2012 annual report jpmorgan mid cap investment trust plc · 2017-02-03 · 2 jpmorgan mid cap...

Annual Report2012JPMorgan Mid Cap

Investment Trust plcAnnual Report & Accounts for the year ended 30th June 2012

JPMorgan M

id Cap Investment Trust plc

2012

Features

Contents

About the Company

1 Financial Results2 Chairman’s Statement

Investment Review

6 Investment Managers’ Report8 Summary of Results9 Performance10 Ten Year Financial Record11 Ten Largest Equity Investments12 Portfolio Analyses and Investment

Activity13 List of Investments

Directors’ Report

15 Board of Directors17 Directors’ Report17 Business Review21 Corporate Governance Statement27 Directors’ Remuneration Report

Accounts

28 Statement of Directors’Responsibilities

29 Independent Auditors’ Report30 Income Statement31 Reconciliation of Movements in

Shareholders’ Funds32 Balance Sheet33 Cash Flow Statement34 Notes to the Accounts

Shareholder Information

51 Shareholder Analysis 52 Notice of Annual General Meeting55 Glossary of Terms and Definitions57 Information about the Company

Objective

JPMorgan Mid Cap Investment Trust plc (the ‘Company’) aims to achieve capitalgrowth from investment in medium-sized UK companies. The Company specialises ininvestment in FTSE 250 companies, using long and short term borrowings to increasereturns to shareholders.

Investment Policies

- To focus on FTSE 250 stocks that deliver strong capital growth.

- To have significant exposure to the UK economy.

- To seek out both value stocks and growth stocks, including AIM stocks, to deliverstrong performance throughout the market cycle.

- To use gearing to increase potential returns to shareholders.

- To invest no more than 15% of gross assets in other UK listed investment companies(including investment trusts).

Benchmark

The FTSE 250 Index (excluding investment trusts).

Capital Structure

UK domiciled.

Full Listing on the London Stock Exchange.

As at 30th June 2012, the Company’s issued share capital comprised 25,498,080ordinary shares of 25p each including 1,400,900 shares held in Treasury.

Management Company

The Company employs JPMorgan Asset Management (UK) Limited (‘JPMAM’ or the‘Manager’) to manage its assets.

JPMorgan Mid Cap Investment Trust plc. Annual Report & Accounts 2012 1

Financial ResultsTotal returns (includes dividends reinvested)

39.0 45.5

63.3

–29.6 –27.811.3

75.082.5

174.7

–40

0

40

80

120

160

200

Benchmark return1,4

JPMorgan Mid Cap – return on net assets2,3

JPMorgan Mid Cap – return to shareholders1

10 Year Performance5 Year Performance3 Year Performance

%

Long Term Performancefor periods ended 30th June 2012

–9.8%Return to shareholders1

(2011: +30.0%)

–7.7%Return on net assets2

(2011: +28.0%)

17.0pOrdinary dividend (2011: 17.0p)

–5.2%Benchmark return4

(2011: +32.1%)

For further details and analysis please refer to the performance attribution on page 6.

A glossary of terms and definitions is provided on page 55.

1Source: Morningstar.2Source: J.P. Morgan.3Total return on net assets, net of management fees and administration expenses, but prior to the use of revenue reserves to financethe dividend.4The Company’s benchmark is the FTSE 250 Index (excluding investment trusts).

JPMorgan Mid Cap Investment Trust plc. Annual Report & Accounts 20122

Chairman’s Statement

Investment Performance and Manager Evaluation

After the strong performance of the Company’s benchmark index in the year to30th June 2011, with the FTSE 250 Index returning 32.1%, the sector retreated in 2012with the benchmark total return registering –5.2%. Although mid cap companieswere able to shrug off the persistent macro headwinds during the Company’s lastfinancial year, a resurgence of the Eurozone debt crisis and weaker global economicdata weighed heavily on sentiment and at the six month mark the sector was alreadydown 14.6%. The second half of the Company’s financial year saw a recovery of 9.4%but this was not enough to offset the earlier falls. The Company’s total return on netassets was –7.7%. The total return to shareholders was –9.8%, as the discountwidened over the course of the year from 16.2% to 18.8%.

Many managers had a torrid time in these extremely volatile markets andunderperformed their benchmarks. However, it is very disappointing to report thatthe Company has underperformed its benchmark index again, particularly giventhat the Company’s half year results were ahead of benchmark. Shareholders willrecall that in May 2009, the Board instigated a change of investment managementpersonnel, which resulted in the appointment of William Meadon and Jane Lennardto run the mandate. The appointment of William and Jane heralded a much neededchange of investment style following a two year period of underperformance againstthe Company’s benchmark. Like their predecessors, William and Jane had utilisedJ.P. Morgan’s behavioural finance investment model to screen the mid cap investmentuniverse so as to identify cheap, fast growing stocks. However, their approachdiffered from the outgoing managers by the adoption of a more concentratedportfolio and a more proactive stock picking approach, which places a greateremphasis on fundamental analysis and company meetings. William and Janeinherited some poor performance statistics, which are evident from the five andten year performance tables on page 1 of this Report.

At the end of March this year, the Company announced that Jane Lennard had stooddown as joint investment manager to pursue interests outside investmentmanagement. The Board was reassured that J.P. Morgan proposed that GeorginaBrittain, a managing director on JPMAM’s UK Mid and Small Cap Team, assume theresponsibility for the management of the portfolio from 1st April 2012. Beforeagreeing to her appointment, the Board met with Georgina to understand herinvestment style and approach. It was clear that Georgina, who is a highlyexperienced fund manager with a strong stock picking track record in the smallercompanies universe, would be able to translate her skills seamlessly into the midcap universe.

The Board has taken the opportunity of Georgina’s appointment to discuss withJPMAM its desire for a more conviction based portfolio, which would ultimatelymanifest itself in a more growth orientated, less defensive portfolio made up of asmaller number of stocks. This approach suits Georgina’s style and she has alreadymade a number of changes to the portfolio with the aim of increasing the conviction,in an orderly fashion. Directors have also given the authority to invest in AIM stockswithin the existing parameter of not more than 10% of the portfolio to be investedoutside the index. Some of the changes that Georgina has made to the portfolio over


the course of the last quarter of the financial year have negatively impacted uponperformance in the very short term, but the Board is fully supportive and believesthat the changes she is making to the portfolio will bear fruit for shareholders giventime. William Meadon, head of JPMAM’s UK institutional business, remains in hisposition as joint investment manager and retains responsibility for strategy andgearing decisions.

During this year’s annual evaluation of the Manager, the Board’s main area of concernwas of course performance. A very frank discussion with JPMAM ensued and bothparties have agreed that the notice period under the Company’s managementcontract will be shortened from six months to three, but only if that notice resultsfrom poor investment performance. Otherwise it will remain at six months.In addition to investment management, the Manager provides many other servicesto the Company, including marketing, accounting and company secretarial services.In all these other functions the Board is very satisfied with JPMAM’s performance.Thus, taking all factors into account, the Board concluded that JPMAM should remainas the Company’s Manager and that its ongoing appointment remains in the interestsof shareholders.

The Board will of course continue to monitor the new team, their investment styleand their investment performance very closely. While the Board recognises that thecurrent world economic problems are some of the most challenging in living memoryand markets are consequently very volatile, it nevertheless expects the Manager tostart adding value against the index and deliver a much improved performance in thefuture.

Revenue and Dividends

Earnings per share for the year to 30th June 2012 were 16.04 pence per share,significantly above the 11.81 pence earned in 2011. This is an encouragingimprovement in net revenue from last year, which has been as a result of animprovement in the growth of dividends paid by the underlying companies in theportfolio and the receipt of some special dividends over the period. Furthermore inthe second half of the financial year there was a reduction in the Company’s interestpayments, following the repayment of the Company’s debenture in December 2011.Despite earnings being marginally below 17.0 pence, the Board has decided tomaintain this level of dividend by proposing to pay a final dividend of 11.5 pence(2011: 11.5 pence). The maintenance of this dividend level necessitates a transfer of£173,000 from revenue reserves, leaving reserves of £2.26 million. The dividend ispayable on 9th November 2012 to shareholders on the register at the close ofbusiness on 5th October 2012.

Excluding the payment of special dividends, early indications suggest thatunderlying dividend receipts in the Company’s portfolio in 2013 are likely to exceedthose of 2012. As in 2012, there is also a probability that a number of companieswill pay special dividends in 2013, which could result in the Company being able tomaintain its dividend at the current level without having to draw significantly onreserves. Shareholders should note that although likely in 2013, the payment ofspecial dividends may not be a permanent feature in the UK market.


The Board is aware of the importance of income to shareholders and it remains theaspiration to maintain the total dividend. While the Company does have significantrevenue reserves, these are clearly finite; however, it is pleasing that the reliance onthe Company’s reserves to maintain the dividend at its current level is diminishing.It remains the case that the Company’s expenses continue to be relatively low incomparison to the rest of the investment trust industry. In line with industry practicefollowing the Retail Distribution Review, the calculation of the Company’s totalexpense ratio has been amended slightly to allow a direct comparison withinvestment trusts and other pooled investment funds. This results in an ongoingcharges figure of 0.80% for 2012 (2011: 0.72%). Further details of this change ofmethodology can be found on pages 18 and 55 of this Report.

Gearing

The use of gearing over the last year has marginally detracted from performance.However, the Board continues to believe in the benefits of gearing over the long term.The Board of Directors sets the overall gearing guidelines and reviews these at eachmeeting; changes in these guidelines between meetings may be undertaken afterconsultation with the Board. The Board has determined that in normal circumstancesthe Company’s gearing range is 95%–125%. At the year end gearing was 104% and atthe time of writing it is 109%. However, the portfolio’s position in Aegis is effectivelycash given that this company is the subject of an agreed bid, hence a moremeaningful gearing figure at the time of writing is 108%.

Borrowing Facilities and Debenture

As reported in the Company’s half year results, the Company’s £9.5 million debenturewas redeemed at par on 2nd December 2011. The Board has replaced the debenturewith cheaper loan facilities with varying maturity dates. At the end of the reportingyear, the Company had two £5million loan facilities with ING Bank and a £15 millionloan facility with Scotiabank. One of the ING facilities has recently expired and theBoard is currently seeking a suitable replacement.

Discount Management

It is the present intention of the Board to continue its policy of buying back shares, toassist in reducing the volatility of the discount and enhance the net asset value pershare. This policy will be reviewed regularly in the light of market conditionsincluding the levels of discounts in our peer group and in the wider investment trustsector. During the year under review, the Company repurchased into Treasury225,400 shares and, upon reaching the Board’s limit of holding up to 5% of theCompany’s share capital in Treasury, a further 634,000 shares were repurchased forcancellation. Since 30th June 2012, the Company has bought back a further100,000 shares.

Directors will be seeking to renew powers to repurchase up to 14.99% of theCompany’s shares at the forthcoming Annual General Meeting.

Board of Directors

The Board has procedures in place to ensure that the Company complies fully withthe AIC Code on Corporate Governance and the UK Code on Corporate Governance.

Chairman’s Statement continued


In accordance with the Company’s Articles of Association, I will be retiring by rotationand seeking re-election at this year’s Annual General Meeting. John Emly also retireson grounds of tenure (having served as a Director for more than nine years) andseeks re-election. The Nomination and Remuneration Committee has met to evaluateour attributes and contributions and to consider Mr Emly’s length of service andindependence. On this point the Board remains entirely satisfied with hisindependence of thought and judgement in fulfilling his role as a Director of theCompany notwithstanding his tenure and believes that he continues to make a strongand effective contribution to the Company. Accordingly, his re-election at theforthcoming Annual General Meeting is recommended to shareholders. TheCompany’s senior independent director, Michael Hughes, led my appraisal, whichalso resulted in recommending my re-election at the Annual General Meeting.

When I come to write my annual statement next year, the majority of the Board willhave served more than nine years. The Nomination and Remuneration Committeehas been tasked with drawing up a succession plan and shareholders will be keptupdated with developments.

Annual General Meeting

This year’s Annual General Meeting will be held on Tuesday, 6th November 2012 at2.30 p.m. at Holborn Bars, 138–142 Holborn, London EC1N 2NQ. As in previous years,in addition to the formal part of the meeting, there will be a presentation from ourinvestment managers, Georgina Brittain and William Meadon, who will answerquestions on the portfolio and performance. There will also be an opportunity tomeet the Board, the investment managers and representatives of JPMAM after themeeting. I look forward to welcoming as many of you as possible to this meeting.

If you have any detailed or technical questions, it would be helpful if you could raisethese in advance of the meeting with the Company Secretary at Finsbury Dials,20 Finsbury Street, London EC2Y 9AQ. Shareholders who are unable to attend theAGM are encouraged to use their proxy votes.

Prospects

Concerns over the Eurozone, slowing growth in China and prospects for the globaleconomy continue to weigh heavily on investor sentiment. Our investment managers,however, believe that the stock market prices of many UK mid cap companies havediscounted too much bad news and consequently they have increased the level ofgearing since the Company’s year end to 109%. Although there remain manyuncertainties for the UK economy our investment managers are confident that theportfolio is well placed to benefit from a recovery in activity and from any lastingresolution of the Eurozone crisis.

At the time of writing1, the Company’s benchmark index has risen 11.3% since the yearend. Provisional figures indicate that the Company’s net asset value per share hasrisen 13.7%. A narrowing of the Company’s discount has led to a share price rise of16.3%. Pleasingly, this makes up for the disappointing absolute and relative returns inthe Company’s last financial year.

1Figures at the close of business on 19th September 2012.

Andrew BarkerChairman 21st September 2012


Market Background

Even by the standard of recent years, the year under review was a particularlyvolatile one. With increasing concerns that the crisis in the Eurozone was worsening,the summer of 2011 saw the Mid cap index fall some 22% from its July peak to itseventual trough at the beginning of October. As hopes rose that a credibleresolution was in sight, the index regained most of these losses before falling awayagain in April and May. June saw another rally which has continued into theCompany’s new financial year.

Performance and Portfolio

In a poor year for the market, where the benchmark returned a negative 5.2%, it isdisappointing to report that the Company underperformed the benchmark producinga net asset value total return of –7.7%. This underperformance was due to bothgearing and stock selection, as can be seen in the table.

In relation to gearing, the presence of the expensive 11% debenture was particularlyburdensome during the falling markets in the first half of the Company’s year. Thereplacement of the debenture by the Board at the first opportunity on 2nd December2011 with much cheaper financing was very beneficial. This cheaper financing wasused to gear the portfolio into the rising markets which continued, albeit in volatilefashion, through to the end of 2011 and indeed into the new year.

In regard to stock selection, a number of companies in the index disappointed overthe year. While the Company avoided many of them, such as Aquarius Platinum,Thomas Cook and Chemring, (the former two falling over 80% during the year, thelatter over 50%), it was not totally immune from shock profit warnings. The keydetractors from performance all fell within this camp, and included Cape, Lamprelland Supergroup. These latter two have now been sold, having been relegated out ofthe Mid 250 Index. More positively, a number of long held positions such as Dunelmand Persimmon continued to outperform.

Corporate activity was a notable feature in the FTSE 250 over the last year and withinthe portfolio, bids were received for technology stocks Logica and Misys, and alsoNorthumbrian Water, Charter and Cable & Wireless Worldwide. This theme is likely tocontinue. In a low growth world, we expect that a number of companies will seek toexpand by using their strong balance sheets to buy growth through expanding intonew geographies or new markets.

Over the last quarter of your financial year, William Meadon and I, as your recentlyappointed investment manager, have made changes to the portfolio. The newapproach is not a step change from the previous methodology of investing, but it is amore conviction based and more growth oriented style. We are encouraged that,despite the UK economy falling back into recession, there are a number of Mid capcompanies where it is possible to find significant growth, organic or otherwise. Whenwe have assured ourselves that such growth prospects are genuine we will add thesestocks to the portfolio. Our balanced approach will, however, ensure that the portfolioincludes some more defensive, higher yielding companies, too.

Performance attribution for theyear ended 30th June 2012

% %

Contributions to total returns

Benchmark –5.2

Stock/sector selection –0.8Gearing/cash –1.3

Investment managercontribution –2.1

Portfolio total return –7.3

Fees/other expenses –0.7Share repurchases 0.4Use of prior year

revenue reserve –0.1

Other effects –0.4

Return on net assets –7.7

Return to shareholders –9.8

Source: Xamin, JPMAM and Morningstar. All figures are

on a total return basis.

Performance attribution analyses howthe Company achieved its recordedperformance relative to its benchmarkindex.

Investment Managers’ Report


Recent new growth stocks in the portfolio include Perform Group (forecast earningsgrowth for this market leader in sports content distribution online and via mobile isover 30% for each of the next two years), Anite (a testing company for 3G and 4Gtelecoms networks, which grew earnings at over 100% last year), Dialight (in the LEDmarket, growing at 30%) and Easyjet (passenger numbers growing at 8% year onyear). New holdings with somewhat lower growth include two telecom companiesTalkTalk and KCOM, the former offering significant margin improvement, the lattersteady growth, with both providing a significant dividend income.

Although the anaemic economic backdrop is putting pressure on consumerspending, there are still some bright spots within the UK. We have retained significantpositions in two domestic retailers in the portfolio, namely Dunelm and Sports Directand added Debenhams to the portfolio. Each of these companies offer verycompetitively priced products which, at a time when there are pressures on everyhousehold budget, we think will prove to be a winning strategy.

The recent changes we have made to the portfolio have resulted in a moregrowth-oriented, less defensive portfolio. As and when the world becomes a morecertain and less volatile place this shift in emphasis will continue further. The Boardstrongly encourages this conviction approach, and with this in mind has broadenedthe available investment universe to include companies of the requisite size whichare quoted on AIM. While we have not yet invested in any AIM stocks, we expect todo so in the future.

Outlook

These are challenging times: the UK economy has fallen back into recession, theEurozone debt crisis remains unresolved and even those economies which aregrowing (eg USA and China) are now slowing. However, the fact that Mid cap equitieshave been relatively resilient in the face of such economic gloom, shows how muchbad news has already been reflected in current share prices. The prospective priceearnings ratio of approximately 11x is at a significant discount to its 10 year average ofapproximately 13x. Mid cap equities also offer an average prospective yield of 3.7%which is not only more than twice that offered on 10 year government gilts but alsooffers the prospect of growth in income. Moreover, balance sheets are generallystrong and there is some sign of corporate merger and acquisition activity returning.

Since the year end, Mid cap equities have rallied strongly and the Company hasbenefitted by being geared into this rally. Barring the very worst economic outcome,long term investors should be rewarded for being invested at this time although theexperience is likely to remain a volatile one.

Georgina BrittainWilliam MeadonInvestment Managers 21st September 2012


2012 2011

Total returns for the year ended 30th JuneReturn to shareholders1 –9.8% +30.0%Return on net assets2 –7.7% +28.0%Benchmark1,3 –5.2% +32.1%

% changeNet asset value, share price and discount at 30th JuneShareholders’ funds (£’000) 116,612 135,572 –14.0Net asset value per share with debt at par value 483.9p 543.2p –10.9Net asset value per share with debt at fair value4 483.9p 541.5p –10.6Share price 393.0p 455.0p –13.6Share price discount to net asset value with debt at par value –18.8% 16.2%Share price discount to net asset value with debt at fair value4 –18.8% 16.0%Shares in issue (excluding shares held in Treasury) 24,097,180 24,956,680 –3.4

Revenue for the year ended 30th JuneNet revenue attributable to shareholders (£’000) 3,938 2,961 +33.0Return per share 16.04p 11.81p +35.8Dividend per share 17.0p 17.0p 0.0

Actual gearing factor at 30th June5 104.3% 106.0%

Ongoing charges6 0.80% 0.72%


1Source: Morningstar. 2Source: J.P. Morgan.3The Company’s benchmark is the FTSE 250 Index (excluding investment trusts).4The Company redeemed its £9.5m debenture on the 2nd December 2011 (2011: the fair value of the £9.5m debenture has been calculated using discounted cash flow techniques usingthe yield on a similarly dated gilt plus a margin based on the 5 year average for the AA Barclays Corporate Bond).5Actual gearing represents investments excluding holdings in liquidity funds, expressed as a percentage of net assets.6Management fee and all other operating expenses, excluding interest, expressed as a percentage of the average of the daily net assets during the year. (2011: Total expense ratio:Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the month end net assets during the year).

Summary of Results


Performance

Performance Relative to BenchmarkFigures have been rebased to 100 at 30th June 2002

Source: Morningstar.

JPMorgan Mid Cap – share price total return.

JPMorgan Mid Cap – net asset value total return.

The benchmark is represented by the grey horizontal line.

60

70

80

90

100

110

20122011201020092008200720062005200420032002

Ten Year PerformanceFigures have been rebased to 100 at 30th June 2002


JPMorgan Mid Cap – share price total return.

JPMorgan Mid Cap – net asset value total return.

Benchmark.

50

100

150

200

250

300

20122011201020092008200720062005200420032002


At 30th June 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Shareholders’ funds (£’m) 138.2 114.5 153.6 165.9 201.4 233.7 150.9 94.1 110.6 135.6 116.6

Net asset value per share (p) 358.3 296.9 398.1 473.5 647.4 799.3 582.2 371.9 441.0 543.2 483.9

Share price (p) 326.5 268.0 315.0 384.5 558.0 695.5 488.0 321.5 364.5 455.0 393.0

Discount (%) 8.9 9.7 20.9 18.8 13.8 13.0 16.2 13.6 17.3 16.2 18.8

Actual gearing factor (%) 118.5 124.8 117.1 110.7 114.0 112.8 106.8 106.8 104.5 106.0 104.3

Year ended 30th June

Revenue attributable to shareholders (£’000) 3,828 4,366 3,364 4,383 4,380 4,689 4,785 4,758 3,018 2,961 3,938

Revenue return per share (p) 9.92 11.32 8.72 12.07 13.15 15.53 17.64 18.74 11.94 11.81 16.04

Dividend per share (p)1 9.50 10.75 9.75 11.30 12.50 14.50 16.50 21.90 17.00 17.00 17.0

Ongoing charges (%)2 1.09 1.08 0.80 0.74 0.70 0.69 0.63 0.78 0.74 0.72 0.80

Rebased to 100 at 30th June 2002

Return to shareholders3 100.0 85.8 104.4 131.1 195.3 248.6 179.0 125.9 149.3 194.0 175.0

Return on net assets3 100.0 86.1 116.8 142.2 200.9 252.9 186.8 125.4 154.9 197.8 182.5

Benchmark3 100.0 94.0 123.8 148.7 196.0 246.7 197.5 168.2 219.3 289.7 274.7


12009 includes ordinary dividends of 17.0p and a special dividend of 4.9p.2Management fee and all other operating expenses, excluding interest, expressed as a percentage of the average of the daily net assets during the year. (2009-2011: Total expenseratio: Management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the month end net assets during the year (2008 and prioryears: the average of the opening and closing net assets)).3Source: Morningstar. Total returns with dividends reinvested.

Ten Year Financial Record


Ten Largest Equity Investmentsat 30th June 2012

2012 2011Valuation Valuation

Company Sector £’000 %1 £’000 %1

Ashtead3 Industrials 4,025 3.3 — —Ashtead Group operates as an investment holding and management company. Through itssubsidiaries, the group hires out plant and machinery for the UK and the US construction and alliedindustries. Ashtead has some 314 Plant branches, supplying UK communications, petrochemical,defence and retail customers. They also have 163 Sunbelt centres in 27 US states.

William Hill2 Consumer Services 3,353 2.8 2,378 1.6William Hill provides bookmaking services in the United Kingdom. The group, which operateslicensed betting offices, telephone based-betting operations, and online betting, offers odds andtakes bets on an assortment of sporting and other events. William Hill’s betting offices provideaccess to real-time sports information via television and audio satellite links.

London Stock Exchange2 Financials 2,951 2.4 1,902 1.3London Stock Exchange Group is the United Kingdom’s primary stock exchange. The LSE providesmarkets that facilitate the raising of capital and the trading of corporate securities, access to atrading environment, as well as real-time pricing and reference information services worldwide.Market coverage includes equities, derivatives and fixed-interest securities.

Babcock International Industrials 2,900 2.4 2,828 2.0Babcock International Group offers support services to public sector institutions. The companyoffers facilities management, training, and support services to defence, rail transportation,marine, and other public sector organisations. Babcock International serves customers inEurope, Africa, and North America.

Catlin2 Financials 2,880 2.4 2,721 1.9Catlin Group underwrites speciality insurance and reinsurance worldwide. The group specialisesin property and casualty treaty reinsurance, structured risk and other coverages, as well asprofessional indemnity, property, general liability, D&O and commercial crime coverage for UKpolicyholders.

Derwent London Financials 2,803 2.3 3,022 2.1Derwent London is a real estate investment trust (REIT) with a focus on the central Londoncommercial, residential and office development market.

Senior2 Industrials 2,692 2.2 1,978 1.4Senior is a holding company. Through its subsidiaries, the company manufactures specialistengineering products for the automotive, industrial and aerospace sectors. Products includeflexible tubing, fluid transfer devices, de-icing systems, assembly components for jet engines, andparts for automotive air conditioning systems. The group operates internationally.

Hiscox Financials 2,478 2.1 3,682 2.5Hiscox is a group of companies that operate in the United Kingdom insurance market. TheCompany’s services include underwriting managed syndicates, underwriting a range of personaland commercial insurance and other underwriting services. Hiscox provides its services forcustomers in the United Kingdom and Continental Europe.

Elementis3 Basic Materials 2,477 2.1 — —Elementis is a global specialty chemicals company. The company comprises three businesses.Specialty Products produces rheology additives that enhance the flow characteristics of liquids ina wide range of applications, such as in coatings, cosmetics and oilfield drilling. Surfactantsproduces surface active ingredients. Chromium manufactures a range of chromium chemicals.

Taylor Wimpey2 Consumer Goods 2,391 2.0 1,866 1.3Taylor Wimpey, through its subsidiaries, conducts business in the housing, constructionand engineering, and property development and investment sectors. The group hashousing activities in the United Kingdom and Spain.

Total 28,950 24.0

1Based on total assets less current liabilities of £120.6m (2011: £145.1m).2Not Included in the ten largest investments at 30th June 2011.3Not held in the portfolio at 30th June 2011.

At 30th June 2011, the value of the ten largest equity investments amounted to £33,976,000 representing 23.4% of total assets lesscurrent liabilities.


2012 2011Portfolio Analysis % %

FTSE 250 Index companies 100.8 99.1Liquidity fund 3.2 1.8Net current liabilities (4.0) (0.9)

Based on total assets less current liabilities of £120.6m (2011: £145.1m).

Portfolio Benchmark Active Portfolio Benchmark Active 2012 2012 position 2011 2011 position

Sector Analysis % % % % % %

Industrials 24.6 25.6 (1.0) 22.5 27.8 (5.3)Financials 23.6 21.3 2.3 23.3 19.2 4.1Consumer Services 18.8 18.6 0.2 18.5 20.6 (2.1)Technology 9.5 6.6 2.9 9.0 7.1 1.9Consumer Goods 8.0 6.8 1.2 8.7 5.6 3.1Oil & Gas 7.3 7.2 0.1 1.7 4.4 (2.7)Telecommunications 4.3 3.4 0.9 3.2 2.0 1.2Basic Materials 2.7 7.0 (4.3) 6.4 8.9 (2.5)Health Care 1.2 2.3 (1.1) 1.9 1.5 0.4Utilities 0.8 1.2 (0.4) 3.9 2.9 1.0Liquidity fund 3.2 — 3.2 1.8 — 1.8Net current liabilities (4.0) — (4.0) (0.9) — (0.9)

Based on total assets less current liabilities of £120.6m (2011: £145.1m).

Value at Change in Value at30th June 2011 Purchases Sales valuation 30th June 2012

Investment Activity £’000 % £’000 £’000 £’000 £’000 %

FTSE 250 Index companies 143,703 98.2 76,945 84,705 (14,336) 121,607 96.9Liquidity fund 2,640 1.8 37,780 36,540 — 3,880 3.1

Total portfolio 146,343 100.0 114,725 121,245 (14,336) 125,487 100.0

Portfolio Analyses and Investment Activity


ValuationCompany £’000

IndustrialsAshtead 4,025Babcock International 2,900Senior 2,692Fenner 2,346Spectris 1,911Travis Perkins 1,892Howden Joinery 1,666RPC 1,552DS Smith 1,445Berendsen 1,375Melrose 1,333Dialight 1,143Diploma 1,025Morgan Crucible 1,018Interserve 951Bodycote International 888John Menzies 490Electrocomponents 434Cookson 383Shanks 181

Total Industrials 29,650

FinancialsLondon Stock Exchange 2,951Catlin 2,880Derwent London 2,803Hiscox 2,478Shaftesbury 2,169Jardine Lloyd Thompson 2,131Provident Financial 2,066Phoenix 2,061Great Portland Estates 1,966International Personal Finance 1,823Rathbone Brothers 1,161Close Brothers 1,049Beazley 956Tullet Prebon 793Hansteen 606Brewin Dolphin 577

Total Financials 28,470


Consumer ServicesWilliam Hill 3,353Dunelm 2,331Aegis 1,986Marston’s 1,859Sports Direct International 1,778Debenhams 1,738Ladbrokes 1,568Millennium & Copthorne Hotels 1,507Greene King 1,376United Business Media 1,314TUI Travel 1,305Perform 990Bwin.Party Digital Entertainment 868Go-Ahead 679

Total Consumer Services 22,652

TechnologyTelecity 2,246Micro Focus International 1,987Logica 1,526CSR 1,389Invensys 1,271Anite 1,233Laird 889Imagination Technologies 887

Total Technology 11,428

Consumer GoodsTaylor Wimpey 2,391Barratt Developments 2,218Persimmon 2,162Bellway 1,905Cranswick 972

Total Consumer Goods 9,648

List of Investmentsat 30th June 2012



Oil & GasWood (John) 2,313Cape 2,238Soco International 1,032Enquest 980Ophir Energy 926Kentz 643Afren 416Lamprell 301

Total Oil & Gas 8,849

TelecommunicationsCable & Wireless Communications 2,336Talk Talk Telecom 1,685Cable & Wireless Worldwide 1,225

Total Telecommunications 5,246

Basic MaterialsElementis 2,477Yule Catto 768

Total Basic Materials 3,245


Health CareBTG 1,468

Total Health Care 1,468

UtilitiesPennon 951

Total Utilities 951

Liquidity FundJPMorgan Sterling Liquidity Fund 3,880

Total Liquidity Funds 3,880

Total Portfolio 125,487

The portfolio comprises investments in equity shares and a liquidity fund.

List of Investments continued


Board of Directors

Andrew Barker(Chairman of the Board, Nomination and Remuneration Committee and ManagementEngagement Committee)

A Director since October 2004. Appointed Chairman in 2005.

Last re-elected to the Board: 2009.

Other directorships/relevant experience: He has spent his career in investmentmanagement after joining Foreign and Colonial Management Ltd in 1970 from which heretired in 2000. His former directorships include The Bankers Investment Trust PLCwhere he was Chairman and Foreign & Colonial Investment Trust PLC. He is also aformer Chairman of the Association of Investment Companies. Currently a Director ofRenn Universal Growth Investment Trust plc.

Connections with Manager: None.

Shared directorships with other Directors: None.

Shareholding in Company: 25,000.

John Emly

A Director since June 1996.


Other directorships/relevant experience: Director of F&C Capital & Income InvestmentTrust plc. Investment Director of The Civil Aviation Authority’s Pension Scheme andMember of the P&O Pension Scheme Investment Committee.

Connections with Manager: An employee of Robert Fleming & Co. (the predecessor tothe Company’s Manager) until 2000.



Michael Hughes CBE (Senior Independent Director)

A Director since May 2008.


Other directorships/relevant experience: Director of T. Bailey Asset Management Limitedand acting investment consultant to various family offices and charities. Formerly aDirector of Baring Asset Management Limited from 1998 and Chief Investment Officerfrom 2000 until his retirement in 2007. Prior to this, he was Managing Director ofBarclays Capital (previously BZW) and Chairman of the Board of pension trustees. Before‘Big Bang’ he was a Partner at stockbrokers de Zoete and Bevan.





Board of Directors continued

Margaret Littlejohns

A Director since July 2008.


Other directorships/relevant experience: Director of Henderson High Income Trust plcand trustee of the Lymphoma Research Trust. Founder and Finance Director of TheSpace Place, a self storage company in the Midlands. Prior to this, she was an employeeof Citigroup from 1982 to 2000 and Managing Director of Citifutures Ltd from 1990 to1992.




Gordon McQueen (Chairman of the Audit Committee)

A Director since December 2004.


Other directorships/relevant experience: Director of The Edinburgh Investment Trustplc, Scottish Mortgage Investment Trust plc and Shaftesbury plc. Served as the FinanceDirector of Bank of Scotland and, until the end of 2003, on the Board of HBOS plc andHalifax plc.





The Directors present their report and audited financialstatements for the year ended 30th June 2012.

Business ReviewBusiness of the CompanyThe Company carries on business as an investment trust andwas approved by HM Revenue & Customs as an investmenttrust in accordance with Section 1158 of the Corporation TaxAct 2010 (‘Section 1158’) for the year ended 30th June 2011. Inthe opinion of the Directors, the Company has subsequentlyconducted its affairs so that it should continue to qualify as aninvestment trust company under the HM Revenue & Customs’qualifying rules.

Approval for the year ended 30th June 2011 is subject to reviewshould there be any subsequent enquiry under CorporationTax Self Assessment.

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

A review of the Company’s activities and prospects is given inthe Chairman’s Statement on pages 2 to 5, and in theInvestment Managers’ Report on pages 6 and 7.

ObjectiveThe Company’s objective is to achieve capital growth frominvestment in medium-sized UK companies. The Companyspecialises in investment in FTSE 250 companies, using longand short term borrowings to increase returns to shareholders.

Investment Policies and Risk ManagementIn order to achieve its objective, the Company invests in adiversified portfolio, concentrating on FTSE 250 companieswith the most attractive prospects. The Company makes use oflong and short-term borrowings to increase returns and doesnot invest more than 15% of its gross assets in other UK listedinvestment companies (including investment trusts).

Investment Limits and RestrictionsThe Board seeks to manage the Company’s risk by imposingvarious investment limits and restrictions.

• The Company will not invest more than 15% of its assets inother UK listed investment companies.

• No more than 10% of the portfolio should be investedoutside the FTSE 250 Index. Investments outside the FTSE250 Index can include AIM stocks.

• The Company will not invest more than 10% of assets incompanies that themselves may invest more than 15% ofgross assets in UK listed investment companies.

• The Company will not invest more than 15% of its assets inany one individual stock at the time of acquisition.

• The Company’s gearing policy is to operate within a rangeof 95% to 125% invested in normal market conditions.

Compliance with the Board’s investment restrictions andguidelines is monitored continuously by the Manager and isreported to the Board on a monthly basis.

PerformanceIn the year to 30th June 2012, the Company produced a totalreturn to shareholders of –9.8%, a total return on net assetsof –7.7%. This compares with the return on the Company’sbenchmark index of –5.2%. As at 30th June 2012, the value ofthe Company’s investment portfolio was £125million. TheInvestment Managers’ Report on pages 6 and 7 includes areview of developments during the year as well as informationon investment activity within the Company’s portfolio.

Total Return, Revenue and Dividends Gross total loss for the year amounted to £9.6million(2011: £31.8million return) and net total loss after deductingfinance costs, management fees, administrative expensesand taxation amounted to £11.2 million (2011: £29.8 millionreturn). Distributable income for the year amounted to£3.9 million (2011: £3.0 million).

The Directors recommend a final dividend of 11.5p (2011: 11.5p)per share payable on 9th November 2012 to shareholders onthe register at the close of business on 5th October 2012. Thisdistribution, will amount to £2,772,000 (2011: £2,860,000).An interim dividend of 5.5p per share (2011: 5.5p per share)was paid on 5th April 2012. Following the payment of the finaldividend, the revenue reserve will amount to £2,260,000 (2011:£2,423,000).

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

• Performance against the benchmark index This is the most important KPI by which performance isjudged. Information on the Company’s performance isgiven in the Chairman’s Statement and the InvestmentManagers’ Report. (Also please refer to the graph onpage 9).

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

Directors’ Report

JPM_Mid Cap_pp17_28_JPM_Mid Cap_pp17_28 21/09/2012 13:14 Page 17


Directors’ Report continued

• Performance attribution The purpose of performance attribution analysis is toassess how the Company achieved its performance relativeto its benchmark index, i.e. to understand the impact on theCompany’s relative performance of the variouscomponents such as stock and sector allocation. Details ofthe attribution analysis for the year ended 30th June 2012are given in the Investment Managers’ Report on page 6.

• Discount to net asset value (‘NAV’)The Board has a share repurchase programme which seeksto address imbalances in supply of and demand for theCompany’s shares within the market and thereby reducethe volatility and absolute level of the discount to NAV atwhich the Company’s shares trade in relation to its peers inthe sector. In the year to 30th June 2012, the shares tradedbetween a discount of –14.4% and –20.2% to the net assetvalue with debt at par value. More information on theBoard’s share buy back policy is given in the Chairman’sStatement.

Discount Performance

Source: Datastream

JPMorganMid Cap – discount with debt at par value.

• Ongoing chargesThe ongoing charges represents management fees and allother operating expenses, excluding interest andperformance fee, expressed as a percentage of the averageof the daily net assets during the year. (2011: the totalexpense ratio (TER): represents management fees and allother operating expenses, excluding interest, expressed asa percentage of the average of the month end net assetsduring the year). The ongoing charges for the year ended30th June 2012 were 0.80% (2011: 0.72% TER). The Boardreviews each year an analysis which shows a comparison ofthe Company’s ongoing charges and its main expenses withthose of its peers.

Share CapitalThe Directors have authority on behalf of the Company torepurchase shares in the market either for cancellation or into

Treasury and to issue new shares for cash. During the year634,100 ordinary shares with a nominal value of £158,000wererepurchased for cancellation (2011: nil). A further100,000 shares have been bought back for cancellation sincethe year end.

During the year 225,400 (2011: 130,000) shares with a nominalvalue of £56,000were repurchased into Treasury, for a totalconsideration of £928,000, (2011: £588,000) bringing thecumulative total of shares bought into Treasury to1,400,900 (2011: 1,175,500), 5.6% (2011: 4.5%) of issued sharecapital.

Special Resolutions to renew the Company’s authorities toissue and repurchase shares will be put to shareholders at theforthcoming Annual General Meeting.

The Company did not issue any new shares during the year.

Principal RisksWith the assistance of the Manager, the Board has drawn up arisk matrix which identifies the key risks to the Company. Thesekey risks fall broadly under the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example stock selection or the level of gearing,may lead to under-performance against the Company’sbenchmark index and peer companies, resulting in theCompany’s shares trading on a wider discount. The Boardmanages these risks through its investment restrictions andguidelines which are monitored and reported monthly.JPMAM provides the Directors with timely and accuratemanagement information, including performance data andattribution analyses, revenue estimates, liquidity reportsand shareholder analyses. The Board monitors theimplementation and results of the investment process withthe Investment Managers, who attend all Board meetings,and reviews data which shows statistical measures of theCompany’s risk profile. The Investment Managers employthe Company’s gearing tactically, within a strategic rangeset by the Board. The Board holds a separate meetingdevoted to strategy each year.

• Financial: The Company is exposed to market risk, liquidityrisk and credit risk. The principal financial risk facing theCompany is market risk arising from uncertainty about thefuture prices of the Company’s investments. It representsthe potential loss the Company might suffer throughholding investments that could fall in value either due togeneral market movements or stock specific events. Thelatter is mitigated through diversification of investments inthe portfolio. The Board reviews the portfolio and itsgearing on a regular basis and has set investmentrestrictions and guidelines for the Manager. JPMAM reports

–25

–20

–15

–10

–5

20122011201020092008200720062005200420032002



its adherence to these limits once a month to the Board.The other financial risks faced by the Company aredisclosed in note 22 on pages 45 to 49.

• Accounting, Legal and Regulatory: In order to qualify asan investment trust, the Company must comply withSection 1158 of the Corporation Tax Act 2010 (‘Section 1158’).Details of the Company’s approval are given under “Businessof the Company” above. Should the Company breachSection 1158, it may lose investment trust status and as aconsequence capital gains within the Company’s portfoliowould be subject to Capital Gains Tax. The Section 1158qualification criteria are continually monitored by JPMAMand the results reported to the Board each month. TheCompany must also comply with the provisions of theCompanies Act 2006 and, as its shares are listed on theLondon Stock Exchange, the UKLA Listing Rules. A breach ofthe Companies Act could result in the Company and/or theDirectors being fined or the subject of criminal proceedings.A breach of the UKLA Listing Rules may result in theCompany’s shares being suspended from listing which inturn would breach Section 1158. The Board relies on theservices of its Company Secretary, JPMAM, and itsprofessional advisers to ensure compliance with theCompanies Act 2006 and the UKLA Listing Rules.

• Corporate Governance and Shareholder Relations: Detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out in the Corporate GovernanceStatement on pages 21 to 26.

• Operational: Disruption to, or failure of, JPMAM’s accounting,dealing or payments systems or the custodian’s recordsmay prevent accurate reporting and monitoring of theCompany’s financial position. Details of how the Boardmonitors the services provided by JPMAM and its associatesand the key elements designed to provide effective internalcontrol are included within the Internal Control section ofthe Corporate Governance Statement on pages 24 and 25.

Future Developments The future development of the Company is much dependentupon the success of the Company’s investment strategy in thelight of economic and equity market developments. TheInvestment Managers discuss the outlook in their report onpage 7.

Management of the Company

The Manager and Company Secretary is JPMorgan AssetManagement (UK) Limited (‘JPMAM’), a company authorisedand regulated by the FSA. JPMAM is a wholly-owned subsidiary

of JPMorgan Chase Bank which, through other subsidiaries,also provides marketing, banking, dealing and custodianservices to the Company.

The Board conducts a formal evaluation of the Manager on anannual basis. The evaluation includes consideration of theinvestment strategy and process of the Manager, performanceagainst the benchmark over the long term and the support thatthe Company receives from JPMAM. As a result of theevaluation process the Board, in consultation with the Manager,has agreed a more conviction based approach to themanagement of the portfolio, which in time will reduce thenumber of holdings within the portfolio. In light of theCompany’s continuing underperformance of its benchmark,the Board has recently renegotiated with the Manager areduction in the notice period under the InvestmentManagement Agreement from six to three months, if notice isserved on the basis of poor investment performance. Thenotice period is six months for all other circumstances, withoutpenalty. If the Company wishes to terminate the contract onshorter notice, the balance of remuneration is payable by wayof compensation. More details are given in the Chairman’sStatement on pages 2 and 3.

Management and Performance Fee

The fixed basic annual management fee is 0.4% per annum ofthe Company’s total assets less current liabilities, excludingbank borrowings.

The calculation excludes management charges on investmentson which JPMAM already earns a management fee andprincipal amounts of more than £1 million drawn down underloan agreements which are either held in cash, on deposit orinvested in a liquidity fund.

In addition to the basic annual management fee, aperformance related fee is calculated at 17.5% of theoutperformance of the Company’s net asset value totalreturn (excluding gearing and management fee) over thebenchmark. The maximum total fee payable in any one yearin respect of the fixed management fee and anyperformance fee is capped at 1.65% of the Company’s totalassets less current liabilities at the year end date. Theperformance fee will be calculated annually and paid withinthree months of the year end. An estimate is accruedmonthly and reflected in the Company’s published net assetvalue per share. The performance fee calculation restartswhen outperformance of the benchmark has been achievedand a performance fee earned. This means that theperformance fee is only payable when there has beenpositive relative performance since the last performance




fee was paid. No performance fee was payable in the yearto 30th June 2012 (2011: £nil).

Going Concern

The Directors believe that having considered the Company’sinvestment objective (see page 17), risk management policies(see pages 45 to 49), liquidity risk (see note 22(b) on page 48),capital management policies and procedures (see page 23),the nature of the portfolio and expenditure projections, thatthe Company has adequate resources, an appropriatefinancial structure and suitable management arrangementsin place to continue in operational existence for theforeseeable future. For these reasons, they consider thatthere is reasonable evidence to continue to adopt the goingconcern basis in preparing the accounts.

Payment Policy

It is the Company’s policy to obtain the best terms for allbusiness and therefore there are no standard payment terms.In general the Company agrees with its suppliers the terms onwhich business will take place and it is the Company’s policy toabide by those terms. As at 30th June 2012, the Company hadno outstanding trade creditors (2011: none).

Directors

The Directors of the Company who held office during the year,together with their beneficial interests in the Company’s shares,are shown below.

30th June 1st JulyDirectors 2012 2011

Andrew Barker 20,000 20,000John Emly 6,151 5,907Michael Hughes 4,000 4,000Margaret Littlejohns 2,000 2,000Gordon McQueen 1,500 1,500

Since the year end, Mr Barker’s beneficial interest in theCompany’s shares has increased by 5,000 shares.

In accordance with the Articles of Association and the UKCorporate Governance Code 2010, the Directors retiring at the

forthcoming Annual General Meeting are Andrew Barker andJohn Emly. Andrew Barker retires by rotation and is standingfor re-election. John Emly retires on grounds of tenure and isstanding for re-election.

Director Indemnification and Insurance

As permitted by the Company’s Articles of Association, theDirectors have the benefit of an indemnity which is a qualifyingthird party indemnity, as defined by Section 234 of theCompanies Act 2006. The indemnity was in place during theyear and as at the date of this report.

An insurance policy is maintained by the Company whichindemnifies the Directors of the Company against certainliabilities arising in the conduct of their duties.

Disclosure of information to Auditors

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

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

(b) each of the Directors has taken all the steps that he/sheought to have taken as a Director in order to makehimself/herself aware of any relevant audit information (asdefined) and to establish that the Company’s auditors areaware of that information.

The above confirmation is given and should be interpreted inaccordance with the provision of Section 418(2) of theCompanies Act 2006.

Annual General Meeting

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

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



(i) Authority to issue relevant securities and disapply pre-emptionrights (resolutions 7&8)

The Directors will seek renewal of the authority to issue up to1,199,859 new shares or shares held in Treasury other than by apro rata issue to existing shareholders up to an aggregatenominal amount of £299,965, such amount being equivalent toapproximately 5% of the current issued share capital(excluding treasury shares). The full text of the resolutions is setout in the Notice of Annual General Meeting on pages 52 to 54.

It is advantageous for the Company to be able to issue newshares to investors purchasing shares through the JPMAMsavings products and also to other investors when theDirectors consider that it is in the best interest of shareholdersto do so. Any such issues would only be made at prices greaterthan the NAV per share, thereby, increasing the assetsunderlying each share.

(ii) Authority to repurchase the Company’s shares (resolution 9)The authority to repurchase up to 14.99% of the Company’sissued share capital, granted by shareholders at the 2011 AGM,will expire on 2nd May 2013 unless renewed at the forthcomingAGM. The Directors consider that the renewal of the authority isin the interests of shareholders as a whole as the repurchase ofshares at a discount to NAV enhances the NAV of the remainingshares. The Board will therefore seek shareholder approval atthe AGM to renew this authority, which will last until5th May 2014 or until the whole of the 14.99% has beenacquired, whichever is the earlier. The full text of the resolutionis set out in the Notice of Annual General Meeting onpages 52 to 54. Repurchases will be made at the discretion ofthe Board, and will only be made in the market at prices belowthe prevailing NAV per share as and when market conditionsare appropriate, thereby enhancing the NAV of the remainingshares.

Recommendation

The Board considers that resolutions 7 to 9 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole.The Directors unanimously recommend that you vote infavour of the resolutions as they intend to do in respect oftheir own beneficial holdings which amount in aggregate to38,651 shares representing approximately 0.1% of the votingrights of the Company.

Corporate Governance StatementCompliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities in respect of the accounts onpage 28, indicates how the Company has applied the principlesof good governance of the Financial Reporting Council UKCorporate Governance Code 2010 and the AIC’s Code ofCorporate Governance (the ‘AIC Code’), which complements theUK Corporate Governance Code 2010 and provides aframework of best practice for investment trusts.

The Board is responsible for ensuring the appropriate level ofcorporate governance and considers that the Company hascomplied with the best practice provisions of the UK CorporateGovernance Code 2010 and the AIC Code throughout the yearunder review.

Role of the Board

A management agreement between the Company and JPMAMsets out the matters over which the Manager has authority.This includes management of the Company’s assets and theprovision of accounting, company secretarial, administrationand some marketing services. All other matters are reservedfor the approval of the Board. A formal schedule of mattersreserved to the Board for decision has been approved. Thisincludes determination and monitoring of the Company’sinvestment objectives and policy and its future strategicdirection, gearing policy, management of the capital structure,appointment and removal of third party service providers,review of key investment and financial data and the Company’scorporate governance and risk control arrangements.

The Board has procedures in place to deal with potentialconflicts of interest and confirms that the procedures haveoperated effectively during the year under review.

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

There is an agreed procedure for Directors to take independentprofessional advice in the furtherance of their duties and at the




Company’s expense. This is in addition to the access that everyDirector has to the advice and services of the CompanySecretary, JPMAM, which is responsible to the Board forensuring that Board procedures are followed and thatapplicable rules and regulations are complied with.

Board Composition

The Board, chaired by Andrew Barker, consists of fivenon-executive Directors, four of whom are considered to beindependent of the Company’s Manager. Given his employmentuntil the year 2000 with the predecessor managementcompany and his length of service, John Emly is not deemed tobe independent. Notwithstanding this fact, the Board believeshe is independent in character and judgement and in view ofhis substantial investment experience and other attributes hemakes a particularly valuable contribution to the Board.The Board believes that it is appropriate to have a SeniorIndependent Director and Michael Hughes fulfils this role. He isavailable to shareholders if they have concerns that cannot beresolved through discussion with the Chairman. The Directorshave a breadth of investment, business and financial skills andexperience relevant to the Company’s business and briefbiographical details of each Director are set out onpages 15 and 16.

The Company has complied with the provisions of the UKCorporate Governance Code 2010 and the AIC Code in regardto the re-election of Directors every three years. The Boarddoes not consider that Directors should serve for a fixed periodof time. However, in order to achieve a balance of skills,experience, ages and length of service, it is the Board’s policyto refresh itself in an orderly manner over time.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be elected by shareholders.Thereafter, a Director’s appointment will run for a maximumterm of three years. A Director may thereafter be invited toserve for one or more further terms of three years, in everycase subject to the normal requirements for re-election byshareholders at Annual General Meetings. The Board does notbelieve that length of service in itself necessarily disqualifies aDirector from seeking re-election but, when making a

recommendation, the Board will take into account the ongoingrequirements of the UK Corporate Governance Code 2010,including the need to refresh the Board and its Committees.Any Director who has served for a period of more than nineyears will stand for annual re-election thereafter.

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

The Board recommends the re-election of Andrew Barker whoretires by rotation at this year’s Annual General Meeting.The Board further recommends the re-election of John Emly,who requires annual re-election as he has served as a Directorfor a period in excess of nine years. Before recommendingAndrew Barker and John Emly for re-election, the Nominationand Remuneration Committee conducted a thorough review oftheir performance and contribution and was satisfied that theycontinued to fulfill their roles in an effective manner.

Meetings and Committees

The Board delegates certain responsibilities and functions tocommittees. Directors who are not members of Committeesmay attend at the invitation of the Chairman.

The table below details the number of Board and Committeemeetings attended by each Director. During the year there werefive Board meetings, including a private meeting of theDirectors to evaluate the Manager. In addition, a separatemeeting devoted to strategy, two Audit Committee meetings, ameeting of the Nomination and Remuneration Committee and aManagement Engagement Committee meeting were held.

AuditBoard Committee

Meetings MeetingsDirector Attended Attended

Andrew Barker 5 2John Emly 5 21

Michael Hughes 5 2Margaret Littlejohns 5 2Gordon McQueen 5 2

1Attended by invitation of the Committee.



Nomination & ManagementRemuneration Engagement

Committee CommitteeMeetings Meetings

Director Attended Attended

Andrew Barker 1 1John Emly 11 11

Michael Hughes 1 1Margaret Littlejohns 1 1Gordon McQueen 1 1

1Attended by invitation of the Committee.

Training and Appraisal

On appointment, the Manager and Company Secretary provideall Directors with induction training. Thereafter regularbriefings are provided on changes in regulatory requirementsthat affect the Company and Directors. Directors areencouraged to attend industry and other seminars coveringissues and developments relevant to investment trusts. As partof the Board’s annual evaluation process the Chairman reviewswith each Director their training and development needs.

The Board conducts a formal evaluation of the Manager, itsown performance and that of its committees and individualDirectors. The responses to industry questionnaires arediscussed at a private meeting. The evaluation of individualDirectors is led by the Chairman, and the Senior IndependentDirector leads the evaluation of the Chairman’s performance.

Board Committees

Nomination and Remuneration Committee The Nomination and Remuneration Committee consists of all ofthe independent Directors and is chaired by Andrew Barker.The Board believes that this is appropriate as it is a combinedcommittee. The Committee meets at least annually to ensurethat the Board has an appropriate balance of skills to carry outits fiduciary duties and to select and propose suitablecandidates when necessary for appointment. A variety ofsources, including the employment of external searchconsultants, are used to ensure that a wide range of candidatesis considered.

The Committee undertakes an annual performance evaluation,as described above, to ensure that all members of the Boardhave devoted sufficient time and contributed adequately to thework of the Board. The Committee also reviews Directors’ feesand makes recommendations to the Board as and whenrequired.

Audit Committee The Audit Committee consists of all the independent Directorsand is chaired by Gordon McQueen. The Committee meets atleast twice each year. Themembers of the Committee considerthat they have the requisite skills and financial experience tofulfil the responsibilities of the Committee.

The Committee reviews the actions and judgements ofthe Manager in relation to the interim and annual financialstatements and the Company’s compliance with theUK Corporate Governance Code 2010. It examines theeffectiveness of the Company’s internal control systems,receives information from the Manager’s compliancedepartment and reviews the scope and results of the externalaudit, its cost effectiveness and the independence andobjectivity of the external auditors. The Audit Committee hasreviewed the independence and objectivity of the auditors ofthe Company and is satisfied that the auditors areindependent. The Audit Committee also has the primaryresponsibility for making recommendations to the Board onthe reappointment and the removal of external auditors. TheCompany’s current auditors, PricewaterhouseCoopers LLP,were appointed in 2010. Representatives of the Company’sAuditors attend the Audit Committee meeting at which thedraft Annual Report & Accounts are considered. Havingreviewed the performance of the external Auditors, theCommittee considered it appropriate to recommend theirreappointment. The Board supported this recommendationwhich will be put to shareholders at the forthcoming AnnualGeneral Meeting. Details of the auditors’ fees are disclosed innote 5 on page 37. The Directors’ statement on the Company’ssystem of internal control is set out below.

Management Engagement Committee The membership of the Management Engagement Committeeconsists of all the independent Directors and is chaired byAndrew Barker. The Committeemeets at least once a year toreview the terms of the management agreement between the




Company and the Manager, to review the performance of theManager, to review the notice period that the Board has withthe Manager and to make recommendations to the Board. TheCommittee also reviews the Company’s agreements with othermajor service providers.

All the Company’s Committees have written terms of referencewhich define clearly their respective responsibilities, copies ofwhich are available for inspection on the Company’s website,on request at the Company’s registered office and at theAnnual General Meeting.

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performanceand reports to shareholders quarterly by way of the AnnualReport and Accounts, the Half Year Report and two interimmanagement statements. This is supplemented by the dailypublication, through the London Stock Exchange, of the netasset value and share price of the Company’s shares.

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

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

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

Section 992 Companies Act 2006

The following disclosures are made in accordance withSection 992 Companies Act 2006.

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

Voting Rights in the Company’s sharesAs at 20th September 2012 (being the latest business day priorto the publication of this Report), the Company’s issued sharecapital consists of 23,997,180 Ordinary shares (excludingTreasury shares) carrying one vote each. Therefore the totalvoting rights in the Company are 23,997,180.

Notifiable Interests in the Company’s Voting RightsAt the date of this report, the following had declared anotifiable interest in the Company’s voting rights:

Number of Shareholders voting rights %

Chase Nominees1,2 6,334,082 26.31607 Capital Partners LLC 2,465,997 10.2Barclays PLC 2,170,318 9.0Lloyds Banking Group plc 1,477,978 6.1Legal & General 880,621 3.7

1These shares are held on behalf of participants in the JPMorgan investment trustsavings products.2Non-beneficial.

Social and Environmental Policies

As an investment trust with no employees, property oractivities outside investment management, environmentalpolicy has limited application.

The Company’s policy is that, subject to an overridingrequirement to pursue the best financial interests of theCompany, the Manager should take account of social,environmental and ethical factors in making investments andin the use of voting powers conferred by such investments.Please refer to page 26 for details of JPMAM’s social andenvironmental policy.

Independent Auditors

A resolution to re-appoint PricewaterhouseCoopers LLP as theCompany’s auditors will be put to shareholders at the AnnualGeneral Meeting.

Internal Control

The UK Corporate Governance Code 2010 requires theDirectors, at least annually, to review the effectiveness of the



Company’s system of internal control and to report toshareholders that they have done so. This encompasses areview of all controls, which the Board has identified includingbusiness, financial, operational, compliance and riskmanagement.

The Directors are responsible for the Company’s system ofinternal control which is designed to safeguard the Company’sassets, maintain proper accounting records and ensure thatfinancial information used within the business, or published,is reliable. However, such a system can only be designed tomanage rather than eliminate the risk of failure to achievebusiness objectives and therefore can only provide reasonable,but not absolute, assurance against fraud, materialmisstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMAM and its associates, the Company’s system of internalcontrol mainly comprises monitoring the services providedby JPMAM and its associates, including the operating controlsestablished by them, to ensure they meet the Company’sbusiness objectives. There is an ongoing process foridentifying, evaluating and managing the significant risks facedby the Company (see Principal Risks on pages 18 and 19). Thisprocess has been in place for the year under review and up tothe date of the approval of the Annual Report & Accounts and itaccords with the Turnbull guidance. The Company does nothave an internal audit function of its own, but relies on theinternal audit department of JPMAM. The key elementsdesigned to provide effective internal control are as follows:

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

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

Management Systems – The Manager’s system of internalcontrol includes organisational agreements which clearlydefine the lines of responsibility, delegated authority, controlprocedures and systems. These are monitored by JPMAM’scompliance department which regularly monitors compliancewith FSA rules.

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

The Board, either directly or through the Audit Committee orManagement Engagement Committee, keeps under review theeffectiveness of the Company’s system of internal control bymonitoring the operation of the key operating controls of theManager and its associates as follows:

• reviews the terms of the management agreement andreceives regular reports from JPMAM’s compliancedepartment;

• reviews the report on the internal controls and theoperations of its custodian, JPMorgan Chase Bank, whichis itself independently reviewed; and

• reviews every six months an independent report on theinternal controls and the operations of JPMAM.

By the means of the procedures set out above, which accordwith the Turnbull guidance on internal controls, the Boardconfirms that it has reviewed and is satisfied with theeffectiveness of the Company’s system of internal control forthe year ended 30th June 2012, and to the date of approval ofthis Annual Report and Accounts.

During the course of its review of the system of internal control,the Board has not identified or been advised of any failings orweaknesses which it has determined to be significant.

Corporate Governance and Voting Policy

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

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



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

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

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

– disclose their policy on managing conflicts of interest;

– monitor their investee companies;

– establish clear guidelines on how they escalate engagement;

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

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

– report to clients.

JPMAM endorses and complies with the Stewardship Code for its UKinvestments and supports the principles as best practice elsewhere. Webelieve that regular contact with the companies in which we invest iscentral to our investment process and we also recognise the importanceof being an ‘active’ owner on behalf of our clients.

Social & EnvironmentalJPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interests

of our clients, we recognise that, increasingly, non-financial issues suchas social and environmental factors have the potential to impact theshare price, as well as the reputation of companies. Specialists withinJPMAM’s environmental, social and governance (‘ESG’) team are taskedwith assessing how companies deal with and report on social andenvironmental risks and issues specific to their industry.

JPMAM is also a signatory to the United Nations Principles of ResponsibleInvestment, which commits participants to six principles, with the aim ofincorporating ESG criteria into their processes when making stockselection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request. JPMAM is alsoa signatory to Carbon Disclosure Project. JPMorgan Chase is a signatoryto the Equator Principles on managing social and environmental risk inproject finance.

JPMAM’s Voting Policy and Corporate Governance Guidelines areavailable on request from the Company Secretary or can bedownloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/Governance. This also setsout its approach to the seven principles of the FRC Stewardship Code,its policy relating to conflicts of interest and its detailed voting record.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Company Secretary 21st September 2012




The Board has prepared this report in accordance with therequirements of Section 421 of the Companies Act 2006. Anordinary resolution to approve this report will be put to themembers at the forthcoming Annual General Meeting.

The law requires the Company’s auditors to audit certain of thedisclosures provided. Where disclosures have been audited,they are indicated as such. The auditors’ opinion is included intheir report on page 29.

Directors’ Remuneration

(Audited Information)

2012 2011Director’s Name £ £

Andrew Barker (Chairman) 28,000 28,000John Emly 19,000 19,000Michael Hughes 19,000 19,000Margaret Littlejohns 19,000 19,000Gordon McQueen 22,500 22,500

Total 107,500 107,500

For the year under review Directors’ fees were paid at the fixedrate of £28,000 for the Chairman, £22,500 for the Chairman ofthe Audit Committee and £19,000 for the other Directors.

No amounts were paid to third parties in connection withDirectors’ remuneration (2011: £nil).

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

The Board has established a Nomination and RemunerationCommittee, which reviews fees on a regular basis. Fee levelsare set with a view to the Company’s ability to attract and retainDirectors of a sufficiently high calibre. Reviews are based oninformation provided by the Manager, JPMorgan AssetManagement (UK) Limited, and industry research, on the levelof fees paid to the directors of the Company’s peers and withinthe investment trust industry generally. The Directors’ fees arenot performance-related. The Articles stipulate that aggregatefees must not exceed £150,000. Any increase in this amount

requires both Board and Shareholder approval. Despite theNomination and Remuneration Committee concluding thatDirectors’ fees were now below the industry average, havingnot been increased since 1st July 2008, Directors have againresolved not to increase fees given the Company’s continueddisappointing performance relative to its benchmark index.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment. Details of the Board’spolicy on tenure are set out on page 22.

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

A graph showing the Company’s share price total returncompared with its benchmark, the FTSE 250 Index (excludinginvestment trusts) is shown below.

Five Year Share Price and Index Total Returnto 30th June 2012


Share price total return.

Benchmark.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Company Secretary

21st September 2012

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201220112010200920082007

Directors’ Remuneration Report



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

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

• select suitable accounting policies and then apply themconsistently;

• make judgements and estimates that are reasonable andprudent;

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

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business.

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at anytime the financial position of the Company and to enable

them to ensure that the financial statements comply with theCompanies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for takingreasonable steps for the prevention and detection of fraudand other irregularities.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report, Directors’Remuneration Report and Statement of CorporateGovernance that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed inthe Directors’ Report confirms that, to the best of his/herknowledge:

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

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

For and on behalf of the Board Andrew Barker Chairman

21st September 2012

Statement of Directors’Responsibilities



To the members of JPMorgan Mid Cap Investment Trust plc

We have audited the financial statements of JPMorgan Mid CapInvestment Trust plc for the year ended 30th June 2012 whichcomprise the Income Statement, Reconciliation of Movementsin Shareholders’ Funds, Balance Sheet, Cash Flow Statementand the related notes. The financial reporting framework thathas been applied in their preparation is applicable law andUnited Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice).

Respective responsibilities of Directors and Auditors

As explained more fully in the Statement of Directors’Responsibilities set out on page 28, the Directors areresponsible for the preparation of the financial statements andfor being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on thefinancial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the Auditing PracticesBoard’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for andonly for the Company’s members as a body in accordance withChapter 3 of Part 16 of the Companies Act 2006 and for no otherpurpose. We do not, in giving these opinions, accept or assumeresponsibility for any other purpose or to any other person towhom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts anddisclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud or error.This includes an assessment of: whether the accountingpolicies are appropriate to the Company’s circumstances andhave been consistently applied and adequately disclosed; thereasonableness of significant accounting estimates made bythe Directors; and the overall presentation of the financialstatements. In addition, we read all the financial andnon-financial information in the Annual Report & Accounts toidentify material inconsistencies with the audited financialstatements. If we become aware of any apparent materialmisstatements or inconsistencies we consider the implicationsfor our report.

Opinion on financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company’saffairs as at 30th June 2012 and of its net loss and cashflows for the year then ended;

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

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

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

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

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

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

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

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

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

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

• we have not received all the information and explanationswe require for our audit.

Under the Listing Rules we are required to review:

• the Directors’ statement, set out on page 20, in relationto going concern;

• the parts of the Corporate Governance Statement relatingto the Company’s compliance with the nine provisions ofthe UK Corporate Governance Code specified for ourreview; and

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

Jeremy Jensen (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon

21st September 2012

Notes:(a) The maintenance and integrity of the JPMorgan Mid Cap Investment Trust

plc website (www.jpmmidcap.co.uk) is the responsibility of JPMAM: the workcarried out by the Auditors does not involve consideration of these mattersand, accordingly, the Auditors accept no responsibility for any changes thatmay have occurred to the financial statements since they were initiallypresented on the website.

(b) Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislation in otherjurisdictions.

Independent Auditors’ Report


Income Statementfor the year ended 30th June 2012

2012 2011Revenue Capital Total Revenue Capital Total

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

(Losses)/gains on investments held atfair value through profit or loss 2 — (14,338) (14,338) — 28,009 28,009

Income from investments 3 4,709 — 4,709 3,768 — 3,768Other interest receivable and similar

income 3 7 — 7 67 — 67

Gross return/(loss) 4,716 (14,338) (9,622) 3,835 28,009 31,844Management fee 4 (156) (363) (519) (166) (388) (554)Other administrative expenses 5 (433) — (433) (364) — (364)

Net return/(loss) on ordinary activities before finance costs and taxation 4,127 (14,701) (10,574) 3,305 27,621 30,926

Finance costs 6 (184) (429) (613) (343) (800) (1,143)

Net return/(loss) on ordinary activities before taxation 3,943 (15,130) (11,187) 2,962 26,821 29,783

Taxation 7 (5) — (5) (1) — (1)

Net return/(loss) on ordinary activities after taxation 3,938 (15,130) (11,192) 2,961 26,821 29,782

Return/(loss) per share 9 16.04p (61.63)p (45.59)p 11.81p 106.95p 118.76p

Details of dividends are given in note 8 on page 39.

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

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

The notes on pages 34 to 50 form an integral part of these accounts.


Called up Capitalshare redemption Capital Revenue

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

At 30th June 2010 6,533 3,467 94,046 6,597 110,643Repurchase of shares into Treasury — — (588) — (588)Net return on ordinary activities — — 26,821 2,961 29,782Dividends appropriated in the year — — — (4,265) (4,265)

At 30th June 2011 6,533 3,467 120,279 5,293 135,572Repurchase of shares into Treasury — — (928) — (928)Repurchase and cancellation of the Company’s

own shares (158) 158 (2,641) — (2,641)Net (loss)/return on ordinary activities — — (15,130) 3,938 (11,192)Dividends appropriated in the year — — — (4,199) (4,199)

At 30th June 2012 6,375 3,625 101,580 5,032 116,612

The notes on pages 34 to 50 form an integral part of these accounts.

Reconciliation of Movements inShareholders’ Fundsfor the year ended 30th June 2012


2012 2011Notes £’000 £’000

Fixed assets Equity investments held at fair value through profit or loss 121,607 143,703Investment in liquidity fund held at fair value through profit or loss 3,880 2,640

Total investments 10 125,487 146,343

Current assets 11Debtors 1,782 3,270Cash and short term deposits 177 35

1,959 3,305Current liabilities Creditors: amounts falling due within one year 12 (6,834) (4,580)

Net current liabilities (4,875) (1,275)

Total assets less current liabilities 120,612 145,068Creditors: amounts falling due after more than one year 13 (4,000) (9,496)

Net assets 116,612 135,572

Capital and reserves Called up share capital 14 6,375 6,533Capital redemption reserve 15 3,625 3,467Capital reserves 15 101,580 120,279Revenue reserve 15 5,032 5,293

Total equity shareholders’ funds 116,612 135,572

Net asset value per share 16 483.9p 543.2p

The accounts on pages 30 to 50 were approved and authorised for issue by the Directors on 21st September 2012 and were signedon their behalf by:

Andrew BarkerDirector

The accompanying notes on pages 34 to 50 form an integral part of these accounts.

Company registration number: 1047690.

Balance Sheetat 30th June 2012


2012 2011Notes £’000 £’000

Net cash inflow from operating activities 17 3,754 2,743

Returns on investments and servicing of financeInterest paid (713) (1,136)

Net cash outflow from returns on investments and servicing of finance (713) (1,136)

TaxationOverseas tax recovered 4 6

Capital expenditure and financial investmentPurchases of investments (116,977) (144,455)Sales of investments 122,572 147,448Other capital charges (4) (13)

Net cash inflow from capital expenditure and financial investment 5,591 2,980

Dividends paid (4,199) (4,265)

Net cash inflow before financing 4,437 328

Financing Repurchase of shares into Treasury (1,154) (366)Repurchase and cancellation of the Company’s own shares (2,641) —Redemption of debenture (9,500) —Loans drawn down 9,000 —

Net cash outflow from financing (4,295) (366)

Increase/(decrease) in cash for the year 18 142 (38)

The accompanying notes on pages 34 to 50 form an integral part of these accounts.

Cash Flow Statementfor the year ended 30th June 2012


1. Accounting policies

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

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

The accounts have been prepared on a going concern basis under the historical cost convention as modified by therevaluation of investments at fair value through profit or loss.

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

(b) Valuation of investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of income andcapital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordancewith a documented investment strategy, and information is provided internally on that basis to the Company’s Board ofDirectors. Accordingly, upon initial recognition the investments are designated by the Company as ‘held at fair value throughprofit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental to purchasewhich are written off to capital at the time of acquisition. Subsequently the investments are valued at fair value which arequoted bid prices for investments traded in active markets.

(c) Accounting for reservesGains and losses on sales of investments including the related foreign exchange gains and losses, realised gains and losseson foreign currency, management fee and finance costs allocated to capital and any other capital charges, are included inthe Income Statement and dealt with in capital reserves within ‘Gains and losses on sales of investments’. Increases anddecreases in the valuation of investments held at the year end including the related foreign exchange gains and losses, areincluded in the Income Statement and dealt with in capital reserves within ‘Holding gains and losses on Investment’.

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

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

UK dividends are accounted for net of tax credits. Overseas dividends are shown gross of any withholding tax.

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

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

Underwriting commission is recognised in revenue where it relates to shares that the Company is not required to take up.Where the Company is required to take up a proportion of the shares underwritten, the same proportion of commissionreceived is deducted from the cost of the shares taken up, with the balance taken to revenue.

Notes to the Accountsfor the year ended 30th June 2012



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

– performance fee is allocated 100% to capital.

– management fee is allocated 30% to revenue and 70% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company’s investment portfolio.

– expenses incidental to the purchase and sale of an investment are charged to capital. These expenses are commonlyreferred to as transaction costs and include items such as stamp duty and brokerage commission.

(f) Finance costsFinance costs are accounted for on an accruals basis using the effective interest rate method in accordance with the provisionsof FRS 25 ‘Financial Instruments: Presentation’ and FRS 26 ‘Financial Instruments: Measurement’.

Finance costs are allocated 30% to revenue and 70% to capital in line with the Board’s expected long term split of revenueand capital return from the Company’s investment portfolio.

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

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

Debenture issues, bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Finance costs,including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis inprofit or loss using the effective interest rate method.

The Company has not utilised any derivative financial instruments in the current or comparative year.

(h) TaxationCurrent tax is provided at the amounts expected to be received or paid.

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

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

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

(i) Dividends payableIn accordance with FRS 21: ‘Events after the Balance Sheet Date’, dividends are included in the accounts in the year in whichthey are paid.

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



Notes to the Accounts continued

1. Accounting policies continued

(k) Repurchases of ordinary shares for cancellationThe cost of repurchasing ordinary shares including the related stamp duty and transactions costs is charged to ‘Capitalreserves’ and dealt with in the Reconciliation of Movement in Shareholders’ Funds. Share repurchase transactions areaccounted for on a trade date basis. The nominal value of ordinary share capital repurchased and cancelled is transferredout of ‘Called up share capital’ and into ‘Capital redemption reserve’.

(l) Repurchase of shares to hold in TreasuryThe cost of repurchasing shares into Treasury, including the related stamp duty and transaction costs is charged to capitalreserves and dealt with in The Reconciliation of Movements in Shareholders’ Funds. Share repurchase transactions areaccounted for on a trade date basis. Where shares held in Treasury are subsequently cancelled, the nominal value of thoseshares is transferred out of called up share capital and into capital redemption reserve.

Should shares held in Treasury be reissued, the sales proceeds will be treated as a realised profit up to the amount of thepurchase price of those shares and will be transferred to capital reserves. The excess of the sales proceeds over the purchaseprice will be transferred to share premium.

(m) Functional currencyThe Board, having regard to the currency of the economic environment in which the Company operates, has determined thatsterling is the functional currency and the currency in which the accounts are presented.

2012 2011£’000 £’000

2. (Losses)/gains on investments held at fair value through profit or loss (Losses)/gains on investments held at fair value through profit or loss based on

historical cost (5,372) 16,352Amounts recognised in investment holding gains and losses in the previous

year in respect of investments sold during the year (6,770) (2,636)

(Losses)/gains on sales of investments based on the carrying value at the previous balance sheet date (12,142) 13,716

Net movement in investment holding gains and losses (2,194) 14,304Other capital charges (2) (11)

Total capital (losses)/gains on investments held at fair value through profit or loss (14,338) 28,009



2012 2011£’000 £’000

3. Income Income from investmentsUK dividend income 3,655 3,082Scrip dividends 171 —Overseas dividend income 757 560Property income distribution 101 107Dividends from liquidity fund 25 19

4,709 3,768

Other interest receivable and similar incomeUnderwriting commission 6 66Deposit interest 1 1

7 67

Total income 4,716 3,835

2012 2011Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

4. Management fee Management fee 156 363 519 166 388 554

Details of the management fee and performance fee are given in the Directors’ Report on pages 19 and 20.

2012 2011 £’000 £’000

5. Other administrative expensesOther administration expenses 241 166Directors’ fees1 108 108Savings scheme costs2 59 63Auditors’ remuneration – for audit services3 25 27

433 364

1Full disclosure is given in the Directors’ Remuneration Report on page 27.2Paid to JPMAM for the marketing and administration of savings scheme products.3Includes £4,000 (2011: £4,000) irrecoverable VAT.





6. Finance costs Interest on bank loans and overdrafts 52 121 173 27 63 90Interest on debenture 132 308 440 316 737 1,053

184 429 613 343 800 1,143

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

2012 2011 £’000 £’000

UK corporation tax for the year — —Overseas withholding tax 4 1Prior year adjustment 1 —

Current tax charge for the year 5 1

(b) Factors affecting current tax charge for the year

The tax assessed for the year is higher (2011: lower) than the UK corporation tax rate chargeable for the year of 25.5% (2011:27.5%). The factors affecting the current tax charge for the year are as follows:


Net return/(loss) on ordinary activities before taxation 3,943 (15,130) (11,187) 2,962 26,821 29,783

Net return/(loss) on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of25.5% (2011: 27.5%) 1,006 (3,859) (2,853) 814 7,376 8,190

Effects of:Non taxable capital losses/(gains) — 3,657 3,657 — (7,703) (7,703)Non taxable UK dividends (932) — (932) (847) — (847)Non taxable overseas dividends (193) — (193) (154) — (154)Non taxable scrip dividends (44) — (44) — — —Tax attributable to expenses and finance

costs charged to capital (202) 202 — (327) 327 —Unrelieved expenses and charges 365 — 365 514 — 514Overseas withholding tax 4 — 4 1 — 1Prior year adjustment 1 — 1 — — —

Current tax charge for the year 5 — 5 1 — 1



(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £10,837,000 (2011: £11,369,000) based on a prospective corporationtax rate of 24% (2011: 26%). The reduction in the standard rate of corporation tax was substantively enacted on 26th March2012 and is effective from 1st April 2012. The Government has also indicated that it intends to enact future reductions in themain rate of tax of 1% each year down to 23% by 1st April 2014. The deferred tax asset has arisen due to the cumulative excessof deductible expenses over taxable income. Given the composition of the Company’s portfolio, it is not likely that this assetwill be utilised in the foreseeable future and therefore no asset has been recognised in the accounts.

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

8. Dividends

(a) Dividends paid and proposed2012 2011 £’000 £’000

2011 Final dividend of 11.5p (2010: 11.5p) 2,860 2,885Interim dividend of 5.5p (2011: 5.5p) 1,339 1,380

Total dividends paid in the year 4,199 4,265

2012 Final dividend proposed of 11.5p (2011: 11.5p) 2,772 2,870

For the year ended 30th June 2011, the Company declared a dividend of £2,870,000 but the final dividend paid amounted to£2,860,000 due to share buyback after the balance sheet date but prior to the share register record date.

The final dividend has been proposed in respect of the year ended 30th June 2012 and is subject to approval at theforthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflectedin the accounts for the year ending 30th June 2013.

(b) Dividends for the purposes of Section 1158 of the Corporation TaxAct 2010 (‘Section 1158’)The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year as follows:

2012 2011 £’000 £’000

Interim dividend of 5.5p (2011: 5.5p) 1,339 1,380Final dividend of 11.5p (2011: 11.5p) 2,772 2,870

Total dividends for Section 1158 purposes 4,111 4,250

The revenue available for distribution by way of dividend for the year is £3,938,000 (2011: £2,961,000).

9. Return/(loss) per share

The revenue return per share is based on the earnings attributable to the ordinary shares of £3,938,000 (2011: £2,961,000) andon the weighted average number of shares in issue during the year of 24,551,213 (2011: 25,078,189).

The capital loss per share is based on the capital loss attributable to the ordinary shares of £15,130,000 (2011: £26,821,000return) and on the weighted average number of shares in issue during the year of 24,551,213 (2011: 25,078,189).

Total loss per share is based on the total loss attributable to the ordinary shares of £11,192,000 (2011: £29,782,000 return) andon the weighted average number of shares in issue during the year of 24,551,213 (2011: 25,078,189).




2012 2011£’000 £’000

10. Investments Investments listed on a recognised stock exchange1 125,487 146,343

Opening book cost 132,283 114,413Opening investment holding gains 14,060 2,392

Opening valuation 146,343 116,805

Movements in the year:Purchases at cost 114,725 148,162Sales – proceeds (121,245) (146,644)(Losses)/gains on sales of investments based on the carrying value at

the previous balance sheet date (12,142) 13,716Net movement in investment holding gains and losses (2,194) 14,304

125,487 146,343

Closing book cost 120,391 132,283Closing investment holding gains 5,096 14,060

Total investments held at fair value 125,487 146,343

1Includes the investment in the JPMorgan Sterling Liquidity Fund.

Transaction costs on purchases during the year amounted to £415,000 (2011: £574,000) and on sales during the yearamounted to £98,000 (2011: £126,000). These costs include stamp duty and brokerage commission.

During the year, prior year investment holding gains of £6,770,000 have been transferred to gains and losses on sales ofinvestments as disclosed in notes 2 and 15.

2012 2011£’000 £’000

11. Current assetsDebtors Securities sold awaiting settlement 1,221 2,548Taxation recoverable 5 12Dividends and interest receivable 544 674Other debtors 12 36

1,782 3,270

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

Cash and short term depositsCash and short term deposits comprises bank balances and short term deposits. The carrying amount of these represents theirfair value. Cash balances in excess of a predetermined amount are placed on short term deposit at market rates of interest.



2012 2011£’000 £’000

12. Creditors: amounts falling due within one year Securities purchased awaiting settlement 1,717 4,140Repurchase of shares into Treasury awaiting settlement — 226Bank loan 5,000 —Interest payable 40 144Other creditors and accruals 77 70

6,834 4,580

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

The bank loan is unsecured and is drawn down on the Company’s floating rate loan facility with ING Bank. Details of the facilityare given in note 22(a)(ii) on page 47.

2012 2011 £’000 £’000

13. Creditors: amounts falling due after more than one year:£9,500,000 11% debenture 2016 — 9,496Bank loan 4,000 —

4,000 9,496

The Company’s £9.5 million debenture was redeemed on 2nd December 2011.

The bank loan is unsecured and is drawn down on the Company’s floating rate loan facility with ING Bank. Details of the facilityare given in note 22(a)(ii) on page 47.

2012 2011£’000 £’000

14. Called up share capital Allotted and fully paid:Ordinary shares of 25p eachOpening balance of 24,956,680 (2011: 25,086,680) shares excluding shares held in Treasury 6,239 6,272Repurchase and cancellation of 634,100 (2011: nil) shares (158) —Repurchase of 225,400 (2011: 130,000) shares into Treasury (56) (33)

Subtotal 24,097,180 (2011: 24,956,680) shares 6,025 6,2391,400,900 (2011: 1,175,500) shares held in Treasury 350 294

Closing balance1 6,375 6,533

1Represented by 25,498,080 (2011: 26,132,180) shares including 1,400,900 (2011: 1,175,500) shares held in Treasury.

During the year 225,400 shares with a nominal value of £56,000, were repurchased into Treasury, representing 0.9% of sharesoutstanding at the beginning of the year, for a total consideration of £928,000.

During the year 634,100 ordinary shares with a nominal value of £158,000 were repurchased for cancellation, representing2.5% of shares outstanding at the beginning of the year, for a total consideration of £2,641,000. The reason for the purchaseswas to seek to manage the volatility and absolute level of the share price discount to net asset value per share.




2012Capital reserves

Gains and HoldingCalled up Capital losses on gains and

share redemption sales of losses on Revenuecapital reserve investments investments reserve Total£’000 £’000 £’000 £’000 £’000 £’000

15. Reserves Opening balance 6,533 3,467 106,219 14,060 5,293 135,572Losses on sales of investments based on the carrying value

at the previous balance sheet date — — (12,142) — — (12,142)Net movement in investment holding gains and losses — — — (2,194) — (2,194)Transfer on disposal of investments — — 6,770 (6,770) — —Repurchase and cancellation of the Company’s own shares (158) 158 (2,641) — — (2,641)Repurchase of shares into Treasury — — (928) — — (928)Finance costs charged to capital — — (429) — — (429)Management fee and finance costs charged to capital — — (363) — — (363)Other capital charges — — (2) — — (2)Dividends appropriated in the year — — — — (4,199) (4,199)Retained revenue for the year — — — — 3,938 3,938

Closing balance 6,375 3,625 96,484 5,096 5,032 116,612

16. Net asset value per share

Net asset value per share is based on total shareholders’ funds of £116,612,000 (2011: £135,572,000) and on the24,097,180 (2011: 24,956,680) shares in issue at the year end, excluding shares held in Treasury.

2012 2011 £’000 £’000

17. Reconciliation of net (loss)/return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

Total (loss)/return on ordinary activities before finance costs and taxation (10,574) 30,926Less capital loss/(return) before finance costs and taxation 14,701 (27,621)Scrip dividends received as income (171) —Decrease/(increase) in dividends and interest receivable 130 (147)Decrease/(increase) in other debtors 24 (15)Increase/(decrease) in accrued expenses 7 (11)Tax on unfranked investment income — (1)Management fee charged to capital (363) (388)

Net cash inflow from operating activities 3,754 2,743



At 30th June Other At 30th June2011 Cash flow movements 2012

£’000 £’000 £’000 £’000

18. Analysis of changes in net debtCash and short term deposits 35 142 — 177Debt falling due within one year — (5,000) — (5,000)Debt falling due after more than one year — (4,000) — (4,000)Debenture falling due after more than one year (9,496) 9,500 (4) —

Net debt (9,461) 642 (4) (8,823)

19. Capital commitments and contingent liabilities

At the balance sheet date there were no capital commitments or contingent liabilities (2011: none).

20. Transactions with JPMorgan

Details of the management contract (which includes a performance fee contract) are set out on pages 19 and 20. The termsmake allowance for the exclusion of management charges on investments held in funds on which JPMorgan earns a separatemanagement fee. Details of the management fee payable for the year can be found in note 4 on page 37. No management fee(2011: £nil) was outstanding at 30th June 2012.

Expenses amounting to £59,000 (2011: £63,000) were payable to JPMAM for the marketing and administration of savingscheme products of which £nil (2011: £nil) was outstanding at the year end.

Safe custody fees and handling charges amounting to £6,000 (2011: £13,000) were payable to JPMorgan Chase of which£2,000 (2011: £4,000) was outstanding at the year end.

JPMAM carries out some of its investment activities through JPMorgan subsidiaries. These transactions are carried out atarm’s length. The commission payable on transactions with JPMorgan subsidiaries was £34,000 (2011: £43,000) of which£nil (2011: £nil) was outstanding at the year end.

The Company holds an investment in the JPMorgan Sterling Liquidity Fund. At 30th June 2012 this holding was valued at£3.9 million (2011: £2.6 million). During the year, the Company made purchases of this fund amounting to £37.8 million(2011: £49.0 million) and sales of £36.5 million (2011: £47.6 million). Income receivable from this fund amounted to£25,000 (2011: £19,000) of which £2,000 (2011: £nil) was outstanding at the year end. JPMorgan earns no management fee onthis fund.

At the year end a bank balance of £177,000 (2011: £35,000) was held with JPMorgan Chase. During the year ended 30th June2012, a net amount of interest of £1,000 (2011: £1,000) was receivable from JPMorgan Chase of which £nil (2011: £nil) wasoutstanding at the year end.




21. Disclosures regarding financial instruments measured at fair value

The Company’s financial instruments within the scope of FRS 29 that are held at fair value comprise its investment portfolio.

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

Level 1 – valued using quoted prices in active markets.

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

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

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset.

Details of the valuation techniques used by the Company are given in note 1(b) on page 34.

The following table sets out the fair value measurements using the FRS 29 hierarchy at 30th June:

2012Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or loss Equity investments 121,607 — — 121,607Liquidity fund 3,880 — — 3,880

Total 125,487 — — 125,487

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

Financial assets held at fair value through profit or lossEquity investments 143,703 — — 143,703Liquidity fund 2,640 — — 2,640

Total 146,343 — — 146,343

There have been no transfers between Levels 1, 2 or 3 during the year (2011: none).



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

As an investment trust, the Company invests in equities and other securities for the long term in order to secure its investmentobjective stated on the ‘Features’ page. In pursuing this objective, the Company is exposed to a variety of risks that couldresult in a reduction in the Company’s net assets or a reduction in the profits available for dividends. These risks includemarket risk (comprising market price risk and interest rate risk), liquidity risk and credit risk. The Directors’ policy formanaging these risks is set out below. The Manager, in close cooperation with the Board, coordinates the Company’s riskmanagement policy. The Company has no significant direct exposure to foreign currencies risk.

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

The Company’s financial instruments comprise the following:

– Investments in listed equity shares of UK companies and a sterling liquidity fund. These are held in accordance with theCompany’s investment objective;

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

– Sterling bank loans, the purpose of which is to raise finance for the Company’s operations.

(a) Market risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in marketprices. This market risk comprises two elements – market price risk and interest rate risk. Information to enable an evaluationof the nature and extent of these two elements of market price risk is given in parts (i) and (ii) of this note, together withsensitivity analyses where appropriate.

The Board reviews and agrees policies for managing these risks. These policies have remained unchanged from thoseapplying in the comparative year. The Manager assesses the exposure to market risk when making each investment decisionand monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

(i) Market price risk Market price risk arises from fluctuations in the market prices of equities which may affect the value of the Company’sinvestments.

Management ofmarket price risk The Board meets on at least four occasions each year to consider the stock selection of the portfolio and the riskassociated with particular industry sectors. The investment management team has responsibility for monitoring theportfolio, which is selected in accordance with the Company’s investment objectives and seeks to ensure that individualstocks meet an acceptable risk/reward profile.

Market price risk exposure The Company’s exposure to changes in market prices at 30th June comprises its holdings in equity investments as follows:

2012 2011 £’000 £’000

Equity investments held at fair value through profit or loss 121,607 143,703

The above data is broadly representative of the exposure to market price risk during the current and comparative year.




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

(a) Market risk continued(i) Market price risk continued

Concentration ofmarket price risk An analysis of the Company’s investments by industry sector is given on page 12. All of the investments’ value is in the UK.Accordingly there is a concentration of exposure to the UK. However, it should be noted that an investment may not bewholly exposed to the economic conditions in its country of domicile or of listing.

Market price risk sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase ordecrease of 10% (2011: 10%) in the fair value of the Company’s equities. This level of change is considered to be areasonable illustration based on observation of current market conditions. The sensitivity analysis is based on theCompany’s equities and adjusting for change in the management fee, but with all other variables held constant.

2012 201110% Increase 10% Decrease 10% Increase 10% Decreasein fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (15) 15 (17) 17Capital return 12,127 (12,127) 14,330 (14,330)

Total return after taxation for the year 12,112 (12,112) 14,313 (14,313)

Net assets 12,112 (12,112) 14,313 (14,313)

(ii) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the liquidity fund, and the interestpayable on the Company’s variable rate cash borrowings when rates are re-set.

Management of interest rate risk The Company does not normally hold significant cash balances. Short term borrowings are used when required. TheCompany may finance part of its activities through borrowings at levels approved and monitored by the Board. Thepossible effects on cash flows that could arise as a result of changes in interest rates are taken into account when theCompany borrows on the loan facility. However, amounts drawn down on this facility are for short term periods andtherefore exposure to interest rate risk is not significant.

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

2012 2011 £’000 £’000

Exposure to floating interest rates:JPMorgan Sterling Liquidity Fund 3,880 2,640Bank loans 9,000 —Cash and short term deposits 177 35

Total exposure 13,057 2,675



The target interest rate earned on the JPMorgan Sterling Liquidity Fund is the 7 day sterling London Interbank Bid rate.

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

On 8th July 2011, the Company arranged two £5 million floating rate loan facilities with ING Bank to replace the existing£10 million facility with that bank.

Under the terms of a one year facility, the Company may draw down up to £5 million at an interest rate of LIBOR as quotedin the market for the loan period, plus a margin of 1.20%, plus Mandatory Costs, which are the lender’s cost of complyingwith certain regulatory requirements of the Bank of England. Under the terms of a three year facility, the Company maydraw down up to £5 million at an interest rate of LIBOR as quoted in the market for the loan period, plus a margin of 1.85%,plus Mandatory Costs. The one year facility expired on 9th August 2012.

Furthermore on 30th May 2012, the Company arranged a new £15 million three year floating rate loan facility withScotiabank (Ireland) Limited to replace the expiring one year £5 million facility with ING Bank. Under the terms of thisfacility, the Company may draw down up to £15 million at a money market rate offered for the loan period by prime banksin the London market as quoted in the market for the loan period, plus a margin of 1.45%, plus mandatory costs.

The exposure to floating interest rates has fluctuated during the year between net loan balances and net cash balances asfollows:

2012 2011£’000 £’000

Maximum credit/debit interest rate exposure to floating rates – net cash balances 10,071 10,323Maximum debit/credit interest rate exposure to floating rates – net (loan) balances (2,433) (5,006)

Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1% (2011: 1%)increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This levelof change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivityanalysis is based on the Company’s monetary financial instruments held at the balance sheet date, with all other variablesheld constant.

2012 20111% Increase 1% Decrease 1% Increase 1% Decrease

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

Income statement – return after taxationRevenue return (68) 68 27 (27)Capital return (63) 63 — —

Total return after taxation for the year (131) 131 27 (27)

Net assets (131) 131 27 (27)

In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposureto interest rate changes due to fluctuation in the level of cash balances, investment in the JPMorgan Sterling Liquidity Fundand drawings on the loan facility.




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

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

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

The Board’s policy is for the Company to remain fully invested in normal market conditions and that short term borrowings beused to manage short term liabilities, working capital requirements and to gear the Company as appropriate. Details of thecurrent loan facilities are given in part (a)(ii) to this note on page 47.

Liquidity risk exposure Contractual maturities of the financial liabilities at the year end are as follows. The table includes the principal amountsrepayable and finance costs, from the balance sheet date to the earliest dates on which payment can be required by the lender.

2012Within One to Two to More than

one year two years five years five years Total£’000 £’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearRepurchase of shares into Treasury awaiting settlement 1,717 — — — 1,717Interest payable 40 — — — 40Other creditors and accruals 77 — — — 77Bank loan 5,000 — — — 5,000

Creditors: amounts falling due after more than one yearBank loan — — 4,000 — 4,000

6,834 — 4,000 — 10,834

2011Within One to Two to More than

one year two years five years five years Total£’000 £’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement 4,140 — — — 4,140Repurchase of shares into Treasury awaiting settlement 226 — — — 226Interest payable 144 — — — 144Other creditors and accruals 70 — — — 70

Creditors: amounts falling due after more than one year£9,500,000 11% debenture 2016 1,045 1,045 3,135 9,500 14,725

5,625 1,045 3,135 9,500 19,305



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

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

Cash Cash balances can only be held with counterparties that have a minimum rating of A1/P1 from Standard & Poors and Moody’srespectively. Counterparties are subject to daily credit analysis by the Manager.

Exposure to JPMorgan Chase JPMorgan Chase is the custodian of the Company’s assets. The custody agreement grants a general lien over securitiescredited to the securities account. The extent of this lien is limited to the amount of unpaid fees payable to JPMorgan Chase.The Company’s investment assets are segregated from JPMorgan Chase’s own trading assets and are therefore protected fromcreditors in the event that JPMorgan Chase were to cease trading. However, no absolute guarantee can be given to investorson the protection of all assets of the Company.

Credit risk exposure The amounts shown in the balance sheet under investment in liquidity fund, debtors and cash and short term depositsrepresent the maximum exposure to credit risk at the current and comparative year ends.

The liquidity fund has a AAA (2011: AAA) credit rating from Standard & Poor’s.

Cash and short term deposits comprises balances held at banks that have a minimum rating of A1/P1 (2011: A1/P1) fromStandard & Poor’s and Moody’s respectively.

(d) Fair values of financial assets and financial liabilitiesAll financial assets and liabilities are either included in the balance sheet at fair value or the carrying amount in the balancesheet is a reasonable approximation of fair value except for the debenture disclosed below. The Company’s £9.5 milliondebenture was redeemed on 2nd December 2011, therefore no fair value was applicable for the year end (2011: the fair valueof the £9.5 million debenture issued by the Company has been calculated using discounted cash flow techniques using theyield on a similarly dated gilt plus a margin based on the 5 year average for the AA Barclays Corporate Bond).

Accounts value Fair value 2012 2011 2012 2011£’000 £’000 £’000 £’000

£9,500,000 11% debenture 2016 — 9,496 — 9,926



23. Capital management policies and procedures

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

2012 2011£’000 £’000

DebtBank loan falling due within one year 5,000 —Bank loan falling due after more than one year 4,000 —£9,500,000 11% debenture 2016 — 9,500

9,000 9,500EquityShare capital 6,375 6,533Reserves 110,237 129,039

116,612 135,572

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

The Board’s current policy is to limit gearing within the range 95% to 125%. Gearing for this purpose is defined as investmentsexcluding liquidity fund holdings, expressed as a percentage of net assets.

2012 2011£’000 £’000

Investments excluding liquidity fund 121,607 143,703Net assets 116,612 135,572

Gearing 104.3% 106.0%

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

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

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

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




Shareholder Analysisat 30th June 2012

Number of shares % Holding

Pension Funds 1,623,675 6.4

Unit Trusts/Mutual Funds 2,599,390 10.2

Insurance Companies 1,628,884 6.4

Other Institutions 1,035,800 4.0

Total Institutions 6,887,749 27.0

Private Client Brokers 6,269,189 24.6

Individuals in the Investment Trust Investment Account, ISA and SIPP1 6,334,082 24.8

Retail investors holding shares directly or through nominee accounts2 4,606,160 18.1

Total Retail Holdings 17,209,431 67.5

Treasury shares3 1,400,900 5.5

Total Shares in Issue 25,498,080 100.0

Nominee accounts have been allocated to their appropriate category.

1Savings Products managed by JPMorgan.2Includes holdings of below 10,000 shares.3Shares held in Treasury do not carry voting rights.

Source: Richard Davies Investor Relations.


Notice is hereby given that the fortieth Annual GeneralMeeting of JPMorgan Mid Cap Investment Trust plc will beheld at Holborn Bars, 138-142 Holborn, London EC1N 2NQ onTuesday, 6th November 2012 at 2.30p.m. for the followingpurposes:

1. To receive the Directors’ Report, the Annual Accounts andthe Auditors’ Report for the year ended 30th June 2012.

2. To approve the Directors’ Remuneration Report for theyear ended 30th June 2012.

3. To approve a final dividend.

4. To re-elect Andrew Barker as a Director of the Company.

5. To re-elect John Emly as a Director of the Company.

6. To reappoint PricewaterhouseCoopers LLP as auditors tothe Company and to authorise the Directors to determinetheir remuneration.

Special Business

To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution7. THAT the Directors of the Company be and they are herebygenerally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors),pursuant to Section 551 of the Companies Act 2006 (the‘Act’) to exercise all the powers for the Company to allotrelevant securities (within the meaning of Section 551 ofthe Act) up to an aggregate nominal amount of £299,965,representing approximately 5% of the Company’s issuedordinary share capital (excluding treasury shares) as at thedate of the passing of this resolution, provided that thisauthority shall expire at the conclusion of the AnnualGeneral Meeting of the Company to be held in 2013 unlessrenewed at a general meeting prior to such time, save thatthe Company may before such expiry make offers,agreements or arrangements which would or might requirerelevant securities to be allotted after such expiry and sothat the Directors of the Company may allot relevantsecurities in pursuance of such offers, agreements orarrangements as if the authority conferred hereby hadnot expired.

Authority to disapply pre-emption rights on allotment of relevantsecurities – Special Resolution8. THAT subject to the passing of Resolution 7 set out above,the Directors of the Company be and they are herebyempowered pursuant to Section 570 and 573 of the Act toallot equity securities (within the meaning of Section 560 ofthe Act) for cash pursuant to the authority conferred byResolution 8 or by way of a sale of Treasury shares as ifSection 561(1) of the Act did not apply to any suchallotment, provided that this power shall be limited to theallotment of equity securities for cash up to an aggregatenominal amount of £299,965, representing approximately5% of the issued ordinary share capital (excluding treasuryshares) as at the date of the passing of this resolution at aprice of not less than the net asset value per share and shallexpire upon the expiry of the general authority conferredby Resolution 7 above, save that the Company may beforesuch expiry make offers, or agreements which would ormight require equity securities to be allotted after suchexpiry and so that the Directors of the Company may allotequity securities in pursuant of such offers, or agreementsas if the power conferred hereby had not expired.

Authority to repurchase the Company’s shares – Special Resolution9. THAT the Company be generally and, subject as hereinafterappears, unconditionally authorised in accordance withSection 701 of the Companies Act 2006 (the ‘Act’) to makemarket purchases (within the meaning of Section 693 of theAct) of its issued shares of 25p each in the capital of theCompany

PROVIDED ALWAYS THAT

(i) the maximum number of shares hereby authorised tobe purchased shall be 3,597,177 or, if less, that numberof shares which is equal to 14.99% of the Company’sissued share capital as at the date of the passing of thisResolution;

(ii) the minimum price which may be paid for a share shallbe 25 pence;

(iii) the maximum price which may be paid for a share shallbe an amount equal to the highest of: (a) 105% of theaverage of the middle market quotations for a share

Notice of Annual General Meeting


taken from and calculated by reference to the LondonStock Exchange Daily Official List for the five businessdays immediately preceding the day on which the shareis purchased; or (b) the price of the last independenttrade; or (c) the highest current independent bid;

(iv) any purchase of shares will be made in the market forcash at prices below the prevailing net asset value pershare (as determined by the Directors) at the datefollowing not more than seven days before the date ofpurchase;

(v) the authority hereby conferred shall expire on5th May 2014 unless the authority is renewed at theCompany’s Annual General Meeting in 2013 or at anyother general meeting prior to such time; and

(vi) the Company may make a contract to purchase sharesunder the authority hereby conferred prior to the expiryof such authority and may make a purchase of sharespursuant to any such contract notwithstanding suchexpiry.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Asset Management (UK) Limited, Company Secretary 21st September 2012

Notes

These notes should be read in conjunction with the notes on thereverse of the proxy form.

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

2. A proxy does not need to be a member of the Company but mustattend the Meeting to represent you. Your proxy could be theChairman, another Director of the Company or another personwho has agreed to attend to represent you. Details of how toappoint the Chairman or another person(s) as your proxy orproxies using the proxy form are set out in the notes to the proxyform. If a voting box on the proxy form is left blank, the proxy orproxies will exercise his/their discretion both as to how to vote andwhether he/they abstain(s) from voting. Your proxy must attendthe Meeting for your vote to count. Appointing a proxy or proxiesdoes not preclude you from attending the Meeting and voting inperson.

3. Any instrument appointing a proxy, to be valid, must be lodged inaccordance with the instructions given on the proxy form.

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments alsoapplies in relation to amended instructions. Any attempt toterminate or amend a proxy appointment received after therelevant deadline will be disregarded. Where two or more validseparate appointments of proxy are received in respect of thesame share in respect of the same Meeting, the one which is lastreceived (regardless of its date or the date of its signature) shall betreated as replacing and revoking the other or others as regardsthat share; if the Company is unable to determine which was lastreceived, none of them shall be treated as valid in respect of thatshare.

5. To be entitled to attend and vote at the Meeting (and for thepurpose of the determination by the Company of the number ofvotes they may cast), members must be entered on the Company’sregister of members as at 6.00 p.m. two business days prior to theMeeting (the ‘specified time’). If the Meeting is adjourned to a timenot more than 48 hours after the specified time applicable to theoriginal Meeting, that time will also apply for the purpose ofdetermining the entitlement of members to attend and vote (andfor the purpose of determining the number of votes they may cast)at the adjourned Meeting. If however the Meeting is adjourned fora longer period then, to be so entitled, members must be enteredon the Company’s register of members as at 6.00 p.m. twobusiness days prior to the adjourned Meeting or, if the Companygives notice of the adjourned Meeting, at the time specified in thatnotice. Changes to entries on the register after this time shall bedisregarded in determining the rights of persons to attend or voteat the Meeting or adjourned Meeting.


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

7. A corporation, which is a shareholder, may appoint an individual(s)to act as its representative(s) and to vote in person at the Meeting(see instructions given on the proxy form). In accordance with theprovisions of the Companies Act 2006, each such representativemay exercise (on behalf of the corporation) the same powers as thecorporation could exercise if it were an individual member of theCompany, provided that they do not do so in relation to the sameshares. It is therefore no longer necessary to nominate adesignated corporate representative.

Representatives should bring to the Meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of theCompanies Act 2006 can require the Company to publish astatement on its website setting out any matter relating to:(a) the audit of the Company’s accounts (including the Auditors’report and the conduct of the audit) that are to be laid beforethe AGM; or (b) any circumstances connected with Auditors ofthe Company ceasing to hold office since the previous AGM,which the members propose to raise at the Meeting. TheCompany cannot require the members requesting thepublication to pay its expenses. Any statement placed on thewebsite must also be sent to the Company’s Auditors no laterthan the time it makes its statement available on the website.The business which may be dealt with at the AGM includes anystatement that the Company has been required to publish on itswebsite pursuant to this right.

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

10. Under Sections 338 and 338A of the 2006 Act, members meetingthe threshold requirements in those sections have the right torequire the Company: (i) to give, to members of the Companyentitled to receive notice of the Meeting, notice of a resolutionwhich those members intend to move (and which may properly bemoved) at the Meeting; and/or (ii) to include in the business to bedealt with at the Meeting any matter (other than a proposedresolution) which may properly be included in the business at theMeeting. A resolution may properly be moved, or a matter properlyincluded in the business unless (a) (in the case of a resolution only)it would, if passed, be ineffective (whether by reason of anyinconsistency with any enactment or the Company’s constitution orotherwise); (b) it is defamatory of any person; or (c) it is frivolous orvexatious. A request made pursuant to this right may be in hardcopy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business,must be accompanied by a statement setting out the grounds forthe request, must be authenticated by the person(s) making it andmust be received by the Company not later than the date that is

six clear weeks before the Meeting, and (in the case of a matter tobe included in the business only) must be accompanied by astatement setting out the grounds for the request.

11. A copy of this notice has been sent for information only to personswho have been nominated by a member to enjoy informationrights under Section 146 of the Companies Act 2006 (a ‘NominatedPerson’). The rights to appoint a proxy can not be exercised by aNominated Person: they can only be exercised by the member.However, a Nominated Person may have a right under anagreement between him and the member by whom he wasnominated to be appointed as a proxy for the Meeting or to havesomeone else so appointed. If a Nominated Person does not havesuch a right or does not wish to exercise it, he may have a rightunder such an agreement to give instructions to the member as tothe exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this notice of meeting, details of the total number ofshares in respect of which members are entitled to exercise votingrights at the AGM, the total voting rights members are entitled toexercise at the AGM and, if applicable, any members’ statements,members’ resolutions or members’ matters of business receivedby the Company after the date of this notice will be available on theCompany’s website www.jpmmidcap.co.uk.

13. The register of interests of the Directors and connected persons inthe share capital of the Company and the Directors’ letters ofappointment are available for inspection at the Company’sregistered office during usual business hours on any weekday(Saturdays, Sundays and public holidays excepted). It will also beavailable for inspection at the Annual General Meeting. No Directorhas any contract of service with the Company.

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

15. As an alternative to completing a hard copy Form of Proxy/VotingDirection Form, you can appoint a proxy or proxies electronicallyby visiting www.sharevote.co.uk. You will need your Voting ID,Task ID and Shareholder Reference Number (this is the series ofnumbers printed under your name on the Form of Proxy/VotingDirection Form). Alternatively, if you have already registered withEquiniti Limited’s online portfolio service, Shareview, you cansubmit your Form of Proxy at www.shareview.co.uk. Fullinstructions are given on both websites.

16. As at 20th September 2012 (being the latest business day prior tothe publication of this Notice), the Company’s issued share capitalconsists of 23,997,180 Ordinary shares (excluding treasury shares)carrying one vote each. Therefore the total voting rights in theCompany are 23,997,180.

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

Notice of Annual General Meetingcontinued


Return to ShareholdersTotal return to the investor, on a mid-market price tomid-market price basis, assuming that all dividends receivedwere reinvested, without transaction costs, in the shares of theCompany at the time the shares were quoted ex-dividend.

Portfolio Return Net of Fees and ExpensesTotal return on net assets, net of management fees andadministration expenses but prior to the use of revenuereserves to finance the dividend.

Return on Net AssetsTotal return on net asset value (‘NAV’) per share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested in the shares of the Company at theNAV per share at the time the shares were quoted ex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the NAV when calculating the totalreturn on net assets.

Benchmark ReturnTotal return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested in the shares of the underlying companies atthe time the shares were quoted ex-dividend.

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

Actual Gearing FactorInvestments excluding holdings in liquidity funds, expressed asa percentage of net assets. This shows the effect of gearing onthe net asset value per share if the market value of the portfoliowere to increase by 100%.

Ongoing ChargesManagement fees and all other operating expenses excludinginterest and performance fees, expressed as a percentage ofthe average of the end of day daily net assets during the year.

(Prior year: Total expense ratio: Management fees and all otheroperating expenses excluding performance fee, expressed as apercentage of the average of the month end net assets duringthe period).

Share Price Discount/Premium to Net Asset Value (‘NAV’) per ShareIf the share price of an investment trust is lower than the NAVper share, the shares are said to be trading at a discount. Thediscount is shown as a percentage of the NAV. The opposite of adiscount is a premium. It is more common for an investmenttrust’s shares to trade at a discount than at a premium.

Performance AttributionAnalysis of how the Company achieved its recordedperformance relative to its benchmark.

Performance Attribution Definitions:

Stock/Sector SelectionMeasures the effect of investing in securities/sectors to agreater or lesser extent than their weighting in the benchmark,or of investing in securities which are not included in thebenchmark.

Gearing/CashMeasures the impact on returns of borrowings or cashbalances on the Company’s relative performance.

Fees/Other ExpensesThe payment of fees and expenses reduces the level of totalassets, and therefore has a negative effect on relativeperformance.

Glossary of Terms and Definitions


Notes

HistoryJPMorgan Mid Cap Investment Trust plc was launched in 1972 asCrossfriars Trust Limited and raised £10 million by a public offer ofshares. Its original policy was to invest up to 25% of its assets in UKunquoted shares. The Company changed its name to The FlemingEnterprise Investment Trust in 1982. It adopted its current investmentpolicy of concentrating on FTSE 250 companies in 1993 andreaffirmed this policy in February 1997. The Company changed itsname to The Fleming Mid Cap Investment Trust plc in October 1998,to JPMorgan Fleming Mid Cap Investment Trust plc in November2001 and adopted its present name in November 2005.

Company NumbersCompany registration number: 1047690London Stock Exchange number: 0235761 ISIN: GB0002357613Bloomberg code: JMF LN

Market InformationThe Company’s shares are listed on the London Stock Exchange. Themarket price is shown daily in the Financial Times, The Times, the DailyTelegraph, The Scotsman, The Independent and on the JPMorganwebsite at www.jpmmidcap.co.uk, where the share price is updatedevery fifteen minutes during trading hours.

Websitewww.jpmmidcap.co.uk

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

Manager and Company SecretaryJPMorgan Asset Management (UK) Limited

Company’s Registered OfficeFinsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone: 020 7742 4000

Please contact Alison Vincent for company secretarial andadministrative matters.

CustodianJPMorgan Chase Bank, N.A.25 Bank StreetCanary WharfLondon E14 5JP

RegistrarsEquiniti LimitedReference 1082Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone: 0871 384 2321

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

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrar quoting reference 1082.

Registered shareholders can obtain further details on individualholdings on the internet by visiting www.shareview.co.uk.

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

Independent AuditorsPricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

BrokersNumis Securities LtdThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT

Information about the Company

Financial CalendarFinancial year end 30th JuneFinal results announced SeptemberHalf year end DecemberHalf year results announced FebruaryInterim Management Statements April and October Half yearly dividends on ordinary shares paid November, April Annual General Meeting November

A member of the AIC


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

Your telephone call may be recorded for your security

www.jpmmidcap.co.uk

2012 annual report jpmorgan mid cap investment trust plc · 2017-02-03 · 2 jpmorgan mid cap...

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