indicator of current and future performance. Source: Shutterstock. For illustrative purposes only.

0.2

0.25

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0.35

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0.45

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-201

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2015

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2017

Share price (left axis)

12 month forward earnings pershare (right axis)

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Innovative companies in traditional sectors


Remy Cointreau

Share price (EUR) EPS (EUR)

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12 month forward earnings per share(right axis)


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Recent additions

Bucher

Share price (CHF) EPS (CHF)

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12 month forward earnings per share(right axis)



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Portfolio positionsJPM Europe Smaller Companies Investment Trust as of 30 September 2017Top 10 overweight positions

Stock Portfolio weight (%) Benchmark weight (%) Relative position (%)

TKH Group 3.0 0.2 2.8

Skandiabanken 2.6 0.1 2.5

ams 2.4 0.0 2.4

IMCD 2.6 0.2 2.4

Amplifon 2.6 0.2 2.4

Sopra Steria 2.6 0.2 2.4

UBISOFT 2.3 0.0 2.3

Trigano 2.5 0.2 2.3

Forbo 2.4 0.2 2.2

Remy Cointreau 2.5 0.4 2.1

Source: Factset. The fund 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.

Benchmark Euromoney Smaller European Companies ex UK Index (Net)

14

Active and absolute country positionsActive and absolute sector positions

Sector and country positionsJPM Europe Smaller Companies Investment Trust as of 30 September 2017

Portfolio weight (%)

Relative to benchmark (%) Portfolio weight (%)

Relative to benchmark (%)

Source: Factset. The fund 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.


-2.5

-3.2

-4.0

-5.0

-7.3

11.5

11.4

5.6

4.0

3.8

-14.0 -7.0 0.0 7.0 14.0

Industrial Engineering

Autos & Parts

Leisure Goods

Beverages

H'hold Goods & HomeConstruction

Electricity

Construction & Materials

Pharma & Biotech

Financial Serv.

Real Estate Inv. & Serv.

-2.1

-2.4

-3.8

-4.6

-7.0

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6.3

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-9.0 -4.5 0.0 4.5 9.0

Italy

France

Netherlands

Norway

Denmark

Germany

Belgium

Austria

Sweden

Spain

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13.8

6.9

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Summary

European smaller companies are a compelling long term asset class

The macro backdrop provides a positive environment for attractively valued smaller companies

A long standing investment team which has led to a strong performance track record

The European Smaller companies Trust plc provides an opportunity to invest in global leaders in niche markets

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Appendix


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Source: J.P. Morgan Asset Management. As at 30 September 2017. The Investment Manager (Portfolio Manager) seeks to achieve the stated targets/objectives. There can be no guarantee the objectives/targets will be met. The Benchmark is a point of reference against which the performance of the Investment Trust may be measured. The Investment Trust may bear little resemblance to its benchmark. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Objective– The Company aims to provide capital growth from a diversified portfolio of smaller European companies (excluding the United

Kingdom). As the emphasis is on capital growth rather than income, shareholders should expect the dividend to vary from year to year. The company has the ability to use borrowing to gear the portfolio within the range of 20% net cash to 20% geared innormal market conditions

Policy– To invest in a diversified portfolio of companies the majority of which, at the time of purchase, fall within the market

capitalisation range of the benchmark index

Benchmark– Euromoney Smaller European Companies (ex UK) Index (Total Return Net)

Gross assets– GBP 740.3 m

Gearing– Current: 2.4% cash

Key characteristics


18

Performance attribution

Source: Factset. (o)= overweight, (u)= underweight, (n)=neutral. The fund 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 necessarily a reliable indicator for current and future performance.

JPM Europe Smaller Companies Investment Trust –9 months to 30 September 2017

Key sector (%) Key stock contributors

Interpump Group (o), Aumann GmbH (o)

Trigano (o), Stabilus (o)

ForFarmers NV (o), Aryzta (u)

Datalogic (o), TKH Group NV (o)

UBISOFT Entertainment (o), Thule Group AB (o)

Key stock detractorsHapag-Lloyd AG (u), ASTM SpA (u)

Husqvarna AB (o), Kaufman & Broad SA (o)

(u), Banca Mediolanum SpA (o)

Nordax Group AB (o), Spar Nord Bank (o)

Aker Solutions (o), TGS-NOPEC Geophysical Company (o)

Attribution summary Stock: 4.81Sector: 1.16


1.02

-0.40

2.65

1.23

1.04

0.85

-0.28

-0.28

-0.44

-0.49

-4.0 -2.0 0.0 2.0 4.0

Industrial Engineering (o)

Autos. & Parts (o)

Food Producers (u)

Electronic & Elec. Equip. (o)

Leisure Goods (o)

Industrial Transport. (u)

H'h' Goods & Home Construct. (o)

Life Insurance (n)

Banks (o)

Oil Equip., Serv. & Distn. (o)

Stock selection

Asset allocation

19

Gearing versus the index

Source: Thomson Reuters Datastream, J.P. Morgan Asset Management as at 31 March 2017. Index rebased to 100 at start of data series. * Index is Euromoney Smaller European Companies (ex UK) Index. Investment trusts may utilise gearing which will exaggerate market movements both down and up which could mean sudden and large falls in value. For further details, please refer to the trust’s annual report and accounts. Gearing is the ability to borrow money to invest that money on behalf of the shareholders

...active management of gearing a source of consistent value added

Since 2009 (quarterly)

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80%

85%

90%

95%

100%

105%

110%

115%

120%

125%

Mar

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Jun

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JPMorgan European Smaller Companies Trust gearing (LHS)Euromoney Smaller European Companies (ex UK) Index (RHS)


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5 year discount

Source: Bloomberg from September 2012 to September 2017. Past performance is not necessarily a reliable indicator of current and future performance.


-20

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Oct '12 Apr '13 Oct '13 Apr '14 Oct '14 Apr '15 Oct '15 Apr '16 Oct '16 Apr '17

Net Asset Value Last Price Fund Percent Premium%


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Source: Euromoney; as at 31 July 2017.

Euromoney Smaller European Companies (ex UK) IndexKey characteristics

1,000 stocks across 14 markets

Market capitalisation range of £125m – £5.1bn

Back history from December 1985

Monthly geographic and sector analysis

Daily pricing on Bloomberg-JCSCEXPT Index


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J.P. Morgan Asset Management

FOR PROFESSIONAL CLIENTS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION

This is a promotional document and as such the views contained herein are not to be taken as an advice or 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.MorganAsset 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 product(s) or underlying overseas investments. Both past performance and yield may not be a reliable guide to current and future performance. 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 product(s), 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. You should note that if you contact J.P. Morgan Asset Management by telephone those lines may be recorded and monitored for legal, security and training purposes. You should also take note that information and data from communications with you will be collected, stored and processed by J.P. Morgan Asset Management in accordance with the EMEA Privacy Policy which can be accessed through the following website http://www.jpmorgan.com/pages/privacy.

Investment is subject to documentation which is comprised of the Prospectus, Key Investor Information (KIID) and either the Supplementary Information Document (SID) or Key Features/Terms and Condition, copies of which can be obtained free of charge from JPMorgan Asset Management Marketing Limited. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 288553. Registered address: 25 Bank St, Canary Wharf, London E14 5JP68fd59e0-9f9f-11e7-8a18-005056960c63

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