2014JPMorgan Income & Capital Trust plc. Annual Report & Accounts 2014 1 Financial Results Totalreturns +18.4% Shareholders’ funds total return1 (2013: +16.2%) +20.3% Unit net asset

Annual Report2014JPMorgan Income & Capital Trust plc

Annual Report & Accounts for the year ended 28th February 2014

Income_Capital A4 cover_Income_Capital Cover 21/05/2014 11:00 Page 2

Features

Contents

1 Financial Results

Strategic Report

2 Chairman’s Statement5 Investment Managers’ Report9 Summary of Results10 Financial Record11 Ten Largest Investments12 Portfolio Analysis 13 List of Investments15 Capital Structure of the Company 16 Business Review

Governance

20 Board of Directors22 Directors’ Report24 Corporate Governance29 Directors’ Remuneration Report32 Statement of Directors’

Responsibilities

33 Independent Auditors’ Report

Financial Statements

36 Income Statement37 Reconciliation of Movements in

Shareholders’ Funds38 Balance Sheet39 Cash Flow Statement40 Notes to the Accounts

Shareholder Information

58 Notice of Annual General Meeting61 Glossary of Terms and Definitions65 Information about the Company

Objectives

To meet the final capital entitlement of the Zero Dividend Preference shareholdersand to provide Ordinary shareholders with a regular quarterly income and capitalgrowth.

Policies

– The Company seeks to achieve its objective by investing principally in UK equitiesand investment grade fixed interest securities.

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

– To use gearing when appropriate to increase potential returns to shareholders.

Benchmark

The benchmark is a composite comprising 90% FTSE 350 Index (excludinginvestment trusts) and 10% Barclays Capital Global Corporate Bond Index in sterlingterms. Prior to 1st March 2010, the benchmark was a composite comprising 90%FTSE 350 Index (excluding investment trusts) and 10% Merrill Lynch 5-10 yearUK Sterling Corporate Index for bonds.

Capital Structure

For details of the capital structure of the Company please refer to page 15.

Life of the Company

The Company has a fixed life of ten years, which expires at the end of February 2018.

Management Company

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


JPMorgan Income & Capital Trust plc. Annual Report & Accounts 2014 1

Financial ResultsTotal returns

+18.4%Shareholders’ funds total return1

(2013: +16.2%)

+20.3%Unit net asset value total return2,3

(2013: +17.1%)

+6.8%Zero Dividend Preference sharenet asset value total return3

(2013: +6.8%)

+31.1%Ordinary share net asset valuetotal return3

(2013: +26.0%)

+12.0%Composite benchmark return4

(2013: +13.3%)

+18.1%Unit share price total return1

(2013: +19.5%)

+8.8%Zero Dividend Preference shareprice total return1

(2013: +10.4%)

+25.4%Ordinary share price total return1

(2013: +29.1%)

%

0

50

100

150

200

201420132012201120102009

Cumulative performance since inception (fiscal years)

A glossary of terms and definitions is provided on page 61.

JPMorgan Income & Capital – shareholders’ funds total return

JPMorgan Income & Capital – unit net asset value total return

Benchmark

The above are total returns and include dividends reinvested.1Source: Morningstar. 2A Unit comprises two Ordinary shares and one Zero Dividend Preference share.3Source: J.P. Morgan. 4Source: MSCI. The Company’s benchmark is a composite, comprising 90% FTSE 350 Index (excluding investment trusts) and 10% Barclays Capital Global Corporate Bond Index insterling terms.

Income_Capital_pp01_15_Income_Capital_pp01_15 20/05/2014 11:13 Page 1

JPMorgan Income & Capital Trust plc. Annual Report & Accounts 20142

Introduction and Performance

I am pleased to report that this has been another positive year for the Company, witha continued rising trend in shareholders’ funds since the low point of the financialcrisis in 2009. The total return (movement in capital value including income received)on the Company’s assets for the year ended 28th February 2014 was +18.4%, animpressive 6.4% outperformance against the composite benchmark (comprising90% FTSE 350 index and 10% Barclays Capital Global Corporate Bond Index insterling terms) which recorded a total return of +12.0% for the same period.

The UK economy improved more significantly than had been expected at the start ofthe financial year, when sentiment was bleak, with a positive impact on investorconfidence. The Investment Managers’ report gives a more detailed commentaryabout the markets and conditions experienced during the reporting period and theoutlook for the current financial year.

Share Price Performance

The prices of the Company’s two classes of share and of its Units (comprising twoOrdinary shares and one ZDP) compared with those at the last year-end date were asfollows:

28th February 2014 28th February 2013(Discount)/ (Discount)/

Share Prices Premium Share Prices Premium

ZDP 162.3p 9.7% 149.1p 7.6%Ordinary 96.3p (14.9)% 82.4p (10.3)%Units 351.5p (6.1)% 309.0p (4.1)%

As at 16th May 2014, the prices of Ordinary shares, Units and ZDPs were atpremium/(discount) of (3.6)%, 2.0% and 11.6% respectively.

Hurdle Rate

The Hurdle Rate measures the amount by which the total assets of the Companyhave to grow each year in order to return the current share price to Ordinaryshareholders when the Company winds up in February 2018. At 28th February2014, the Hurdle Rate required to return the Ordinary share price of 96.25p was1.5% per annum and the Hurdle Rate required to return an Ordinary share price of100.0p was 1.9% per annum. At 28th February, 2014, the Hurdle rate required toreturn the Final Capital Entitlement of the ZDP shares of 192.13p was – 11.5% perannum.

At 16th May 2014, the Hurdle Rate required to return the current Ordinary shareprice of 100p was 2.6% per annum and to return the Final Capital Entitlement ofthe ZDP shares of 192.13p was –11.6% per annum.

Strategic ReportChairman’s Statement



Total Return, Revenue and Dividends

The gross total return amounted to £24,339,000 and net total return after interest,administrative expenses and taxation, but before dividends and attributions,amounted to £22,758,000. Distributable income for the period amounted to£4,727,000 (7.0p per Ordinary share).

A fourth interim dividend of 1.625p per Ordinary share was paid on 25th April 2014to Ordinary shareholders and Unitholders on the register at the close of businesson 4th April 2014. That dividend, together with the three interim dividendspreviously paid, each of 1.5p per Ordinary share, brings the total payment for theyear to 6.125p per Ordinary share.

The undistributed revenue reserves, after allowing for the payment of the abovedividends, amount to £2,450,000. The Board anticipates that, in the absence ofunforeseen circumstances, the Company will be in a position to maintain the levelof quarterly dividend during the current financial year ending 28th February 2015,at 1.625p per Ordinary share (making a total of 6.50p per Ordinary share for the fullyear).

The Board

The Directors retiring by rotation at this year’s Annual General Meeting areRoderick Collins and myself. Being eligible, we both offer ourselves forreappointment. The Board recommends that shareholders vote in favour ofRoderick’s and my reappointment. Details of all the Directors’ backgrounds andexperience can be found on pages 20 and 21.

Alternative Investment Fund Managers Directive (‘AIFMD’)

The Company is required, under the provisions of the AIFMD, to appoint anAlternative Investment Fund Manager (‘AIFM’) and a Depositary by 22nd July 2014.After consideration of its options, the Board has agreed in principle to appointJPMorgan as the AIFM and Bank of New York as the Company’s Depositary.Extensive time and cost has been expended by the investment managementindustry in order to meet the deadline for compliance with the AIFMD and theCompany will incur additional cost as a result. It remains unclear whether thisregulation imposed by the European Union Parliament will provide any tangibleenhanced protection for shareholders.

Annual General Meeting

The Directors and I look forward to welcoming shareholders to the fifth AnnualGeneral Meeting, which will be held at 60 Victoria Embankment, London EC4Y 0JPon 3rd July 2014 at 3.00 p.m. The Investment Managers will make a presentation toshareholders, reviewing the previous financial year and commenting on theoutlook for the current financial year. It would be helpful if shareholders couldsubmit, in advance, in writing any detailed or technical questions that they wish toraise at the Annual General Meeting to the Company Secretary at 60 VictoriaEmbankment, London EC4Y 0JP.



Changes to the Annual Report

Shareholders will note that significant changes have been made to the narrativesections of this Annual Report. These reflect revisions in regulations and aredesigned to improve clarity. There are also changes in the format of the report onDirectors’ remuneration.

Outlook

The UK’s economic prospects have improved significantly over the last 12 months,with unemployment falling much faster than forecast, corporate profitabilityremaining resilient and inflation staying subdued. The Board continues to supportthe Investment Managers in their maintaining an overweight position in equities(at close to 100%) relative to the portfolio’s composite benchmark (of 90% equitiesand 10% bonds). This overweighting has served the Company well over the lastyear and, given the prospects for increased dividends flowing from improvingcorporate revenues, remains in place. The Board remains confident in theInvestment Managers’ ability to select companies with characteristics which canproduce a combination of income and capital growth for shareholders.

Although the violent turbulence that affected world stock markets during theperiod 2007 to 2012 has lessened, a number of major uncertainties remain. Theseinclude the continuing (and increasing) indebtedness of sovereign borrowers,which cannot be sustained in perpetuity. In addition, there is the prospect, at somepoint, of a return to rates of interest which are not depressed almost to zerothrough quantitative easing and other interventions by Central Banks in moneymarkets.

Sir Laurence MagnusChairman 20th May 2014

Strategic Report continuedChairman’s Statement continued



Market Review

The UK equity market made good progress in the year to 28th February 2014, withthe FTSE 350 (ex ITs) Index up 13.0% in sterling terms. Corporate earnings growthtrends were mixed over the year, with domestic companies generally outperformingthe more internationally exposed companies. However, UK equity dividendscontinued to make decent progress, with a number of companies announcing strongdividend growth or special dividends for shareholders, due to their focus on cashgeneration. Although corporate bonds also delivered positive returns over the12 month period, they were much more modest than those of UK equities, with theBarclays Global Aggregate Corporate Bond Index returning 2.6% in sterling termsover the same period. Overall the Company’s benchmark delivered a positive returnof +12.0%, with the Company itself outperforming, with a return of +18.4%.

As the year progressed, the UK economy appeared to be on the mend, with the firsthalf of the financial year seeing a slew of positive data, which served to boost bothconsumer and business sentiment. Indicative of a broad-based recovery, themanufacturing, services and construction sectors all made gains. Mark Carney, thenew governor of the Bank of England (BoE), introduced forward guidance into theBoE’s monetary policy toolkit. In his first meeting in July, he reaffirmed the centralbank’s commitment to keeping interest rates at a record low for some time to come,and maintaining the ongoing asset-purchase programme. In August, Carney signalledthat a fall in unemployment to at least 7% would be a key condition for any changein interest rate policy.

The onset of the European summer heralded a period of increased market volatility,reminding investors of the large market sell-offs that had occurred in previous years.This year’s trigger was a possible reduction in the pace of bond purchases under theUS Federal Reserve’s (Fed) quantitative easing (QE) programme. In May, investorswere caught off-guard by press conference comments from Fed chairman BenBernanke that the slowing of asset purchases could begin sooner than markets hadanticipated. The result was a sell-off across both equities and bonds, and an increasein volatility across asset classes. The slowing of asset purchases was conditionalon an improving US economy, so the Fed’s statement regarding tapering could havebeen interpreted as a more positive signal on the progress being made by theUS economy.

Investor appetite for risk assets slowly returned in the second half of the year,supported by a gradual shift in the global economy towards recovery. The eurozonetook its own tentative steps in August, breaking out of recession after six quarters ofnegative growth. Growth was strongest in the core countries of Germany and Francewhile the pace of economic contraction in the peripheral countries slowed. The UKalso announced stronger than expected GDP figures for the second quarter, with theeconomy growing by 0.7%, ahead of expectations.

Global bond markets recovered from the steep sell-off incurred in the first half of theyear. Softer economic data, rising mortgage rates and potential political gridlockin Washington saw the Fed err on the side of caution at its September meeting,making no change to QE.

John Baker

Sarah Emly

Investment Managers’ Report



The UK equity market fell marginally in November, despite an improving economy,as investors feared earlier-than-expected interest rate rises and the BoE amendedits Funding for Lending scheme to take some heat out of the housing market. Thepace of recovery meant the government’s financial position was improving aheadof forecasts. However, new BoE governor Mark Carney has taken a similar stance toFed officials by stating that interest rate rises will not be automatic, even if economicthresholds are reached earlier than expected.

January didn’t get off to the start that many equity investors had been hoping for,with the weakness of emerging markets – due to inflation fears and balance ofpayment issues – in particular leading to a fall in global equity markets and a surpriserally in global bonds. However, January blues were replaced by renewed enthusiasmin February, as investors shrugged off disappointing economic data from around theworld. The UK equity market performed strongly in February, as the domesticeconomic situation continued to improve. The BoE upgraded its growth expectationsto 3.4% for this year, but although the more balanced growth picture is reassuring,it does not appear enough to suggest higher interest rates before 2015, particularlygiven inflation remains relatively subdued.

Portfolio Review

We started the year overweight in equities relative to the portfolio’s compositebenchmark. We increased that overweight allocation over the course of the year,ultimately divesting the remaining holding in our JPMorgan Global Corporate BondFund. As such, apart from a small cash holding, the portfolio is fully exposed toequities. We believe that the outlook for equities is positive as valuations remainattractive, earnings should benefit from economic recovery and companies haveconsiderably strengthened their balance sheets.

Recent economic data suggests that economic growth in the UK is accelerating.Importantly, there is evidence that the recovery is broadening in scope, not justdriven by the housing market but also growth in manufacturing. The wider economiccontext has also improved with the economic prospects for the Eurozone lookingbrighter and the US continuing to grow strongly. The outlook for China is less certainbut the authorities there have many levers to pull to boost growth.

In the Half Year Report we spoke of buying stocks to gain exposure to the recoveryin the UK housing market. Further to that, we continued to add to our position inLloyds Banking Group which has significant exposure to UK housing through its loanbook. Additionally, it is possible that the company will recommence paying a dividendlater in 2014, or in early 2015. We also participated in the IPO of Foxtons, the Londonestate agency business which is highly cash generative and has stated that excesscash will be returned to shareholders as special dividends. Halfords was anotheraddition to the portfolio as the bicycle and car parts retailer is experiencinga recovery in sales under new management. We bought the fund management groupHenderson as the company’s earnings are benefiting from rising equity markets andincreased inflows from clients.

Strategic Report continuedInvestment Managers’ Report continued



Conversely, we sold our position in Lancashire, the speciality insurer, as it announceda change in strategy by acquiring Cathedral Capital Ltd. The prospect of sizeablefuture dividends consequently lessened. Rexam, the manufacturer of beverage cans,was another sale following a profit warning. We sold out of our position in Diageo asits earnings outlook deteriorated due to weakness in its emerging market businessand as its dividend yield was modest.

We will continue to focus our investments in companies where the newsflowis positive, valuations attractive and where balance sheet strength and strong cashflow generation allow for sustainable dividend growth.

Performance Review

In the year to 28th February 2014 the Company’s overall portfolio return was +18.4% ,in comparison with the benchmark’s return of +12.0% over this period. The portfoliohas outperformed its benchmark over the year, benefiting from strong UK equitystock selection whilst our asset allocation of being overweight in equities andconsequently underweight in corporate bonds was also positive, given theoutperformance of UK equities relative to corporate bonds.

Our best performing stock over the year was ITV, the television broadcaster whichperformed very well both in terms of profit delivery and share price returns, with itsshare price rising by 71% over the 12 months. We have held ITV for a considerableperiod of time, as its management team have focused on cost cutting, cashgeneration and the diversification of its revenue streams. During 2013 the company’sprofit growth and cash generation enabled it to announce strong dividend growth,alongside a special dividend for shareholders; another special dividend has recentlybeen announced in early 2014.

As was the case during the interim period, some of our strongest performers for thefull financial year to the end of February 2014 were some of our more domesticallyfocused stocks, including BT, whose share price total return was +57% over the yearand WH Smith whose share price total return was +79%. Other domestically focusedstrong performers included the housebuilders, Taylor Wimpey and Berkeley Group,whose share price total returns rose by 55% and 54% respectively, as their profitsgrew strongly during the year. They benefited from improving sales volumes andrising average house selling prices as they gained from the improving UK economyand new measures from the government to boost the domestic housing market.

By contrast, our holding in Barclays detracted from performance over the year as thisbank delivered mixed results. Being underweight in Lloyds Banking Group for part ofthe year was also unhelpful, although we now have an overweight position as thisdomestic retail bank makes good progress on its profit recovery and capital strength.Our holding in Rio Tinto, the leading global iron ore producer detracted fromperformance over the year, as mining stocks generally suffered from fallingcommodity price and fears over the slowing rate of economic growth in China.However, Rio Tinto has delivered strong dividend growth in its most recent profitannouncement and has begun to perform more encouragingly in share price terms.Overall the underlying stock selection of the portfolio contributed strongly to theTrust’s outperformance of the positive benchmark returns in this most recentfinancial year.



Market Outlook

The pace of UK economic recovery looks set to continue exceeding expectations.Consensus forecasts for UK growth in 2014 have roughly doubled since the middleof last year, and unemployment has fallen much faster than anticipated by the Bankof England.

In March, the Office for National Statistics released its labour market report for thethree months ending January 2014. The unemployment rate, at 7.1%, was down from7.8% a year earlier. With unemployment falling and inflation also down sharply — therate of consumer price inflation fell to a four-year low in February — wage growth isbeginning to pick up. A narrowing in the gap between earnings growth and inflationis viewed as a positive, given that falling real incomes have hindered the UK economicrecovery thus far.

In the corporate sector, profitability continues to recover, which should help drivedividends higher. Given the strengthening balance sheets and the focus on cashflowgeneration of UK companies, their ability to increase dividend payouts is likely togrow. Income growth is an important driver of our stock selection decisions and webelieve that the UK equity market currently offers opportunities for both income andcapital growth for our shareholders, particularly in comparison with other assetclasses.

Sarah EmlyJohn BakerInvestment Managers 20th May 2014

Strategic Report continuedInvestment Managers’ Report continued



Summary of Results

Total returns for the year ended 28th February 2014 2013

Shareholders funds1 +18.4% +16.2%Ordinary share net asset value2 +31.1% +26.0%Unit net asset value2 +20.3% +17.1%Zero Dividend Preference share net asset value2 +6.8% +6.8%Ordinary share price1 +25.4% +29.1%Unit share price1 +18.1% +19.5%Zero Dividend Preference share price1 +8.8% +10.4%Composite benchmark3 +12.0% +13.3%

% change

Net asset value, market price and premium/(discount) at 28th February

Zero Dividend Preference shares4

Capital entitlement (£’000) 68,193 63,882 +6.7Net asset value per share 148.0p 138.6p +6.7Market price 162.3p 149.1p +8.9Premium 9.7% 7.6%

Ordinary shares Net assets (£’000) 76,372 61,960 +23.2Net asset value per share 113.1p 91.8p +23.2Market price 96.25p 82.38p +16.8Discount (14.9)% (10.3)%

Units Net asset value per Unit 374.2p 322.2p +16.1Market price 351.5p 309.0p +13.8Discount (6.1)% (4.1)%

Assets (Ordinary and Zero Dividend Preference shareholders)Shareholders’ funds (£’000) 144,565 125,842 +14.9

Revenue for the year ended 28th FebruaryAttributable to Ordinary shareholders Gross revenue return (£’000) 5,634 4,934 +14.2Revenue return for shareholders (£’000) 4,727 4,095 +15.4Revenue return per share 7.0p 6.1p +14.8Total dividends declared (£’000) 4,136 3,848 +7.5Total dividend declared per share 6.125p 5.7p +7.5

Gearing/(net cash)5 (0.6)% (0.9)%

Ongoing charges6 1.17% 1.23%

A glossary of terms and definitions is provided on page 61.1Source: Morningstar.2Source: J.P. Morgan.3Source: MSCI. The Company’s benchmark is a composite, comprising 90% FTSE 350 Index (excluding investment trusts) and 10%Barclays Capital Global Corporate Bond Index insterling terms.4The predetermined final capital entitlement of 192.13p per ZDP (£88,547,000) is explained on page 15.5Gearing represents the excess amount above shareholders’ funds of total assets expressed as a percentage of the shareholders’ funds. Total assets include total investments and netcurrent assets/liabilities less cash/cash equivalents and excluding bank loans of less than one year. If the amount calculated is negative, this is shown as a ‘net cash’ position.6Management fee and all other operating expenses, excluding finance costs, expressed as a percentage of the average of the daily net assets during the year. The ongoing charges arecalculated in accordance with guidance issued by the Association of Investment Companies in May 2013.



3rd March 28th February 28th February 28th February 29th February 28th February 28th February2008 2009 2010 2011 2012 2013 2014

Zero Dividend Preference shares

Net assets (£’000) 46,037 49,197 52,517 56,061 59,844 63,882 68,193Net asset value per share (p) 100.0 106.7 114.0 121.6 129.8 138.6 148.0Market price (p) 102.5 89.5 111.5 123.6 135.0 149.1 162.3Premium/(discount) (%) 2.5 (16.1) (2.2) 1.6 4.0 7.6 9.7

Ordinary shares Net assets (£’000) 61,627 26,112 46,933 56,235 52,714 61,960 76,372Net asset value per share (p) 99.0 38.7 69.5 83.3 78.1 91.8 113.1Share price (p) 100.0 48.3 68.0 74.0 69.25 82.38 96.25Premium/(discount) (%) 1.0 24.8 (2.2) (11.2) (11.3) (10.3) (14.9)

Year ended 28th February 2008 2009 2010 2011 2012 2013 2014

Gross revenue (£’000) N/A 5,646 4,090 4,323 5,134 4,934 5,634Revenue return for shareholders (£’000) N/A 4,670 3,404 3,559 4,301 4,095 4,727

Revenue return per share (p) N/A 7.3 5.0 5.3 6.4 6.1 7.0Total dividends declared (£’000) N/A 4,076 3,376 3,376 3,578 3,848 4,136Total dividends declared per share (p) N/A 6.251 5.00 5.00 5.30 5.70 6.125

Rebased to 100 at 3rd March 2008Year ended 28th February 2009 2010 2011 2012 2013 2014

Unit share price total return 100.0 60.2 90.6 104.7 107.5 129.7 153.3Unit net asset value total return 100.0 68.3 97.4 115.4 118.9 137.1 163.6Benchmark 100.0 69.0 100.2 116.1 118.8 134.5 150.7

1Includes a special dividend of 1.25p per share.

Strategic Report continuedFinancial Recordfrom 3rd March 2008 (the date the Company began investing) to date



Ten Largest Investments

At 28th February 2014 At 28th February 2013Valuation Valuation

Company Sub-Sector £’000 %1 £’000 %1

Royal Dutch Shell Oil & Gas Producers 10,384 7.2 9,453 7.5 Royal Dutch Shell is an oil and petrochemicals company.

HSBC Banks 8,796 6.1 10,216 8.1HSBC is a global financial services provider.

BP Oil & Gas Producers 7,411 5.1 5,911 4.7BP is an oil and petrochemicals company.

GlaxoSmithKline Pharmaceuticals & 7,014 4.8 5,466 4.3GlaxoSmithKline is a pharmaceutical company. Biotechnology

British American Tobacco Tobacco 5,739 4.0 5,406 4.3British American Tobacco manufactures, markets and sells cigarettesand other tobacco products.

Vodafone Mobile 4,904 3.4 5,268 4.2Vodafone is a global mobile telecommunications company. Telecommunications

Rio Tinto Mining 4,878 3.4 4,543 3.6Rio Tinto is an international mining company.

Barclays Banks 4,467 3.1 4,351 3.5Barclays is a global financial services provider.

AstraZeneca Pharmaceuticals & 4,413 3.0 3,734 3.0AstraZeneca is a pharmaceutical company. Biotechnology

BT2 Fixed Line 4,289 3.0 2,773 2.2BT provides telecommunications services. Telecommunications

Total 62,295 43.1

1Based on total assets less current liabilities of £144.6m (2013: £125.8m).2Not included in the ten largest investments at 28th February 2013.

At 28th February 2013, the value of the ten largest equity investments amounted to £57.5m representing 45.7% of total assets less current liabilities.



Sector Analysis 28th February 2014 28th February 2013

Portfolio1 Benchmark Portfolio1 BenchmarkSector % % % %

Financials 25.6 19.5 22.9 19.1Oil & Gas 12.3 13.6 12.2 14.5Consumer Goods 11.7 12.6 13.6 13.2Consumer Services 10.3 10.2 8.9 8.9Industrials 10.3 9.3 10.5 8.3Basic Materials 8.4 7.7 9.1 9.2Health Care 7.9 7.5 7.3 6.4Telecommunications 7.5 4.8 7.1 5.4Utilities 2.9 3.5 3.7 3.5Technology 1.2 1.3 1.4 1.5

Total equities 98.1 90.0 96.7 90.0

Fixed interest — 10.0 2.2 10.0Liquidity fund 0.5 — 0.6 —Net current assets 1.4 — 0.5 —

Total 100.0 100.0 100.0 100.0

1Based on total assets less current liabilities of £144.6m (2013: £125.8m).

28th February 28th February2014 2013

Class of security %1 %1

Equities 98.1 96.7Fixed interest — 2.2Liquidity fund 0.5 0.6Net current assets 1.4 0.5

100.0 100.0

1Based on total assets less current liabilities of £144.6m (2013: £125.8m).

Strategic Report continuedPortfolio Analysis



List of Investmentsat 28th February 2014

ValuationCompany £’000

FinancialsBanksHSBC 8,796Barclays 4,467Lloyds 3,544

16,807Nonlife InsuranceBeazley 1,355Direct Line Insurance 1,435

2,790Life InsurancePrudential 3,699Legal & General 3,127Standard Life 1,921

8,747Real EstateFoxtons 1,802British Land 1,398

3,200General FinancialHenderson 1,596Schroders 1,478Provident Financial 1,336Aberdeen Asset Management 1,162

5,572

Total Financials 37,116

Oil & GasOil & Gas ProducersRoyal Dutch Shell 10,384BP 7,411

Total Oil & Gas 17,795


Consumer GoodsAutomobiles & PartsGKN 2,063Galliford Try 30

2,093Household Goods & Home ConstructionTaylor Wimpey 2,182Berkeley 2,036Persimmon 1,462

5,680TobaccoBritish American Tobacco 5,739Imperial Tobacco 3,385

9,124

Total Consumer Goods 16,897

Consumer ServicesMediaITV 2,655WPP 1,885Informa 1,070

5,610Travel & LeisureTUI Travel 2,268Compass 1,309Intercontinental Hotels 1,090

4,667General RetailersWH Smith 1,849Next 1,515Halfords 1,298

4,662

Total Consumer Services 14,939




IndustrialsAerospace & DefenceBAe Systems 1,151Senior 1,092

2,243Support ServicesInterserve 1,698Berendsen 1,363Ashtead 1,319Diploma 1,229Bodycote 1,189Filtrona 1,086John Menzies 846

8,730General IndustrialsSmith (DS) 2,527RPC 1,303

3,830

Total Industrials 14,803

Basic MaterialsChemicalsElementis 969

969MiningRio Tinto 4,878BHP Billiton 3,308Glencore Xstrata 1,920

10,106

Forestry & PaperMondi 1,015

1,015

Total Basic Materials 12,090

Health CarePharmaceuticals & BiotechnologyGlaxoSmithKline 7,014AstraZeneca 4,413

Total Health Care 11,427


TelecommunicationsFixed Line TelecommunicationsBT 4,289Kcom 1,654

5,943Mobile TelecommunicationsVodafone 4,904

4,904

Total Telecommunications 10,847

UtilitiesElectricityScottish & Southern Energy 1,566Drax 1,076

2,642Gas, Water & MultiutilitiesNational Grid 1,541

1,541

Total Utilities 4,183

TechnologySoftware & Computer ServicesMicro Focus International 1,715

Total Technology 1,715

Liquidity FundJPMorgan Sterling Liquidity Fund 720

Total Liquidity Fund 720

Total Investments 142,532

Total investments comprised £141,812,000 in equity shares and£720,000 in liquidity fund.

Strategic Report continuedList of Investments continued



Background and Details

Investment ObjectivesThe Company is a split-capital investment trust. Its objective isto meet the final capital entitlement of the Zero DividendPreference shares and to provide Ordinary shareholders with aregular quarterly income and capital growth.

The Company’s capital comprises Ordinary shares of 1p eachand Zero Dividend Preference shares (ZDPs) of 1p each whichare traded on the London Stock Exchange, both separately andin the form of Units (each comprising two Ordinary shares andone ZDP). The net asset values of the Ordinary shares and ZDPsare £76,372,000 and £68,193,000 respectively (note 17).As at 28th February 2014 the Company’s share capitalconsisted of 67,506,782 Ordinary shares and 46,087,200 ZeroDividend Preference shares. Following the year end 275,000Units were allotted on 30th April 2014 (consisting of twoOrdinary shares and one Zero Dividend Preference (ZDP) shareper Unit). Therefore, the share capital of the Company nowconsists of 68,056,782 Ordinary shares and 46,362,200 ZDPshares. The final capital entitlement of £88,547,000 is payableon the ZDP Shares on 28th February 2018 (note 14).

Ordinary Shares

Investment Characteristics The Ordinary shares are designed to provide a regularquarterly income, together with the potential for capitalgrowth. Ordinary shareholders should note that the Ordinaryshares are considered to carry above-average risk.

Entitlements Ordinary shareholders are entitled to all dividends paid by theCompany and, on a winding-up, to all of the Company’s surplusassets (including any growth in their value) after anyindebtedness has been repaid and the prior entitlement of£88,547,000 to the holders of ZDPs has been met in full.

Voting Rights Ordinary shareholders have the right to vote at generalmeetings and, on a poll, to one vote for each Ordinary shareheld.

Zero Dividend Preference shares

Investment Characteristics The ZDPs are designed to provide a pre-determined, but notguaranteed, capital entitlement, ranking in priority to theOrdinary shares. Because of their prior capital entitlementand pre-determined growth, they are considered to carrybelow-average risk.

Entitlements The ZDPs are not entitled to any dividends and are designed toprovide a predetermined Final Capital Entitlement payable onthe ZDP Repayment Date which ranks behind the Company’screditors, but in priority to the Ordinary shares (except for anyrevenue profits). The Final Capital Entitlement of 192.13p perZDP share due on 28th February 2018 (the ZDP RepaymentDate), equates to an annual return of 6.75% per annumcompound on their issue price of 100p.

Voting Rights Holders of ZDPs will be entitled to attend and vote at allgeneral meetings of the Company and, on a poll, to one votefor each ZDP held. Holders of ZDPs will not, however, beentitled to vote on resolutions relating to the payment ofdividends to Ordinary shareholders.

Units

The Units each consist of two Ordinary shares and one ZDP.

Investment Characteristics The Units are designed to provide a regular quarterly incometogether with the potential for capital growth. The income yieldprovided by the Units is lower than that provided by theOrdinary shares, but the inclusion of the ZDP in each Unitmeans that the capital risk is also lower. Unitholders shouldnote therefore, that the Units are considered to carry less riskthan the Ordinary shares but more risk than the ZDPs.

Entitlements and Voting Rights Unitholders have the same entitlements and voting rights as ifthey held separately the Ordinary shares and ZDPs comprisedin their Units. In addition, they will be entitled, in respect of thecomponent shares comprised in their Units, to vote at classmeetings of both the Ordinary shareholders and ZDPshareholders convened to consider certain proposals whichwould be likely to affect their position.

Capital Structure of the Company



Business ReviewStructure of the Company

JPMorgan Income & Capital Investment Trust plc is aninvestment trust company that has a premium listing on theLondon Stock Exchange. The Company employs J.P. MorganAsset Management (UK) Limited (‘JPMAM’ or the ‘Manager’) toactively manage the Company’s assets. The Board hasdetermined an investment policy and related guidelines andlimits, as described below.

The Company is subject to UK and European legislation andregulations including UK company law, Financial ReportingStandards, the UKLA Listing, Prospectus, Disclosure andTransparency Rules, taxation law and the Company’s ownArticles of Association. The Company is an investmentcompany within the meaning of Section 833 of the CompaniesAct 2006 and has been approved by HM Revenue & Customsas an investment trust (for the purposes of Sections 1158 and1159 of the Corporation Tax Act 2010) for the year ended28th February 2014 and future years. The Directors have noreason to believe that approval will not continue to beobtained. The Company is not a close company for taxationpurposes.

InvestmentObjective andPoliciesThe Company’s objective is to meet the final capital entitlementof the Zero Dividend Preference shares and to provideOrdinary shareholders with a regular quarterly income andcapital growth.

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

• The Company will not invest more than 10% of its GrossAssets in any one individual investment (excludingGovernment bonds and liquidity funds) at the time ofacquisition, unless invested in a diversified fund where thelimit is 15%.

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

• 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 may invest, with the approval of the Board,in derivative instruments for the purposes of efficientportfolio management and for generating income.

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 ended 28th February 2014, the Companyproduced a portfolio return of 18.4%, compared with thereturn on the Company’s benchmark index of 12.0%. At28th February 2014, the value of the Company’s investmentportfolio was £142.5 million. The Investment Managers’Report on pages 5 to 8 includes a review of developmentsduring the year as well as information on investment activitywithin the Company’s portfolio.

Total Return, Revenue and Dividends Gross total return amounted to £24.3 million (2013:£18.5 million) and net total return after deducting interest,administrative expenses and taxation, amounted to£18.4 million (2013: £13.0 million). Distributable income forthe year amounted to £4.7 million (2013: £4.1 million).

The Directors declared a fourth quarterly dividend of 1.625pper Ordinary share which was paid on 25th April 2014 toshareholders on the register at close of business on 4th April2014. This, when added to the other three quarterly dividendspaid during the year, made a total dividend for the year of6.125p (2013: 5.70p) per Ordinary share which cost£4,136,000 (2013: £3,848,000). The year end revenue reserveafter allowing for these dividends amounts to £2,366,000(2013: £1,775,000). In accordance with the accounting policyof the Company, the fourth quarterly dividend will bereflected in the accounts for the year ending 28th February2015.

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 This is the most important KPI by which performance isjudged.

Strategic Report continued



Performance Relative to BenchmarkFigures have been rebased to 100 since inception

Source: Morningstar/MSCI.

JPMorgan Income & Capital – Unit price.

JPMorgan Income & Capital – Unit net asset value.

The composite benchmark index is represented by the dotted horizontal line.The Company’s benchmark is a composite of 90% FTSE 350 index (excludingInvestment Trusts) and 10%Barclays Capital Global Corporate Bond Indexin sterling terms. Prior to 1st March 2010, the benchmark was a compositecomprising 90% FTSE 350 Index (excluding investment trusts) and 10% MerrillLynch 5-10 year UK Sterling Corporate Index for bonds.

Performance since InceptionFigures have been rebased to 100 since inception


JPMorgan Income & Capital – Unit price.

JPMorgan Income & Capital – Unit net asset value.

Benchmark.

• Share price discount/premium to net asset value (‘NAV’)per share The Board recognises that the tendency of investment trustshares to trade at a discount can be a key disadvantage that

can discourage investors. The Board has approval fromshareholders for a share repurchase programme that mayassist to address imbalances in supply of and demand forthe Company’s shares within the market and therebyreduce the volatility and absolute level of the share pricediscount or premium to NAV per share at which theCompany’s shares trade. The Ordinary shares tradedbetween a discount of 5.8% and 16.5% and the ZDP sharestraded between a premium of 7.4% and 11.1%.

Premium (+)/Discount (–)

Source: Datastream.

JPMorgan Income & Capital – Ord (Dis)/Prem.

JPMorgan Income & Capital – Unit (Dis)/Prem

JPMorgan Income & Capital – ZDPs (Dis)/Prem.

• Ongoing chargesThe ongoing charges represent the Company’s managementfee and all other operating expenses, excluding financecosts, expressed as a percentage of the average of the dailynet assets during the year. The ongoing charges for the yearended 28th February 2014 were 1.17% (2013: 1.23%). TheBoard reviews each year an analysis which shows acomparison of the Company’s ongoing charges and its mainexpenses with those of its peers.

Share CapitalThe Directors have authority on behalf of the Company torepurchase shares in the market for cancellation. However, noshares have been issued nor repurchased during the year(2013: nil) or since the year end.

Resolutions to renew the authority to repurchase shares andissue new shares will be put to shareholders at the forthcoming

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Annual General Meeting. More details are given on pages 23and 24 and the full text of the resolutions is set out in theNotice of Meeting on pages 58 and 59.

Details of the share capital structure of the Company can befound on page 15.

Principal RisksWith the assistance of the Manager, JP Morgan AssetManagement (UK) Limited (‘JPMAM’) the Board has drawn upa risk matrix, which identifies the key risks to the Company.These key risks fall broadly into the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example asset allocation or the level ofgearing, may lead to underperformance against theCompany’s benchmark index and peer companies whichcan result in the Company’s shares trading on a widerdiscount. The Board manages these risks by diversificationof investments through its investment restrictions andguidelines, which are monitored and reported on. JPMAMprovides the Directors with timely and accuratemanagement information, including performance data andattribution analysis, revenue estimates, liquidity reportsand shareholder analyses. The Board monitors theimplementation and results of the investment process withrepresentatives of the Investment Manager, who attend allBoard meetings, and reviews data which show statisticalmeasures of the Company’s risk profile. The InvestmentManager is free to employ the Company’s gearing tactically,within a strategic range set by the Board. The Board holds aseparate meeting devoted to strategy each year.

• Market: The Company is inevitably exposed to movement instockmarkets, both as a consequence of macro-economictrends and developments at the particular companies inwhich it holds securities. The Board considers assetallocation, stock selection and levels of gearing on a regularbasis and has set investment restrictions and guidelines,which are monitored and reported on by JPMAM. TheBoard monitors the implementation and results of theinvestment process with the Manager.

• Accounting, Legal and Regulatory: In order to qualify as aninvestment trust, the Company must comply withSection 1158 (‘Section 1158’) of the Corporation Tax Act2010. Details of the Company’s approval are given under‘Business of the Company’ above. Were the Company tobreach Section 1158, it might lose investment trust status

and, as a consequence, gains within the Company’sportfolio could be subject to Capital Gains Tax. TheSection 1158 qualification criteria are continually monitoredby JPMAM and the results reported to the Board eachmonth. The Company must also comply with the provisionsof the Companies Acts 2006 and, since its shares are listedon the London Stock Exchange, the UKLA Listing Rules.A breach of the Companies Act could result in the Companyand/or the Directors being fined or the subject of criminalproceedings. Breach of the UKLA Listing Rules could resultin the Company’s shares being suspended from listingwhich in turn would breach Section 1158. The Board relieson the services of its Company Secretary, JPMAM, to ensurecompliance with the Companies Act 2006 and the UKLAListing Rules.

• Corporate Governance and Shareholder Relations: Detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out on pages 24 to 27.

• Operational: Disruption to, or failure of, JPMAM’saccounting, dealing or payments systems or the custodian’srecords could prevent accurate reporting and monitoring ofthe Company’s financial position. Details of how the Boardmonitors the services provided by JPMAM and itsassociates and the key elements designed to provideeffective internal control are included on pages 27 and 28.

• Going concern: Pursuant to the Sharman Report, Boards arenow advised to consider going concern as a potential risk,whether or not there is an apparent issue arising in relationthereto. Going concern is considered rigorously on anongoing basis and the Board’s statement on going concernis detailed on page 22.

• Financial: The financial risks faced by the Company includemarket price risk, interest rate risk, liquidity risk and creditrisk. Bank counterparties are subject to daily credit analysisby the Manager. In addition the Board receives regularreports on the Manager’s monitoring and mitigation ofcredit risks on share transactions carried out by theCompany. Further details are disclosed in note 23 onpages 53 to 56.

Board Diversity

At 28th February 2014, there were four male Directors and onefemale Director on the Board. When recruiting a new Director,

Strategic Report continuedBusiness Review continued



the Board’s policy is to appoint individuals on merit. Diversity isimportant in bringing in an appropriate range of skills andexperience to the Board.

Employees, Social, Community and Human Rights Issues

The Company has a management contract with JPMAM. It hasno employees and all of its Directors are non-executive. Theday to day activities are carried out by third parties. There aretherefore no disclosures to be made in respect of employees.The Board notes the JPMAM policy statements in respect ofSocial, Community and Environmental and Human Rightsissues, as highlighted in italics:

Social, Environmental and Human Rights

JPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interestsof 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 stock

selection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request.

Greenhouse Gas Emissions

The Company is managed by JPMAM. It has no employees andall of its Directors are non-executive, the day to day activitiesbeing carried out by third parties. There are therefore nodisclosures to be made in respect of employees. The Companyitself has no premises, consumes no electricity, gas or dieselfuel and consequently does not have a measurable carbonfootprint. The Company’s manager, JPMAM, is a signatory tothe Carbon Disclosure Project and JPMorgan Chase is asignatory to the Equator Principles on managing social andenvironmental risk in project finance.

Future Developments The future development of the Company depends on thesuccess of the Company’s investment strategy. The InvestmentManagers discuss the outlook in their report on pages 5 to 8.

By order of the Board Divya Amin, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 20th May 2014



Sir Laurence Magnus (Chairman of the Board and Nomination Committee)

A Director since 2008.

Last reappointed to the Board: 2011.

He is a Senior Adviser at Evercore Partners, a corporate finance advisory business. He isa non-executive director of Pantheon International Participations plc, Fidelity JapaneseValues plc and The Cayenne Trust plc. He is Chairman of English Heritage and a trusteeof The Allchurches Trust, The Windsor Leadership Trust and The Landmark Trust. He isa director of Aggregated Micro Power Holdings Plc. He was formerly an executivemanaging director of investment banking at Donaldson, Lufkin & Jenrette and itssuccessor company Credit Suisse First Boston. He was Chairman of Lexicon Partnersimmediately prior to its merger with Evercore Partners in 2011.

Shared directorships with other Directors: None.

Shareholding in Company: 47,268 units.

Roderick Collins



He has had extensive business and investment management experience, notably aschief executive of the private banking activities of Matheson & Co. Limited between 1985and 2000. He is a director of Solent Systematic Investment Strategies Limited. He sits onvarious investment committees.


Shareholding in Company: 11,818 Units.

Sian Hansen

A Director since February 2013.


Sian Hansen is the Chief Operating Officer of The Legatum Institute, a public policyorganisation focusing on promoting policies which foster free and prosperous societiesaround the world. She is responsible for the Legatum Institute’s operations andhigh-level strategic leadership. Previously Sian spent seven years as the ManagingDirector of the UK’s leading think tank Policy Exchange; an educational charityencouraging discourse on domestic policy development. Sian is a Non-ExecutiveDirector of the Centre for Entrepreneurs, a Commissioner of The Women’s RefugeeCommission (USA) and a trustee of The Prospero World Charitable Trust UK. She wasformerly Head of Sales for Asian Equities at Société Générale. Prior to this she wasan equity analyst and broker with Enskilda Securities in Europe.


Shareholding in Company: 5,000 Ordinary shares (acquired since the year end).

GovernanceBoard of Directors



All Directors are members of the Audit and Nomination Committees and are consideredindependent of the Manager.

Richard Hills



Richard Hills has substantial experience of investment trust and investment companyboards and is currently the Senior Independent Director of Henderson Global Trust plcand Phaunos Timber Fund Ltd. He is also a director of Strategic Equity Capital plc wherehe will take over as Chairman later this year. He chairs the Aztec Group Ltd, one of thelargest Channel Islands administrators of private equity funds and is on the board ofCinven Ltd, a major European private equity house and 3 Legs Resource a company thatis exploring for shale gas in the Baltic Basin region of Poland.


Shareholding in Company: 50,000 Ordinary shares.

James West (Chairman of the Audit Committee and Senior Independent Director)



Mr West FCA is a former chief executive of Lazard Asset Management and a managingdirector of Lazard Brothers, prior to which he was managing director of GlobeInvestment Trust plc. He is currently Chairman of New City High Yield Fund Ltd. He is anon-executive Director of British Assets Trust plc, Aberdeen Smaller Companies HighIncome Trust plc, and a director of other companies.


Shareholding in Company: 35,663 Ordinary shares.



The Directors present their report and the audited financialstatements for the year ended 28th February 2014. A numberof disclosures previously incorporated in the Directors’ Reportare now included in the Strategic Review.

Management of the Company

The Manager and Secretary is JPMAM. JPMAM is a whollyowned subsidiary of JPMorgan Chase Bank which, throughother subsidiaries, also provides banking, dealing and custodialservices 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 supportthat the Company receives from JPMAM. The latest evaluationof the Manager was carried out in February 2014. As a resultof the evaluation process, the Board is satisfied that thecontinuing appointment of the Manager is in the interests ofshareholders as a whole. In arriving at this view, the Boardconsidered the investment process and performance of theManager and the support that the Company receives fromJPMAM.

Management Fee

JPMAM is employed under a contract which is subject tosix months’ notice of termination. If the Company wishes toterminate the contract on less than six months’ notice, thebalance of the six months’ remuneration is payable by wayof compensation.

The annual management fee is charged at 0.85% per annum ofthe value of the Company’s net assets, excluding investments infunds on which JPMAM charges a management fee, calculatedand paid monthly.

Going Concern

The Directors believe that having considered the Company’sinvestment objective (see page 16), risk management policies(see page 18), capital management policies and procedures(see page 16), nature of the portfolio and expenditureprojections, that the Company has adequate resources, anappropriate financial structure and suitable managementarrangements in place to continue in operational existence forthe foreseeable future. For these reasons, they consider thatthere is reasonable evidence to continue to adopt the goingconcern basis in preparing the accounts.

Directors

The Directors of the Company who held office at the end of theyear are described on pages 20 and 21.

Details of Directors’ beneficial shareholdings may be found inthe Directors’ Remuneration Report on pages 30 and 31. Sincethe year end, Sian Hansen purchased 5,000 Ordinary shares.

Sir Laurence Magnus and Roderick Collins retire by rotationand, being eligible, offer themselves for reappointment at theforthcoming Annual General Meeting.

The Nomination Committee, having considered the Directors’qualifications, performance and contribution to the Board andits Committees, confirms that each Director continues to beeffective and demonstrates commitment to the role. The Boardrecommends to shareholders that those Directors standing forreappointment be reappointed.

Director Indemnification and Insurance

As permitted by the Company’s Articles of Association, theDirectors have the benefit of an indemnity which is aqualifying third party indemnity, as defined by Section 234of the Companies Act 2006. The indemnities were in placeduring the year 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. There is nocover against fraudulent or dishonest actions.

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 2006) ofwhich the Company’s auditors are unaware, and

(b) each of the Directors has taken all the steps that he oughtto have taken as a Director in order to make himself awareof any relevant audit information (as defined) and toestablish that the Company’s auditors are aware of thatinformation.

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

Governance continuedDirectors’ Report



Independent Auditors

PricewaterhouseCoopers LLP have expressed their willingnessto continue in office as auditors to the Company and aresolution proposing their re-appointment and to authorise theDirectors to agree their remuneration for the ensuing year willbe put to shareholders at the forthcoming Annual GeneralMeeting.

Section 992 Companies Act 2006

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

Capital StructureThe Company’s capital structure is summarised on page 15.

Voting Rights in the Company’s sharesAs at 16th May 2014 (being the latest business day prior to thepublication of this report), the Company’s issued share capitalconsists of 68,056,782 Ordinary Shares and 46,362,200 ZeroDividend Preference Shares carrying one vote each. Therefore,the total voting rights in the Company are 114,418,982.

Notifiable Share Interests

At the year-end date and the date of this report the followinghad declared a notifiable interest in the Company’s votingrights:

Ordinary shares Number of Shareholders shares held %

Rathbone Brothers Plc 9,512,733 14.1JPMorgan Chase & Co1,2 5,655,942 8.4Investec Wealth & Investment Limited 1,154,176 1.7

1Held on behalf of JPMAM Investment Account, ISA and SIPP participants.2Non-beneficial.

Zero Dividend Preference shares Number of Shareholders shares held %

Investec Wealth & Investment Limited 3,395,772 7.4Rathbone Brothers Plc 812,616 1.8

The Company is also aware that approximately 32.4% of theCompany’s total voting rights are held by individuals throughsavings products managed by JPMAM and registered in thename of Chase Nominees Limited. If those voting rights are notexercised by the beneficial holders, in accordance with theterms and conditions of the savings products, under certain

circumstances JPMAM has the right to exercise those votingrights. That right is subject to certain limits and restrictions andfalls away at the conclusion of the relevant general meeting.

Annual General Meeting

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

(i) Authority to allot relevant Securities (resolution 7) The Directors will seek authority at the Annual General Meetingto issue new shares equivalent to 5% of the present issuedshare capital. This authority will remain in effect until theAnnual General Meeting in 2015 unless renewed at an earliergeneral meeting. The full text of the resolution is set out in theNotice of Meeting on page 58.

It is advantageous for the Company to be able to issue newshares to investors when the Directors consider that it is inthe best interests of shareholders to do so. As such issues areonly made at prices greater than the NAV, they increase theassets underlying each share and spread the Company’sadministrative expenses, other than the management feewhich is charged on the value of the Company’s assets, overa greater number of shares.

(ii) Disapplication of pre-emption rights (resolution 8) Resolution 8 seeks authority to disapply statutory pre-emptionrights on any issues of new shares under (i) above. This avoidsthe legal requirement to offer them pro rata to allshareholders. The full text of the resolution is set out in theNotice of Meeting on page 58.

(iii) Authority to repurchase the Company’s shares (resolution 9) A resolution will be proposed at the Annual General Meetingthat the Company be authorised to purchase in the market up to14.99% of the Company’s issued share capital as at the date ofthe passing of this resolution using its realised capital reserves.

The decision as to whether the Company repurchases anyshares will be at the discretion of the Board and purchases willbe made in the market and at prices below the prevailing netasset value per share. Under the rules of the London StockExchange, the maximum price that may be paid on a purchaseby a company of its shares under a general authority is 105% ofthe average of the middle market quotations of the shares forthe five business days immediately before the day on which thepurchase is made. The minimum price that the Company willpay for a share will be one pence (the nominal value of eachshare). The Company will utilise the authority to purchase



shares on an ad hoc basis by either a single purchase or a seriesof purchases as and when market conditions are appropriate.

The authority to purchase shares will last until the AnnualGeneral Meeting in 2015 or until the whole of the 14.99% hasbeen acquired, whichever is the earlier. The authority may berenewed by shareholders at any time at a general meeting.

Recommendation (resolutions 7 to 9)

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. TheDirectors unanimously recommended that shareholders votein favour of the resolutions as they intend to do in respect oftheir own beneficial holdings.

Corporate Governance Compliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statementof Directors’ Responsibilities on page 32, indicates how theCompany has applied the principles of good governance ofthe 2012 UK Corporate Governance Code and the AIC’s Codeof Corporate Governance (the ‘AIC Code’), which complementsthe UK Corporate Governance Code and provides a frameworkof best practice for investment trusts.

The Board is responsible for corporate governance andconsiders that the Company has complied with the bestpractice provisions of the UK Corporate Governance Code andthe AIC Code throughout the period under 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, administration,and 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, following the introduction of theBribery Act 2010, has adopted appropriate proceduresdesigned to prevent bribery. It confirms that the procedureshave operated effectively during the year under review.

The Board meets on at least five occasions 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 if necessary and at the Company’s expense.This is in addition to the access that every Director has to theadvice and services of the Company Secretary, JPMAM, whichis responsible to the Board for ensuring that Board proceduresare followed and for compliance with applicable rules andregulations.

Board Composition The Board, chaired by Sir Laurence Magnus, currently consistsof five non-executive Directors, all of whom are regarded bythe Board as independent of the Company’s Manager andCompany Secretary. The Directors have a breadth ofinvestment, business and financial skills and experiencerelevant to the Company’s business and brief biographicaldetails of each Director are set out on pages 20 and 21. Therehave been no changes to the Chairman’s other significantcommitments during the year under review, except thathe retired as Deputy Chairman of the National Trust andbecame Chairman of English Heritage.

A review of Board composition and balance is included as partof the annual performance evaluation of the Board, details ofwhich may be found below. The Board has appointed JamesWest as Senior Independent Director. He is available toshareholders if they have concerns that cannot be resolvedthrough discussion with the Chairman.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be reappointed byshareholders. Thereafter, a Director’s appointment runs for a

Governance continuedDirectors’ Report continued



term of three years. In the light of the performance evaluationcarried out each year, the Board will decide, when the termexpires, whether it is appropriate for the Director, if he or sheso wishes, to seek an additional term. A Director’s continuingappointment is subject to reappointment by shareholders onretirement by rotation in accordance with the Company’sArticles of Association.

The Board does not believe that length of service in itselfnecessarily disqualifies a Director from seeking re-appointmentbut, when making a recommendation, the Board will takeinto account the ongoing requirements of the UK CorporateGovernance Code, including the need to refresh the Board andits Committees.

The Company’s Articles of Association require that Directorsstand for re-election at least every three years.

The Board recommends the reappointment of Sir LaurenceMagnus and Roderick Collins following a performance review,conducted by the Nomination Committee, which concludedthat they continued to add value to the Board.

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 Annual General Meeting.

Induction and Training

On appointment, the Manager and Company Secretary provideall Directors with induction training. Thereafter, regularbriefings are provided on changes in law and regulatoryrequirements that affect the Company and the Directors.Directors are encouraged to attend industry and otherseminars covering issues and developments relevant toinvestment trust companies. Regular reviews of the Directors’training needs are carried out by the Chairman by means of theevaluation process described below.

Meetings and Committees

The Board delegates certain responsibilities and functions toCommittees. Details of membership of Committees are shownwith the Directors’ profiles on pages 20 and 21.

The table below details the number of Board, Audit Committeeand Nomination Committee meetings attended by eachDirector. During the year there were five Board meetings,including a private meeting of the Directors to evaluate the

Manager and one meeting devoted to strategy, two AuditCommittee meetings and one Nomination Committee meeting.

Audit NominationBoard Committee Committee

Meetings Meetings MeetingsDirector Attended Attended Attended

Roderick Collins 5 2 1Sian Hansen1 5 2 1Antony Hichens2 2 1 —Richard Hills 5 2 1Sir Laurence Magnus 5 2 1James West 5 2 11Appointed 1st February 2013.2Resigned 2nd July 2013.

Board Committees

Nomination Committee The Nomination Committee, chaired by Sir Laurence Magnus,consists of all of the Directors and meets at least annually toensure that the Board has an appropriate balance of skills tocarry out its fiduciary duties and to select and propose suitablecandidates when necessary for appointment. The appointmentprocess takes account of the benefits of all aspects of diversity,including gender.

The Board’s policy on diversity, including gender, is to takeaccount of the benefits of these during the appointmentprocess. However, the Board remains committed to appointingthe most appropriate candidate, regardless of gender or otherforms of diversity. Therefore, no targets have been set againstwhich to report. There were no new directors appointed in theyear.

The Committee undertakes an annual performance evaluationof the Board, its committees and individual Directors, to ensurethat all its members have devoted sufficient time andcontributed adequately to the work of the Board. The SeniorIndependent Director leads the evaluation of the Chairman’sperformance. In the light of these evaluations, the Committeemakes recommendations to the Board concerning thereappointment by shareholders of any Director under the‘retirement by rotation’ provisions in the Company’s Articlesof Association. The Committee also reviews Directors’ fees andmakes recommendations to the Board as and when required inrelation to remuneration policy.



On an annual basis each Director submits a list of potentialconflicts of interest for approval. These are consideredcarefully, taking into account the circumstances surroundingthem and, if considered appropriate, are approved for a periodof one year.

Audit Committee The Audit Committee, chaired by James West, and comprisingall the Directors, meets at least twice each year. The membersof the Audit Committee consider that they have the requisiteskills and experience to fulfil the responsibilities of theCommittee.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the UK Corporate GovernanceCode.

During its review of the Company’s financial statements for theyear ended 28th February 2014, the Audit Committeeconsidered the following significant issues, including thosecommunicated by the Auditors during their reporting:

Significant issue How the issue was addressed

The valuation of investments is undertaken inaccordance with the accounting policies, disclosed innote 1 to the accounts on page 40. 100% of theportfolio can be verified against daily publishedprices. The Board monitors significant movements inthe underlying portfolio.

The recognition of investment income is undertakenin accordance with accounting policy note 1(d) to theaccounts on page 40. The Board regularly reviewssubjective elements of income such as specialdividends and agrees their accounting treatment.

Approval for the Company as an investment trustunder Sections 1158 and 1159 for financial yearscommencing on or after 1st October 2012 has beenobtained and ongoing compliance with the eligibilitycriteria is monitored on a regular basis.

The Audit Committee was made fully aware of any significantfinancial reporting issues and judgements made in connectionwith the preparation of the financial statements.

As a result of the work performed, the Committee hasconcluded that the Annual Report for the year ended28th February 2014, taken as a whole, is fair, balanced and

understandable and provides the information necessary forshareholders to assess the Company’s performance, businessmodel and strategy, and has reported on these findings to theBoard. The Board’s conclusions in this respect are set out inthe Statement of Directors’ Responsibilities on page 32.

The Audit Committee also examines the effectiveness of theCompany’s internal control systems, receives information fromthe Manager’s Compliance department and also reviews thescope and results of the external audit, its cost effectivenessand the independence and objectivity of the external auditors.In the Directors’ opinion the Auditors are independent.

The Audit Committee also has a primary responsibility formaking recommendations to the Board on the reappointmentand removal of external Auditors. Representatives of theCompany’s Auditors attended the Audit Committee meeting atwhich the draft Annual Report & Accounts were consideredand also engage with Directors as and when required. Havingreviewed the performance of the external Auditors, includingassessing the quality of work, timing of communications and workwith JPMAM, the Committee considered it appropriate torecommend their reappointment. The Board supported thisrecommendation which will be put to shareholders at theforthcoming Annual General Meeting. The current audit firm,PricewaterhouseCoopers LLP, has audited the Company’sfinancial statements since its launch. The Company’s year ended28th February 2014 is the current Audit Partner’s fourth of a fiveyear maximum term.

Details of remuneration paid to the external Auditors are givenin note 5 on page 43.

Terms of ReferenceBoth the Nomination Committee and the Audit Committee havewritten terms of reference which define clearly theirresponsibilities. Copies are available for inspection on requestat the Company’s registered office and at the Annual GeneralMeeting.

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 formally to shareholders twice a year by way of theAnnual Report and Accounts and the Half Year Report. This issupplemented by daily publication, through the London StockExchange, of the net asset value of the Company’s shares.

Valuation, existenceand ownership ofinvestments

Recognition ofinvestment income

Compliance withSections 1158 and1159




All shareholders have the opportunity, and are encouraged, toattend the Company’s Annual General Meeting, at which theDirectors and representatives of the Manager are available inperson to meet shareholders and answer their questions, and apresentation is given by the Investment Manager, who reviewsthe Company’s performance. During the year the Company’sbrokers, and representatives of the Manager hold regulardiscussions with larger shareholders and make the Board fullyaware of their views. The Chairman and Directors makethemselves available as and when required to support thesemeetings and to address shareholder queries. The Directorsmay be contacted through the Company Secretary whosedetails are shown on page 65.

The Company’s Annual Report and Accounts is published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders who cannot attendthe meeting but wish to raise questions in advance of themeeting are encouraged to write to the Company Secretary atthe address shown on page 65.

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

Miscellaneous Information

The rules concerning the appointment and replacement ofDirectors, amendment of the Articles of Association andpowers to issue or buy back the Company’s shares arecontained in the Articles of Association of the Company andthe Companies Act 2006.

There are no restrictions concerning the transfer of securitiesin the Company; no special rights with regard to controlattached to securities; no agreements between holders ofsecurities regarding their transfer known to the Company;no agreements which the Company is party to that affect itscontrol following a takeover bid; and no agreements betweenthe Company and its directors concerning compensation forloss of office.

Risk Management and Internal Control

The UK Corporate Governance Code requires the Directors, atleast annually, to review the effectiveness of the Company’ssystem of internal control and to report to shareholders thatthey have done so. This encompasses a review of all controls,which the Board has identified as including business, financial,operational, compliance and risk management controls.

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 provided byJPMAM 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 page 18). This processhas been in place for the year under review and up to the dateof the approval of the Annual Report & Accounts, and it accordswith the Turnbull guidance. The Company does not have aninternal audit function of its own, but relies on the internalaudit department of JPMAM, and the Board keeps thisarrangement under review. The key elements designed toprovide effective internal control are as follows:

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

Management Agreement – Appointment of a manager andcustodian regulated by the Financial Conduct Authority (FCA),whose responsibilities are clearly defined in a writtenagreement.

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 FCA 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,keeps under review the effectiveness of the Company’s system




of internal control by monitoring the operation of the keyoperating controls of the Manager and its associates as follows:

• the Board, through the Audit Committee, reviews the termsof the management agreement and receives regularreports from JPMAM’s Compliance department;

• the Board reviews the report on the internal controls andoperations of its custodian, JPMorgan Chase Bank, which isitself independently reviewed; and

• the Directors review every six months an independentreport on the internal controls and the operations ofJPMAM.

By means of the procedures set out above, the Board confirmsthat it has reviewed the effectiveness of the Company’s systemof internal control for the year ended 28th February 2014, andto the date of approval of this Annual Report and Accounts.

During the course of its review of the system of internal control,the Board had not identified nor 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 extract of JPMAM’s policystatements on corporate governance, voting policy and socialand environmental issues, which has been reviewed and notedby the Board. Details on social and environmental issues areincluded in the Strategic Report on page 19.

“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 It is the policy of JPMAM to vote in a prudent and diligent manner, basedexclusively on our reasonable judgement of what will best serve thefinancial interests of our clients. So far as is practicable, we will vote at allof the meetings called by companies in which we are invested.

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 the Stewardship Code for its UK investments andsupports the principles as best practice elsewhere. We believe thatregular contact with the companies in which we invest is central to ourinvestment process and we also recognise the importance of being an‘active’ owner on behalf of our clients.

JPMAM’s Voting Policy and Corporate Governance Guidelinesare available on request from the Company Secretary or canbe downloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/Governance,which also sets out its approach to the seven principles of theFRC Stewardship Code, its policy relating to conflicts of interestand its detailed voting record.

By order of the Board Divya Amin, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary 20th May 2014



The Board presents the Directors’ Remuneration Report for theyear ended 28th February 2014, which has been prepared inaccordance with the requirements of Section 421 (as amended)of the Companies Act 2006.

The law requires the Company’s Auditor to audit certain of thedisclosures provided. Where disclosures have been audited,they are indicated as such. The Auditor’s opinion is included intheir report on pages 33 to 35.

As all of the Directors are non-executive, the Board has notestablished a Remuneration Committee. Instead, theNomination Committee reviews Directors’ fees on a regularbasis and makes recommendations to the Board as and whenappropriate.

Directors’ Remuneration Policy

The Directors’ Remuneration Policy is subject to a triennialbinding vote and therefore an ordinary resolution to approvethis report will be put to shareholders at the forthcomingAnnual General Meeting. The policy subject to the vote is setout in full below and is currently in force.

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 other Directors,reflecting the greater time commitment involved in fulfillingthose roles.

Reviews are based on information provided by the Manager,JPMAM, and industry research carried out by third parties onthe level of fees paid to the directors of the Company’s peersand within the investment trust industry generally. Theinvolvement of remuneration consultants has not beendeemed necessary as part of this review. The Company has noChief Executive Officer and no employees and therefore noconsultation of employees is required. There is no employeecomparative data to provide in relation to the setting of theremuneration policy for Directors.

All of the Directors are non-executive. There are noperformance-related elements to their fees and the Companydoes not operate any type of incentive, share scheme, award orpension scheme and therefore no Directors receive bonus

payments or pension contributions from the Company or holdoptions to acquire shares in the Company. Directors are notgranted exit payments and are not provided withcompensation for loss of office. No other payments are madeto Directors, other than the reimbursement of reasonableout-of-pocket expenses incurred in attending the Company’sbusiness.

In the year under review, Directors’ fees were paid at thefollowing rates: Chairman £33,000; Chairman of the AuditCommittee £25,000; and other Directors £22,000.

With effect from 1st March 2014, fees have been increased to£27,500 for the Audit Committee Chairman.

The Company’s Articles of Association stipulate that aggregatefees must not exceed £175,000 per annum. Any increase in thismaximum aggregate amount requires both Board andshareholder approval.

The Company has not sought shareholder views on itsremuneration policy. The Nomination Committee will considerany comments received from shareholders on remunerationpolicy on an ongoing basis and will take account of any suchviews.

The Directors do not have service contracts with the Company.The terms and conditions of Directors’ appointments are setout in formal letters of appointment which are available forreview at the Company’s Annual General Meeting and theCompany’s registered office. Details of the Board’s policy ontenure are set out on page 24.

The Company’s Remuneration Policy applies to new Directorsas well.

There have been no changes to the policy during the yearended 28th February 2014 and no changes are proposed forthe year ending 28th February 2015.

Directors’ Remuneration Policy ImplementationReport

The Directors’ Remuneration Policy Implementation Report,which provides details of how the Directors’ remunerationpolicy has been implemented is subject to an annual advisoryvote and therefore an ordinary resolution to approve thisreport will be put to shareholders at the forthcoming AnnualGeneral Meeting.

Directors’ Remuneration Report



At the Annual General Meeting held on 2nd July 2013, ofvotes cast, 99.8% of votes cast were in favour of (or granteddiscretion to the Chairman who voted in favour of) theremuneration report and 0.2% voted against. Abstentionswere received from less than 0.1% of the votes cast.

Details of voting on both the Remuneration Policy and theDirectors’ Remuneration Policy Implementation Report fromthe 2014 Annual General Meeting will be given in the annualreport for the year ending 28th February 2015. Thereafter, thereporting will be annually for the advisory vote on theRemuneration Policy Implementation Report and trienniallyfor the Remuneration Policy.

Details of how the Company’s remuneration policy has beenimplemented are given below. No advice from remunerationconsultants was received during the year under review.

Single total figure of remuneration

The single total figure of remuneration for the Board as a wholefor the year ended 28th February 2014 was £132,502. Thesingle total figure of remuneration for each Director is detailedbelow, together with the comparative figure for the prior year.

Single total figure table1

Total amount ofsalary and fees

2014 2013

Sir Laurence Magnus £33,000 £30,000Roderick Collins £22,000 £20,000Sian Hansen2 £22,000 £1,833Antony Hichens3 £8,502 £22,083Richard Hills £22,000 £20,000James West £25,000 £20,417

Total £132,502 £114,333

1Audited information. Other columns have been omitted because no payments of anyother type were made or are applicable.22013 figure is restated from £1,667 to £1,833 due to under provision.3Antony Hichens retired 2nd July 2013.

Remuneration for the Chairman over the five years ended28th February 2014

Year ended28th February Fees

2014 £33,0002013 £30,0002012 £30,0002011 £27,5002010 £27,500

Directors’ Shareholdings1

There are no requirements pursuant to the Company’s Articlesof Association for the Directors to own shares in the Company.The Directors’ beneficial shareholdings are detailed below.

Zero Dividend 28th February 28th FebruaryPreference shares 2014 2013

Roderick Collins _________ — Sian Hansen2 _________ —Antony Hichens3 _________ 199,500Richard Hills _________ — Sir Laurence Magnus _________ — James West _________ —

28th February 28th FebruaryOrdinary shares 2014 2013

Roderick Collins _________ — Sian Hansen2 _________ —Antony Hichens3 _________ 50,000 Richard Hills 50,000 50,000 Sir Laurence Magnus _________ — James West 35,663 35,663

Governance continuedDirectors’ Remuneration Report continued



28th February 28th FebruaryUnits 2014 2013

Roderick Collins 11,818 11,818 Sian Hansen2 _________ —Antony Hichens3 _________ — Richard Hills _________ — Sir Laurence Magnus 47,268 47,268 James West _________ —

1Audited information.2Sian Hansen acquired 5,000 ordinary shares in the Company after the year end.3Antony Hichens retired 2nd July 2013.

The Directors have no other share interests or share options in the Company and noother share schemes are available.

A graph showing the Company’s Unit price total returncompared with its composite benchmark index for the fiveyears ended 28th February 2014 is shown below. Thebenchmark is a composite comprising 90% FTSE 350 Index(excluding investment trusts) and 10% Barclays Capital GlobalCorporate Bond Index in sterling terms. The Board believes thisbenchmark is the most representative comparator for theCompany given its objectives.

Unit price and benchmark total returnperformance for the five years ended28th February 2014


Unit price total return.

Benchmark total return.

A table showing actual expenditure by the Company onremuneration and distributions to shareholders for the yearand the prior year is below:

Expenditure by the Company on remuneration and distributions toshareholders

Year ended 28th February

2014 2013

Remuneration paid to all Directors £132,502 £114,333

Distribution to shareholders— by way of dividend £4,136,000 £3,848,000— by way of share repurchases £nil £nil

By order of the Board Sir Laurence MagnusChairman

20th May 2014

100

125

150

175

200

225

250

275

201420132012201120102009



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 ,taken as awhole, the annual report and accounts are fair, balanced andunderstandable, provide the information necessary forshareholders to assess the Company’s performance, businessmodel and strategy and that they give a true and fair view ofthe state of affairs of the Company and of the net return andloss of the Company for that period. In order to provide theseconfirmations, and in preparing these financial statements, theDirectors 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.

and the Directors confirm that they have done so.

The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any timethe financial position of the Company and to enable them toensure 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 fraud andother irregularities.

The accounts are published on thewww.jpmincomeandcapital.co.uk website, which is maintainedby the Company’s Manager, JPMorgan Asset Management (UK)Limited (‘JPMAM’). The maintenance and integrity of thewebsite maintained by JPMAM is, so far as it relates to theCompany, the responsibility of JPMAM. The work carried outby the auditors does not involve consideration of themaintenance and integrity of this website and, accordingly, theauditors accept no responsibility for any changes that haveoccurred to the accounts since they were initially presentedon the website. The accounts are prepared in accordance withUK legislation, which may differ from legislation in otherjurisdictions.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Strategic Report, 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 beenprepared in accordance with United Kingdom GenerallyAccepted Accounting Practice (United Kingdom AccountingStandards and applicable law), give a true and fair view of theassets, liabilities, financial position and net return or loss of theCompany.

The Strategic Report and Directors’ Report includes a fairreview of the development and performance of the businessand the position of the Company, together with a description ofthe principal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the annual reportand accounts taken as a whole are fair, balanced andunderstandable and provide the information necessary forshareholders to assess the strategy and business model of theCompany.

For and on behalf of the Board Sir Laurence MagnusChairman

20th May 2014

Governance continuedStatement of Directors’ Responsibilities



Report on the financial statements

Our opinion

In our opinion the financial statements, defined below:

• give a true and fair view of the state of the Company’saffairs as at 28th February 2014 and of its net return andcash flows 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.

This opinion is to be read in the context of what we say below.

What we have audited

The financial statements, which are prepared by JPMorganIncome & Capital Trust plc (the ‘Company’), comprise:

• the balance sheet as at 28th February 2014;

• the income statement for the year then ended;

• the reconciliation of movements in shareholders’ fundsand the cash flow statement for the year then ended; and

• the notes to the financial statements, which include asummary of significant accounting policies and otherexplanatory information.

The financial reporting framework that has been applied intheir preparation comprises applicable law and UnitedKingdom Accounting Standards (United Kingdom GenerallyAccepted Accounting Practice).

What an audit of financial statements involves

We conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).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 accounting policies are appropriate to theCompany’s circumstances and have been consistentlyapplied and adequately disclosed;

• the reasonableness of significant accounting estimatesmade by the Directors; and

• the overall presentation of the financial statements.

In addition, we read all the financial and non-financialinformation in the Report and Accounts (the ‘Annual Report’)to identify material inconsistencies with the audited financialstatements and to identify any information that is apparentlymaterially incorrect based on, or materially inconsistent with,the knowledge acquired by us in the course of performing theaudit. If we become aware of any apparent materialmisstatements or inconsistencies we consider the implicationsfor our report.

Overview of our audit approach

MaterialityWe set certain thresholds for materiality. These helped us todetermine the nature, timing and extent of our auditprocedures and to evaluate the effect of misstatements,both individually and on the financial statements as a whole.

Based on our professional judgement, we determined anoverall materiality for the financial statements as a whole of£760,000 which is approximately 1% of Net Assets.

We agreed with the Audit Committee that we would report tothem misstatements identified during our audit above£38,000 as well as misstatements below that amount that, inour view, warranted reporting for qualitative reasons.

Overview of the scope of our auditThe Company is a standalone Investment Trust Companymanaged by an independent investment manager, JPM AssetManagement Limited (the ‘Investment Manager’).

The financial statements, which remain the responsibility ofthe Directors, are prepared on their behalf by theInvestment Manager. The Investment Manager has, with theconsent of the Directors, delegated the provision of certainadministrative functions to JPMorgan Chase & Co, InvestorServices (the ‘Company Administrator’).

In establishing the overall approach to our audit weassessed the risks of material misstatement, taking intoaccount the nature, likelihood and potential magnitude ofany misstatement. As part of our risk assessment, weconsidered the Company’s interaction with the InvestmentManager and Company Administrator, and we assessed thecontrol environment in place at both organisations to theextent relevant to our audit of the Company.

Following this assessment, we applied professionaljudgement to determine the extent of testing required overeach balance in the financial statements.

Independent Auditors’ Reportto the members of JPMorgan Income & Capital Trust plc



Areas of particular audit focus In our audit, we tested and examined information, usingsampling and other auditing techniques, to the extent weconsidered necessary to provide a reasonable basis for us todraw conclusions. We obtained audit evidence throughtesting the effectiveness of controls, substantive proceduresor a combination of both.

We considered the following areas to be those that requiredparticular focus in the current year. This is not a completelist of all risks or areas of focus identified by our audit.

We discussed these areas of focus with the Audit Committee.Their report on those matters that they considered to besignificant issues in relation to the financial statements is setout on page 26.

How the scope of our audit Area of focus addressed the area of focus

The investment portfolio principallycomprises listed equity investments.

We tested the listed investment portfolio byagreeing the valuation of 100% of theCompany’s investments to independent thirdparty sources.

We tested the existence of the investmentportfolio by obtaining a custodianconfirmation independently and agreeing100% of the Company’s investmentholdings.

We tested a sample of dividend receipts toindependent third party sources.

We tested the completeness of incomereceipts for a sample of investmentholdings.

We tested special dividend receipts as totheir allocation between income and capital.

How the scope of our audit Area of focus addressed the area of focus

We tested journal entries to determinewhether adjustments were supported byevidence and were appropriatelyauthorised.

We also built an element of ‘unpredictability’into our detailed testing.

Going Concern

Under the Listing Rules we are required to review theDirectors’ statement, set out on page 22, in relation to goingconcern. We have nothing to report having performed ourreview.

As noted in the Directors’ statement, the Directors haveconcluded that it is appropriate to prepare the financialstatements using the going concern basis of accounting.The going concern basis presumes that the Company hasadequate resources to remain in operation, and that theDirectors intend it to do so, for at least one year from thedate the financial statements were signed. As part of ouraudit we have concluded that the Directors’ use of the goingconcern basis is appropriate.

However, because not all future events or conditions can bepredicted, these statements are not a guarantee as to theCompany’s ability to continue as a going concern.

Opinions on matters prescribed by the Companies Act 2006

In our opinion:

• the information given in the Strategic Report and theDirectors’ Report for the financial year for which thefinancial statements are prepared is consistent with thefinancial statements; and

• the part of the Directors’ Remuneration Report to beaudited has been properly prepared in accordance withthe Companies Act 2006.

Valuation andexistence of InvestmentsWe focused on thisarea becauseinvestmentsrepresent theprincipal element of the financialstatements

Income recognitionWe focused on thisarea becauseincomplete orinaccurate incomecould have a materialimpact on theCompany’s net assetvalue and dividendcover.

Risk of managementoverride of internalcontrolsISAs (UK & Ireland)require that weconsidermanagementoverride controls.

Independent Auditors’ Reportcontinued



Other matters on which we are required to report by exception

Adequacy of accounting records and information andexplanations receivedUnder the Companies Act 2006 we are required to report toyou if, in our opinion:

• we have not received all the information andexplanations we require for our audit; or

• adequate accounting records have not been kept, orreturns adequate for our audit have not been receivedfrom branches 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.

We have no exceptions to report arising from thisresponsibility.

Directors’ remunerationUnder the Companies Act 2006 we are required to reportto you if, in our opinion, certain disclosures of Directors’remuneration specified by law have not been made. We haveno exceptions to report arising from this responsibility.

Corporate Governance StatementUnder the Listing Rules we are required to review the partof the Corporate Governance Statement relating to theCompany’s compliance with nine provisions of the UKCorporate Governance Code (the ‘Code’). We have nothingto report having performed our review.

On page 32 of the Annual Report, as required by the CodeProvision C.1.1, the Directors state that they consider theAnnual Report taken as a whole to be fair, balanced andunderstandable and provides the information necessary formembers to assess the Company’s performance, businessmodel and strategy. On page 26, as required by C.3.8 of theCode, the Audit Committee has set out the significant issuesthat it considered in relation to the financial statements, andhow they were addressed. Under ISAs (UK & Ireland) we arerequired to report to you if, in our opinion:

• the statement given by the Directors is materiallyinconsistent with our knowledge of the Companyacquired in the course of performing our audit; or

• the section of the Annual Report describing the work ofthe Audit Committee does not appropriately addressmatters communicated by us to the Audit Committee.


Other information in the Annual ReportUnder ISAs (UK & Ireland), we are required to report to youif, in our opinion, information in the Annual Report is:

• materially inconsistent with the information in theaudited financial statements; or

• apparently materially incorrect based on, or materiallyinconsistent with, our knowledge of the Companyacquired in the course of performing our audit; or

• is otherwise misleading.


Responsibilities for the financial statements and the audit

Our responsibilities and those of the DirectorsAs explained more fully in the Statement of Directors’Responsibilities set out on page 32, the Directors areresponsible for the preparation of the financial statementsand for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on thefinancial statements in accordance with applicable law andISAs (UK & Ireland). Those standards require us to complywith the Auditing Practices Board’s Ethical Standards forAuditors.

This report, including the opinions, has been prepared forand only for the Company’s members as a body inaccordance with Chapter 3 of Part 16 of the Companies Act2006 and for no other purpose. We do not, in giving theseopinions, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shownor into whose hands it may come save where expresslyagreed by our prior consent in writing.

Jeremy Jensen (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors, London

20th May 2014



2014 2013Revenue Capital Total Revenue Capital Total

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

Gains on investments held at fair value through profit or loss 2 — 18,691 18,691 — 13,520 13,520

Net foreign currency gains — 14 14 — 1 1Income from investments 3 5,610 — 5,610 4,889 — 4,889Other interest receivable and similar income 3 24 — 24 45 — 45

Gross return 5,634 18,705 24,339 4,934 13,521 18,455Management fee 4 (444) (666) (1,110) (374) (561) (935)Other administrative expenses 5 (448) — (448) (458) — (458)

Net return on ordinary activities before finance costs and taxation 4,742 18,039 22,781 4,102 12,960 17,062

Finance costs – appropriations for Zero DividendPreference shares 6 — (4,311) (4,311) — (4,038) (4,038)

Finance costs – other 6 (9) (14) (23) (9) (14) (23)

Net return on ordinary activities before taxation 4,733 13,714 18,447 4,093 8,908 13,001

Taxation (charge)/credit 7 (6) — (6) 2 — 2

Net return on ordinary activitiesafter taxation 4,727 13,714 18,441 4,095 8,908 13,003

Return per class of shareReturn per Ordinary share 9 7.0p 20.3p 27.3p 6.1p 13.2p 19.3pReturn per Zero Dividend Preference share 9 — 9.4p 9.4p — 8.8p 8.8p

Details of dividends paid and declared are given in note 8 on page 45.

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 40 to 57 form an integral part of these accounts.

Financial StatementsIncome Statementfor the year ended 28th February 2014



Called up Capitalshare Share Other redemption Capital Revenuecapital premium reserve reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000 £’000

At 29th February 2012 675 3,640 60,424 8 (14,506) 2,473 52,714Amortisation of expenses of the placing and offer for subscription — — 23 — — — 23

Net return on ordinary activities — — — — 8,908 4,095 13,003Dividends payable in the year — — — — — (3,780) (3,780)

At 28th February 2013 675 3,640 60,447 8 (5,598) 2,788 61,960Amortisation of expenses of the placing and offer for subscription — — 23 — — — 23

Net return on ordinary activities — — — — 13,714 4,727 18,441Dividends payable in the year — — — — — (4,052) (4,052)

At 28th February 2014 675 3,640 60,470 8 8,116 3,463 76,372

Reconciliation of Movements in Shareholders’ Fundsfor the year ended 28th February 2014



2014 2013Notes £’000 £’000

Fixed assets 10Investments held at fair value through profit or loss 141,812 124,382Investments in liquidity funds held at fair value through profit or loss 720 800

142,532 125,182Current assetsDerivative financial instruments 11 12 —Debtors 12 5,429 817Cash and short term deposits 217 271

5,658 1,088

Creditors: amounts falling due within one year 13 (3,625) (428)

Net current assets 2,033 660

Total assets less current liabilities 144,565 125,842

Creditors: amounts falling due after more than one year Capital entitlement of the Zero Dividend Preference shareholders 14 (68,193) (63,882)

Net assets 76,372 61,960

Capital and reservesCalled up share capital 15 675 675Share premium 16 3,640 3,640Other reserve 16 60,470 60,447Capital redemption reserve 16 8 8Capital reserves 16 8,116 (5,598)Revenue reserve 16 3,463 2,788

Total equity shareholders’ funds 76,372 61,960

Net asset values per share Zero Dividend Preference share 17 148.0p 138.6pOrdinary share 17 113.1p 91.8p

The accounts on pages 36 to 57 were approved by the Directors and authorised for issue on 20th May 2014 and are signed ontheir behalf by:

James WestDirector


Company registration number: 6453183

Financial Statements continuedBalance Sheetat 28th February 2014



2014 2013Notes £’000 £’000

Net cash inflow from operating activities 18 4,073 3,483

Taxation Overseas tax recovered — 2

Capital expenditure and financial investment1

Purchases of investments (23,497) (39,020)Sales of investments 23,422 39,230Other capital charges (2) (4)Income from options taken to revenue — (6)

Net cash (outflow)/inflow from capital expenditure and financial investment (77) 200

Dividends paid (4,052) (3,780)

Net cash outflowbefore financing (56) (95)

Decrease in cash for the year 19 (56) (95)

1Includes investment in equities, fixed interest securities, liquidity funds and options.


Cash Flow Statementfor the year ended 28th February 2014



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 AIC in January 2009.

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.

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

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 incomeand capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, inaccordance with a documented investment strategy and information is provided internally on that basis to the Company’sBoard of Directors. Accordingly, upon initial recognition, the investments are designated by the Company as ‘held at fair valuethrough profit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental topurchase which are written off to capital at the time of acquisition. Subsequently the investments are valued at fair valuewhich are quoted bid market prices for investments traded in active markets.

Gains and losses on sales of investments, are included in the capital column of the Income Statement and are dealt with incapital reserves within ‘Gains and losses on sales of investments’. Increases and decreases in the valuation of investments heldat the year end are included in the capital column of the Income Statement and are accounted for in capital reserves within‘Investment holding gains and losses’.

Written options are valued at fair value using quoted mid market prices.

(c) Accounting for reservesGains and losses on sales of investments and realised gains and losses on options, management fee and finance costs allocatedto capital and any other capital charges, are included in the Income Statement and dealt with in capital reserves within ‘Gainsand losses on sales of investments’. Increases and decreases in the valuation of investments and options held at the year end,are included in the Income Statement and dealt with in capital reserves within ‘Investment holding gains and losses’.

(d) IncomeDividends receivable are included in revenue on an ex-dividend basis except where, in the opinion of the Board, the dividendis capital in nature, in which case it is included in capital. Special dividends are looked at individually to ascertain the reasonbehind the payment. This will determine whether they are treated as income or capital.

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

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 as income. Any excess in the value of the shares received over the amount of thecash dividend is recognised in capital.

Interest receivable from debt securities, together with any premiums or discounts on purchase, are allocated to revenue on atime apportionment basis so as to reflect the effective interest rate of those securities.

Income from written options is included in revenue on a time apportionment basis over the life of the instrument.

Deposit interest is taken to revenue on an accruals basis.

Financial Statements continuedNotes to the Accountsfor the year ended 28th February 2014



Underwriting commission is taken to revenue on a receipts basis. Underwriting commission is recognised in revenue where itrelates to shares that the Company is not required to take up. Where the Company is required to take up a proportion of theshares underwritten, the same proportion of commission received is deducted from the cost of the shares taken up, with thebalance taken to revenue.

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

– management fees are allocated 40% to revenue and 60% 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 comprise mainly stamp duty and brokerage commission. Details of transaction costscan be found in note 10 on page 47.

(f) Finance costsFinance costs are accounted for on an accruals basis using the effective interest rate method and in accordance with theprovisions of FRS 25 ‘Financial instruments: presentation’ and FRS 26 ‘Financial instruments: measurement’.

The provision for the capital entitlement of the Zero Dividend Preference shares is charged wholly to capital as to allocate anyportion to revenue would affect the rights and benefits attributable to the Ordinary shareholders.

Other finance costs are allocated 40% to revenue and 60% to capital in line with the Board’s expected long term split ofrevenue and 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 are not interest bearing, are short term in nature and are accordingly stated at nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

Derivative transactions which the Company may enter into comprise forward exchange contracts, the purpose of which is tomanage currency risk arising from the Company’s investing activities. The Company does not use derivative financialinstruments for speculative purposes. These are shown as part of current assets in note 11.

In accordance with FRS 26: ‘Financial instruments: measurement’, written options are included in current assets or currentliabilities at fair value.

In accordance with FRS 25: ‘Financial instruments: presentation’, because of the Company’s limited life and the rights andobligations attached to the Zero Dividend Preference shares, these shares are classified in the financial statements as liabilities.

(h) Foreign currencyIn accordance with FRS 23: ‘The effects of changes in foreign currency exchange rates’ the Company is required to nominate afunctional currency, being the currency in which the Company predominantly operates. The Board, having regard to thecurrency of the Company’s share capital and the predominant currency in which its shareholders operate, has determined thatsterling is the functional currency. Sterling is also the currency in which the financial statements are presented.

Any gain or loss on monetary assets arising from a change in exchange rates subsequent to the date of a transaction isincluded as an exchange gain or loss in revenue or capital depending on whether the gain or loss is of a revenue or capitalnature.



1. Accounting policies continued

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

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

Deferred taxation is provided on all timing differences that have originated but not reversed by the balance sheet date.Deferred taxation liabilities are recognised for all taxable timing differences but deferred taxation assets are only recognisedto the extent that it is probable 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.

Tax relief on expenses charged to capital is calculated on the ‘marginal’ basis in accordance with the recommendations of theSORP.

(j) Value Added Tax (‘VAT’)Irrecoverable VAT is included in the expense on which it has been suffered.

The Company may recover a small proportion of VAT input tax and this is calculated using the partial exemption methodwhich is based on the proportion of non taxable supplies to total supplies.

(k) Capital entitlement of the Zero Dividend Preference shareholdersThe provision for the capital entitlement of the Zero Dividend Preference shares is included as a finance cost in the incomestatement and is credited to the capital entitlement of the Zero Dividend Preference shareholders in note 14 on page 49. Theprovision is calculated on a cumulative compound basis. The Zero Dividend Preference shares are recognised as liabilities dueto their predetermined life, in accordance with FRS 25: ‘Financial instruments: presentation’ and details of the final capitalentitlement are disclosed at note 23 on page 53.

(l) 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.

2014 2013£’000 £’000

2. Gains/(losses) on investments held at fair value through profit or loss Gains on sales of investments held at fair value through profit or loss based on historic cost 6,264 2,789Amounts recognised in investment holding gains and losses in the previous period

in respect of investments sold during the year (5,701) (4,472)

Gains/(losses) on sales of investments based on the carrying value at the previous balance sheet date 563 (1,683)

Net movement in investment holding gains and losses 18,130 15,164Movement on realisation of options — 40Other capital charges (2) (1)

Total capital gains on investments held at fair value through profit or loss 18,691 13,520

Financial Statements continuedNotes to the Accounts continued



2014 2013£’000 £’000

3. Income Income from investmentsUK dividend income 4,401 4,037UK special dividends 615 383Overseas dividends 456 298UK bond interest 83 80Unfranked dividends from REITS 52 41Dividends from liquidity fund 3 14Scrip dividends — 36

Total income from investments 5,610 4,889

Other interest receivable and similar incomePremiums receivable from written options 9 30Deposit interest — 1Underwriting commission 15 14

Total other interest receivable and similar income 24 45

Gross revenue return 5,634 4,934

2014 2013Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

4. Management fee Management fee 444 666 1,110 374 561 935

Details of the management fee are given in the Directors’ Report on page 22.

2014 2013£’000 £’000

5. Other administrative expensesAdministration expenses 177 220Directors’ fees1 133 114Savings scheme costs2 107 93Auditors’ remuneration – for audit services3 31 31

448 458

1Full disclosure is given in the Directors’ Remuneration Report on page 30.2These fees are payable to JPMAM for the marketing and administration of savings scheme products.3Includes £5,000 (2013: £5,000) irrecoverable VAT.




6. Finance costs Finance costs – appropriationsProvision for capital entitlement of the

Zero Dividend Preference shareholders (note 14) — 4,311 4,311 — 4,038 4,038

Finance costs – otherAmortisation of expenses of the placing and offer

for subscription 9 14 23 9 14 23

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


Overseas withholding tax 6 — 6 (2) — (2)

Current tax charge/(credit) for the year 6 — 6 (2) — (2)

(b) Factors affecting current tax charge for the yearThe tax charge for the year is lower (2013: lower) than the Company’s applicable rate of corporation tax of 23.08%(2013: 24.17%). The difference is explained below:


Net return on ordinary activities before taxation 4,733 13,714 18,447 4,093 8,908 13,001

Net return on ordinary activities before taxation multiplied by the applicable rate of corporation tax of 23.08% (2013: 24.17%) 1,092 3,165 4,257 989 2,153 3,142

Effects of:Non taxable scrip dividends — — — (8) — (8)Non taxable UK dividends (1,177) — (1,177) (1,068) — (1,068)Non taxable overseas dividends (105) — (105) (72) — (72)Non taxable capital losses — (4,320) (4,320) — (3,268) (3,268)Tax attributable to expenses and finance costs

charged to capital (154) 154 — (136) 136 —Appropriation to Zero Dividend Preference shares — 995 995 — 976 976Amortisation of issue expenses 2 3 5 2 3 5Overseas withholding tax 6 — 6 (2) — (2)Unutilised expenses carried forward to future periods 342 — 342 293 — 293Expenses not allowable for tax purposes — 3 3 — — —

Current tax charge/(credit) for the year 6 — 6 (2) — (2)




(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £1,106,000 (2013: £932,000) based on a prospective corporation taxrate of 20% (2013: 23%). The reduction in the standard rate of corporation tax was substantively enacted on 3rd July 2012 andbecame effective from 1st April 2013. The Government has also further reduced the main rate of tax down to 21% with effectfrom 1st April 2014 and 20% by 1st April 2015. The deferred tax asset has arisen due to the cumulative excess of deductibleexpenses over taxable income. Given the composition of the Company’s portfolio, it is not likely that the Company will be ableto utilise this asset in the foreseeable future and therefore no asset has been recognised in the accounts.

Given the Company’s intention to meet the conditions required to obtain approval as an Investment Trust Company, noprovision has been made for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

8. Dividends(a) Dividends paid and declared

2014 2013£’000 £’000

2013 fourth quarterly dividend paid of 1.50p (2012: 1.40p) 1,013 945First quarterly dividend paid of 1.50p (2013: 1.40p) 1,013 945Second quarterly dividend paid of 1.50p (2013: 1.40p) 1,013 945Third quarterly dividend paid of 1.50p (2013: 1.40p) 1,013 945

Total dividends paid in the year 4,052 3,780

Fourth quarterly dividend declared of 1.625p (2013: 1.50p) 1,097 1,013

The fourth quarterly dividend in respect of the year ended 28th February 2014 has been declared and paid. In accordance withthe accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 28th February 2015.

(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 (‘Section 1158’)The requirements of Section 1158 are considered on the basis of dividends declared in respect of the year as follows. Therevenue available for distribution by way of dividend for the year is £4,727,000 (2013: £4,095,000).

2014 2013£’000 £’000

First quarterly dividend of 1.50p (2013: 1.40p) 1,013 945Second quarterly dividend of 1.50p (2013: 1.40p) 1,013 945Third quarterly dividend of 1.50p (2013: 1.40p) 1,013 945Fourth quarterly dividend of 1.625p (2013: 1.50p) 1,097 1,013

Total dividend for Section 1158 purposes 4,136 3,848



9. Return per class of share

Return per Ordinary share is based on the following:2014 2013£’000 £’000

Revenue return 4,727 4,095Capital return 13,714 8,908

Total return 18,441 13,003

Weighted average number of Ordinary shares in issue 67,506,782 67,506,782

Revenue return per share 7.0p 6.1pCapital return per share 20.3p 13.2p

Total return per share 27.3p 19.3p

Return per Zero Dividend Preference share is based on the following:2014 2013£’000 £’000

Capital entitlement 4,311 4,038

Weighted average number of Zero Dividend Preference shares in issue 46,087,200 46,087,200

Return per share 9.4p 8.8p

Further details are given in note 14.




10. Investments 2014 2013£’000 £’000

Investments listed on a recognised stock exchange 141,812 121,683JPMorgan Sterling Liquidity Fund 720 800JPMorgan Global Corporate Bond Fund — 2,699

142,532 125,182

Opening book cost 97,901 95,966Opening investment holding gains 27,281 16,589

Opening valuation 125,182 112,555

Movements in the year:Purchases at cost 26,764 38,436Sales – proceeds (28,107) (39,290)Gains/(losses) on sales of investments based on the carrying value at the previous

balance sheet date 563 (1,683)Netmovement in investment holding gains and losses 18,130 15,164

142,532 125,182

Closing book cost 102,822 97,901Closing investment holding gains 39,710 27,281

Total investments held at fair value through profit or loss 142,532 125,182

During the year, prior year investment holding gains amounting to £5,701,000 have been transferred to gains and losses onsales of investments as disclosed in note 16 on page 49.

Transaction costs on purchases during the year amounted to £121,000 (2013: £138,000) and on sales during the yearamounted to £17,000 (2013: £23,000). These costs comprise brokerage commission and stamp duty.



2014 2013£’000 £’000

11. Current assetsDerivative instruments at fair value through profit or lossForward foreign current contracts 12 —

2014 2013£’000 £’000

12. Current assetsDebtors Securities sold awaiting settlement 4,764 79Dividends and interest receivable 631 684Taxation recoverable 13 19Other debtors 21 35

5,429 817

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

Cash and short term depositsCash and short term deposits comprises the following:

2014 2013£’000 £’000

Balance held with JPMorgan Chase 217 271

217 271

The carrying amount of the above balances represents their fair value.

2014 2013£’000 £’000

13. Creditors: amounts falling due within one year Securities purchased awaiting settlement 3,547 280Other creditors and accruals 78 148

3,625 428

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.




2014 2013£’000 £’000

14. Capital entitlement of the Zero Dividend Preference shareholdersOpening balance 63,882 59,844Accrued capital entitlement 4,311 4,038

Closing balance 68,193 63,882

The predetermined final capital entitlement of £88,547,000 payable on the ZDP Repayment Date on 28th February 2018 isexplained on page 15. The entitlement is accrued year by year in accordance with the Company’s accounting policy.

2014 2013£’000 £’000

15. Called up share capital Issued and fully paid: Ordinary shares of 1p eachOpening and closing balance of 67,506,782 (2013: 67,506,782) shares 675 675

Zero Dividend Preference shares of 1p eachOpening and closing balance of 46,087,200 (2013: 46,087,200) shares 461 461

Following the year end 275,000 Units were allotted on 30th April 2014 (consisting of two Ordinary shares and one ZeroDividend Preference (ZDP) share per Unit). Therefore, the share capital of the Company consists of 68,056,782 Ordinary sharesand 46,362,200 ZDP shares.

Capital reservesGains and Investment

Called up Capital losses on holdingshare Share Other redemption sales of gains and Revenuecapital premium reserve1 reserve investments losses reserve Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

16. Capital and reserves Opening balance 675 3,640 60,447 8 (32,879) 27,281 2,788 61,960Amortisation of the expenses of the placing

and offer for subscription — — 23 — — — — 23Net currency gains on cash and short term

deposits held during the year — — — — 2 — — 2Unrealised gains on foreign currency contracts — — — — — 12 — 12Gains on sales investments — — — — 563 — — 563Investment holding gains — — — — — 18,130 — 18,130Transfer on disposal of investments — — — — 5,701 (5,701) — —Management fee and finance costs charged

to capital — — — — (680) — — (680)Other capital charges — — — — (2) — — (2)Compound growth entitlement of the

Zero Dividend Preference shares — — — — (4,311) — — (4,311)Dividends appropriated in the year — — — — — — (4,052) (4,052)Net revenue for the year — — — — — — 4,727 4,727

Closing balance 675 3,640 60,470 8 (31,606) 39,722 3,463 76,372

1Formerly share premium account which was cancelled on 23rd April 2008 and redesignated as a distributable reserve.



17. Net asset values per share

The net asset values per share calculated in accordance with the Articles of Association are as follows:

2014 2013Net asset Net assets Net asset Net assetsvalue per attributable value per attributable

share in pence £’000 share in pence £’000

Zero Dividend Preference shares 148.0p 68,193 138.6p 63,882Ordinary shares 113.1p 76,372 91.8p 61,960

2014 2013£’000 £’000

18. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

Net return on ordinary activities before finance costs and taxation 22,781 17,062Less capital return before finance costs and taxation (18,039) (12,960)Scrip dividends included in income — (36)Decrease/(increase) in dividends and interest receivable 53 (60)Decrease/(increase) in other debtors 14 (1)(Decrease)/increase in other creditors and accruals (70) 41Overseas withholding tax — (2)Management fee charged to capital (666) (561)

Net cash inflow from operating activities 4,073 3,483

At At28th February Exchange 28th February

2013 Cash flow movement 2014£’000 £’000 £’000 £’000

19. Analysis of changes in net fundsCash and short term deposits 271 (56) 2 217




20. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments (2013: same) at the balance sheet date.

21. Transactions with the Manager

Details of the management contract are set out in the Directors’ Report on page 22. The management fee payable to JPMorganAsset Management (UK) Limited (‘JPMAM’) for the year was £1,110,000 (2013: £935,000) of which £nil (2013: £nil) wasoutstanding at the year end.

During the year £107,000 (2013: £93,000), excluding VAT, was payable to JPMAM for the marketing and administration ofsavings scheme products, of which £nil (2013: £25,000) was outstanding at the year end.

Safe custody fees and other charges amounting to £2,000 (2013: £2,000) were payable to third party custodians on behalf ofJPMAM, of which £375 (2013: £nil) was outstanding at the year end.

JPMAM may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm’slength. The commission payable in the year was £12,000 (2013: £2,000) of which £nil (2013: £nil) was outstanding at the yearend.

Handling charges on dealing transactions amounting to £2,000 (2013: £1,000) were payable to JPMorgan Chase during theyear of which £80 (2013: £nil) was outstanding at the year end.

During the year, the Company made £3.4 million (2013: £10.6 million) purchases and £3.5 million (2013: £11.5 million) sales ofunits in the JPMorgan Sterling Liquidity Fund, which is managed by JPMAM. JPMAM charges no fee for managing this fund. Atthe year end, the Company’s investment in this fund amounted to £0.7 million (2013: £0.8 million) or 0.5% (2013: 0.6%) of theCompany’s investments. Income amounting to £3,000 (2013: £14,000) was receivable from this investment during the year ofwhich £nil (2013: £nil) was outstanding at the year end.

During the year, the Company held an investment in the JPMorgan Global Corporate Bond Fund which was managed by JPMAM.This investment was sold in its entirety during the year. At 28th February 2013 this investment was valued at £2.7 million andrepresented 2.2% of the Company’s investment portfolio. It was deducted from the funds used for the basis of calculating themanagement fee. During the year, the Company made £nil (2013: £1.1 million) purchases of this investment and £2.6 million(2013: £11.5 million) sales. Income amounting to £83,000 (2013: £80,000) was receivable from this investment during the year, ofwhich £nil (2013: £nil) was outstanding at the year end.

At the year end, a bank balance of £217,000 (2013: £271,000) was held with JPMorgan Chase. A net amount of interest of £nil(2013: £1,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2013: £nil) was outstandingat the year end.



22. 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 portfolioand derivative financial instruments comprising written options.

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

Level 1 – valued using quoted prices.

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 notes 1(b) and 1(c) on page 40.

The following table sets out the fair value measurements using the FRS 29 hierarchy at 28th February 2014:

2014Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or loss Investments 142,532 — — 142,532

Total 142,532 — — 142,532

2013Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or lossInvestments 125,182 — — 125,182

Total 125,182 — — 125,182

There have been no transfers between Levels 1, 2 or 3 during the year (2013: nil).




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

As an investment trust, the Company invests in equities and other investments for the long term so as 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 include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. The Directors’policy for managing these risks is set out below. The Company Secretary, in close cooperation with the Board and the Manager,coordinates the Company’s risk management policy. The Company has no significant exposure to foreign currencies.

The Company’s financial instruments comprise the following:

– investments in UK equity shares and other securities, which are held in accordance with the Company’s investmentobjective;

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

– derivative transactions comprising written options, forward foreign currency contracts; and

– Zero Dividend Preference shares, the purpose of which is to finance 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 – interest rate risk and other price risk. Information to enable an evaluation ofthe nature and extent of these two elements of market price risk is given in parts (i) and (ii) to this note, together withsensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks. The Manager assessesthe exposure to market risk when making each investment decision and monitors the overall level of market risk on the wholeof the investment portfolio on an ongoing basis.

(i) Interest rate risk Interest rate movements may affect the level of income receivable on the liquidity funds and cash deposits and the interestpayable on variable rate cash borrowings.

Management of interest rate risk It is not intended that bank debt will be used to provide long term structural gearing. The Company does not normally holdsignificant cash balances. An overdraft facility is available if required.

Interest rate exposure At the year end, the Company held an investment in a corporate bond fund valued at £nil (2013: £2.7 million). Theunderlying investments in this fund may carry fixed coupons and their value may fluctuate when interest rates are reset.This in turn may impact the Company’s capital return but the amounts are not significant. Other than this investment andthe Zero Dividend Preference shares, which are carried in the Balance Sheet at their predetermined capital entitlement,the Company has no financial assets or liabilities carrying a fixed rate of interest. The exposure to floating rates of interest,giving cash flow interest rate risk when rates are reset, is shown below.

2014 2013£’000 £’000

Exposure to floating interest rates:JPMorgan Sterling Liquidity Fund 720 800Cash and short term deposits 217 271

Total exposure 937 1,071

The target interest earned on the JPMorgan Sterling Liquidity Fund is the 7 day Sterling London Interbank Bid Rate.Interest receivable on bank balances and payable on overdrafts is at a margin below or above LIBOR respectively.The above year end amounts are broadly representative of the exposure to interest rates during the year.



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

(a) Market risk continued(i) Interest rate risk continued

Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 1% (2013: 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.

2014 20131% increase in 1% decrease in 1% increase in 1% decrease in

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

Income statement – return after taxationRevenue return 9 (9) 11 (11)

Total return after taxation for the year 9 (9) 11 (11)

Net assets 9 (9) 11 (11)

In the opinion of the Directors, the above sensitivity analysis is broadly representative of the whole year.

(ii) Other price risk Other price risk includes changes in market prices, other than those arising from interest rate risk, which may affect thevalue of equity investments.

Management of other price risk The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the riskassociated with particular industry sectors. An 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.

Other price risk exposure The Company’s total exposure to other changes in market prices at 28th February comprises its holdings in equityinvestments as follows:

2014 2013£’000 £’000

Equity investments held at fair value through profit or loss 141,812 121,683

The Company also has exposure to changes in market prices through its holdings in written options.

The above data is broadly representative of the exposure to other price risk during the year.




Other 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% (2013: 10%) in the fair values 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 exposure through equity investments and written options and includes the impact on the management feebut assumes all other variables are held constant.

2014 201310% increase in 10% decrease in 10% increase in 10% decrease in

fair value fair value fair value fair value £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (48) 48 (40) 40 Capital return 14,109 (14,109) 12,108 (12,108)

Total return after taxation and net assets 14,061 (14,061) 12,068 (12,068)

(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 mainly realisable securities, which can be sold to meetfunding requirements if necessary. Short term flexibility is achieved through the use of overdraft facilities.

Liquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be requiredare as follows:

2014 2013Three More Three More

months than months thanor less one year Total or less one year Total£’000 £’000 £’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearOther creditors and accruals 78 — 78 148 — 148Securities purchased awaiting settlement 3,547 — 3,547 280 — 280

Creditors: amounts falling due after more than one yearFinal Capital Entitlement of the Zero Dividend Preference

shareholders due 28th February 2018 — 88,547 88,547 — 88,547 88,547

3,625 88,547 92,172 428 88,547 88,975



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

(c) Credit risk Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transactioncould result in loss to the Company.

Management of credit risk Portfolio dealingThe 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.

CashCounterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties that havea minimum rating of A1/P1 (2013: A1/P1) from Moody’s and Standard & Poor’s respectively.

Exposure to JPMorgan ChaseJPMorgan Chase is the custodian of the Company’s assets. The custody agreement grants a general lien over the securitiescredited to the securities account. The Company’s assets are segregated from JPMorgan Chase’s own trading assets and aretherefore protected from creditors in the event that JPMorgan Chase were to cease trading.

Credit risk exposure The following amounts shown in the Balance Sheet represent the maximum exposure to credit risk at the current andcomparative year end.

2014 2013Balance Maximum Balance Maximumsheet exposure sheet exposure£’000 £’000 £’000 £’000

Fixed assets – investments held at fair value through profit or loss 142,532 — 125,182 —Current assetsDerivative Instruments at fair value through profit or lossForward foreign currency contracts 12 12 — —DebtorsSecurities sold awaiting settlement 4,764 4,764 79 79Dividends and interest receivable

and other debtors 652 652 719 719Cash and short term deposits 217 217 271 271

148,177 5,645 126,251 1,069

(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 balance sheet amount is areasonable approximation of fair value, except for the Zero Dividend Preference shares whose fair value as determined byreference to their market value at the balance sheet date was £74,800,000 (2013: £68,728,000).




24. Capital management policies and procedures

The Board’s capital management policy is to enable the Company to secure the investment objective stated on page 16. It isnot the Board’s intention to use bank debt to provide long term structural gearing.

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

2014 2013£’000 £’000

Capital entitlement of the Zero Dividend Preference shareholders (notes 14 and 23) 68,193 63,882Capital and reserves attributable to the Ordinary shareholders 76,372 61,960

Total debt and equity 144,565 125,842

2014 2013£’000 £’000

Investments held at fair value excluding liquidity fund holdings 141,812 124,382Current assets excluding cash 5,441 817Current liabilities (3,625) (428)

Total assets 143,628 124,771

Total assets less current liabilities 144,565 125,842

Gearing/(net cash) (0.6)% (0.9)%

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

– the opportunity for issues of new shares, including issues from Treasury; and

– the extent to which revenue in excess of that which is required to be distributed should be retained.

25. Subsequent events

The Directors have reviewed the period since the year end and do not believe that it is necessary to disclose any materialsubsequent events.



Notice is hereby given that the sixth Annual General Meetingof JPMorgan Income & Capital Trust plc will be held at60 Victoria Embankment, London EC4Y 0JP on Thursday,3rd July 2014 at 3.00 p.m. for the following purposes:

1. To receive the Directors’ Report & Accounts and theIndependent Auditors’ Report for the year ended28th February 2014.

2. To approve the Directors’ Remuneration Policy.

3. To approve the Directors’ Remuneration Report for theyear ended 28th February 2014.

4. To reappoint Sir Laurence Magnus as a Director of theCompany.

5. To reappoint Roderick Collins as a Director of the Company.

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

Special Business

To consider the following resolutions:

Authority to allot new ordinary shares – Ordinary Resolution 7. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitutionof any authorities previously granted to the Directors),pursuant to and in accordance with Section 551 of theCompanies Act 2006 (the ‘Act’) to exercise all the powersfor the Company to allot relevant securities (in theCompany and to grant rights to subscribe for, or to convertany security into Shares in the Company (‘Rights’)) up to anaggregate nominal amount of £34,028, representingapproximately 5% of the Ordinary issued share capital and£23,181, representing approximately 5% of the ZDP issuedshare capital at the date of the passing of this resolutionprovided that this authority shall expire at the Company’sAnnual General Meeting in 2015, save that the Companymay before such expiry make offers, agreements orarrangements which would or might require relevantsecurities to be allotted after such expiry and so that theDirectors of the Company may allot relevant securities inpursuance of such offers, agreements or arrangements asif the authority conferred hereby had not expired.

Authority to disapply pre-emption rights on allotment of shares –Special Resolution 8. 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 560of the Act) pursuant to the authority conferred byResolution 7 as if Section 561(1) of the Act did not apply toany such allotment, provided that this power shall belimited to the allotment of equity securities for each up toan aggregate nominal amount of £34,028, representingapproximately 5% of the Ordinary issued share capital and£23,181, representing approximately 5% of the ZDP issuedshare capital as at the date of the passing of this resolutionat a price of not less than the Net Asset Value per Ordinaryor ZDP share and shall expire at the Company’s AnnualGeneral Meeting in 2015, save that the Company maybefore such expiry make offers, agreements orarrangements which would or might require equitysecurities in pursuance of such offers, agreements orarrangements as if the power conferred hereby had notexpired.

Authority to repurchase the Company’s shares – Special Resolution 9. THAT the Company be generally and subject as hereinafter

appears 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 Ordinary Shares, Zero Dividend PreferenceShares (‘ZDP’) and Units.

PROVIDED ALWAYS THAT

(i) Ordinary Shares may only be purchased at prices belowtheir prevailing net asset value (as determined by theDirectors as at a date falling not more than 10 daysbefore the date of repurchase) and where the Cover onthe ZDPs is 1.15 times or above and where suchpurchases will not reduce the Cover on the ZDPs (ineach case as determined by the Directors as at a datefalling not more than 10 days before the date ofrepurchase) below 1.15 times;

(ii) ZDPs may only be purchased as prices below theirprevailing net asset value (as determined by theDirectors as at a date falling not more than 10 daysbefore the date of repurchase);

Shareholder InformationNotice of Annual General Meeting



(iii) the maximum number of Ordinary Shares authorised tobe purchased is 10,201,711 or such number as is equal to14.99% of the issued Ordinary Shares (including in theform of Units) as at the date of the passing of itsResolution;

(iv) the maximum number of ZDPs authorised to bepurchased is 6,949,694 or such number as is equal to14.99% of the issued ZDPs (including in the form ofUnits) as at the date of the passing of this Resolution;

(v) the minimum price which may be paid for any OrdinaryShare or ZDP is 1p in each case, the minimum pricewhich may be paid for a Unit is 3p and the maximumprice which may be paid for any Ordinary Share, ZDP orUnit is an amount equal to 105% of the average of themarket values for an Ordinary Share, a ZDP or a Unit, asthe case may be taken from the London Stock ExchangeDaily Official List for the five business days immediatelypreceding the day on which the relevant security ispurchased;

(vi) the authority hereby conferred shall expire on1st January 2016 unless the authority is renewed at anyother general meeting prior to such time; and

(vii)the Company may make a contract to purchaseOrdinary shares under the authority and may make apurchase of ordinary shares pursuant to any suchcontract notwithstanding such expiry.

By order of the BoardDivya Amin, for and on behalf of JPMorgan Asset Management (UK) Limited, Secretary

28th May 2014

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 bringto the Meeting evidence of their appointment, including anyauthority 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) theaudit of the Company’s accounts (including the Auditors’ reportand the conduct of the audit) that are to be laid before the AGM;or (b) any circumstances connected with Auditors of the Companyceasing to hold office since the previous AGM, which the memberspropose to raise at the Meeting. The Company cannot require themembers requesting the publication to pay its expenses. Anystatement placed on the website must also be sent to theCompany’s Auditors no later than the time it makes its statementavailable on the website. The business which may be dealt with atthe AGM includes any statement that the Company has beenrequired to publish on its website 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 businessmust 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 sixclear weeks before the Meeting, and (in the case of a matter to be

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.jpmincomeandcapital.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 hardcopy 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 16th May 2014 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capitalconsists of 68,056,782 Ordinary shares and 46,362,200 ZeroDividend Preference shares carrying one vote each. Therefore thetotal voting rights in the Company are 114,418,982.

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.

Shareholder Information continuedNotice of Annual General Meeting continued



Shareholders’ funds total returnChange in net assets, excluding the effect of share issues, sharerepurchases and dividend payments.

Composite benchmark return Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends quotedex-dividend during the year were reinvested, withouttransaction costs, into the shares of the underlying companies,at the time the shares were quoted ex-dividend.

The benchmark comprises two recognised indices of stockswhich should not be taken as wholly representative of theCompany’s investment universe. The Company’s investmentstrategy does not follow or ‘track’ these indices and,consequently, there may be some divergence between theCompany’s performance and the benchmark performance.

Ordinary share price total return Total return to the investor based on the change in theOrdinary share mid-market price and assuming that alldividends paid out during the year were reinvested, withouttransaction costs, into Ordinary shares, at the time the shareswere quoted ex-dividend.

Unit share price total return Total return to the investor based on the change in the Unitmid-market price and assuming that all dividends paid out inrespect of a Unit during the year were reinvested withouttransaction costs, into Units, at the time the Units were quotedex-dividend. Note that a Unit comprises two Ordinary sharesand one Zero Dividend Preference share.

Zero Dividend Preference share price total return Total return to the investor based on the change in the ZeroDividend Preference share mid-market price.

Ordinary share net asset value total return Return to the investor based on the change in the net assetvalue (‘NAV’) per Ordinary share and assuming all dividendspaid out during the year were reinvested into Ordinary sharesat the NAV per Ordinary share at the time the shares werequoted 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.

Unit net asset value (‘NAV’) total return Return to the investor based on the change in the Unit NAV andassuming all dividends paid out in respect of a Unit during theyear were reinvested into Units, at the NAV per Unit at the timethe Units were quoted ex-dividend. Note that a Unit comprisestwo Ordinary shares and one Zero Dividend Preference share.

Discount/premium If the share price of an investment trust is lower than the netasset value (‘NAV’) per share, the shares are said to be tradingat a discount. The discount is shown as a percentage of the NAVper share. The opposite of a discount is a premium. It is morecommon for an investment trust’s shares to trade at a discountthan at a premium.

Gearing/net cashGearing represents the excess amount above shareholders’funds of total assets expressed as a percentage of shareholders’funds. Total assets include total investments and net currentassets/liabilities less cash/cash equivalents and excluding bankloans of less than one year. If the amount calculated is negative,this is shown as a ‘net cash’ position.

Ongoing chargesThe ongoing charges represent the Company’s management feeand all other operating expenses, excluding finance costs andperformance fee payable, expressed as a percentage of theaverage of the daily net assets during the year.

Cover on the Zero Dividend Preference Shares Represents the Gross Assets of the Company divided by theFinal Capital Entitlement of the Zero Dividend Preferenceshares.

Glossary of Terms and Definitions



Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

1 6

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority



Notes



Notes


HistoryThe Company is an investment trust which was launched as thesuccessor vehicle to JPMorgan Income & Capital InvestmentTrust plc. Dealings in the securities of the Company began on3rd March 2008 and the Company has a fixed life of 10 years.Accordingly, the Company will be wound-up on 28th February2018 unless, prior to that date, shareholders and unitholdersapprove alternative arrangements.

Company NumbersCompany registration number: 6453183 London Stock Exchange numbers:

Ordinary Shares: B2NBJ06 Units: B2NBJ40 ZDPs: B2NBJ28

ISIN: Ordinary shares: GB00B2NBJ068 Units: GB00B2NBJ407 ZDPs: GB00B2NBJ282

Bloomberg codes: Ordinary shares: JPI LN Units: JPIU LN ZDPs: JPIZ LN

Market InformationThe Company’s shares are listed on the London Stock Exchange.The market price is shown daily in the Financial Times, The Times,the Daily Telegraph, The Scotsman and on the JPMorgan website atwww.jpmincomeandcapital.co.uk, where the share price is updatedevery 15 minutes during trading hours.

Websitewww.jpmincomeandcapital.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 Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone: 020 7742 4000

For company secretarial and administrative matters, pleasecontact Divya Amin.

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

RegistrarsEquiniti LimitedReference 3300Aspect HouseSpencer RoadWest Sussex BN99 6DATelephone number: 0871 384 2633

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., Mondayto Friday. 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 3300.

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

Independent Auditors PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

BrokersWinterflood Securities LimitedThe Atrium Building Cannon Bridge 25 Dowgate Hill London EC4R 2GA

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISAand J.P. Morgan SIPP, see contact details on the back cover of thisreport.

Information about the Company

Financial CalendarFinancial year end 28th/29th FebruaryFinal results announced MayHalf year end 31st AugustHalf year results announced NovemberInterim Management Statements issued June and DecemberDividend on ordinary shares Payable quarterly in October, January, April and JulyAnnual General Meeting July

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.jpmincomeandcapital.co.uk


Documents

2014JPMorgan Income & Capital Trust plc. Annual Report & Accounts 2014 1 Financial Results Totalreturns +18.4% Shareholders’ funds total return1 (2013: +16.2%) +20.3% Unit net asset