Half Year Report JPMorgan American Investment …Half Year Report & Accounts 2014 Chairman’s...

Half Year Report2014JPMorgan AmericanInvestment Trust plc

Half Year Report & Accounts for the six months ended 30th June 2014

Features

Contents

About the Company

1 Half Year Performance2 Chairman’s Statement5 Investment Manager’s Report

Investment Review

9 List of Investments 11 Portfolio Analyses

Accounts

12 Income Statement13 Reconciliation of Movements in

Shareholders’ Funds14 Balance Sheet15 Cash Flow Statement16 Notes to the Accounts

Shareholder Information

18 Interim Management Report19 Glossary of Terms and Definitions21 Information about the Company

ObjectiveTo achieve capital growth from North American investments by outperformance of theCompany’s benchmark.

Investment Policies– To invest in quoted companies including, when appropriate, exposure to the smallercapitalisation companies.

– To emphasise capital growth rather than income.

BenchmarkThe S&P 500 Index expressed in sterling total return terms.

Gearing and Hedging Policies– The Company uses short and long term gearing to increase potential returns toshareholders. The Company’s gearing policy is to operate within a range of 5% net cashto 20% geared in normal market conditions. The Manager is accountable for tacticallymanaging the gearing, within a +/–2.0% range around a ‘normal’ gearing level. Thenormal gearing level, which is set by the Board and kept under review, is currently 10%.

– To hedge the currency risk only in respect of the Company’s sterling debenture.

Capital StructureAt the Company’s Annual General Meeting held on 7th May 2014, a resolution was passedby shareholders to sub-divide each Ordinary share of 25p into five Ordinary shares of5p each. Accordingly as at 30th June 2014, the Company’s share capital comprised276,818,910 ordinary shares of 5p each.

The Company has a £50 million debenture in issue, carrying a fixed interest rate of 6.875%,per annum, repayable in June 2018. The Company also has a £30 million one year floatingrate debt facility with ING Bank.

Management and Performance FeesThe management fee is charged at a rate of 0.5% per annum, paid quarterly in arrears, onthe Company’s total assets less current liabilities. The performance fee is calculated at therate of 10% of the difference between the net asset value capital return and the capitalreturn of the S&P 500 Index. The fee is capped in any one year at 0.25% of the fully dilutednet asset value at the previous 31st December, and any negative fee resulting fromunderperformance is deducted from any unpaid fees brought forward from prior yearswith any remaining amount carried forward until paid in full.

Management CompanyDuring the period the Company employed JPMorgan Asset Management (UK) Limited tomanage its assets. From 1st July 2014, JPMorgan Funds Limited, was appointed Manager,following its approval as an Alternative Investment Fund Manager by the FinancialConduct Authority. For further information on this change please refer to the Chairman’sStatement.

FCA regulation of ‘non-mainstream pooled investments’The Company currently conducts its affairs so that the shares issued by the Company canbe recommended by independent financial advisers to ordinary retail investors inaccordance with the FCA’s rules in relation to non-mainstream investment products andintends to continue to do so for the foreseeable future.

The shares are excluded from the FCA’s restrictions which apply to non-mainstreaminvestment products because they are shares in an investment trust.

AICThe Company is a member of the Association of Investment Companies.

WebsiteThe Company’s website, which can be found at www.jpmamerican.co.uk, includes usefulinformation on the Company, such as daily prices, factsheets and current and historic halfyear and annual reports.

JPMorgan American Investment Trust plc. Half Year Report & Accounts 2014 1

+4.2%Return to shareholders1

(includes dividends reinvested)

1.0pInterim Dividend (2013: 1.0p)6

+4.1%Return on net assets2

(includes dividends reinvested anddebt calculated at par)

+3.6%Benchmark index1, 3

(includes dividends reinvested)

Financial Data30th June 31st December %

2014 2013 change

Shareholders’ funds (£’000) 685,114 642,213 +6.7

Number of shares in issue 276,818,910 268,218,910|6 +3.2

Net asset value per share with debt at par value4 247.5p 239.4p|6 +3.4

Net asset value per share with debt at fair value4,5 244.8p 236.6p|6 +3.5

Share price 246.5p 238.2p|6 +3.5

Share price premium to net asset value per share with debt at fair value 0.7% 0.7%

Gearing7 9.3% 9.1%

Ongoing charges8 0.61% 0.63%

Ongoing charges inclusive of any performance fee9 0.66% 0.66%

S&P 500 Index expressed in sterling capital return terms 1,146.43 1,115.99 +2.7

Exchange rate £1 = $1.7097 £1 = $1.6562 –3.2

A glossary of terms and definitions is provided on page 19.

1Source: Morningstar. 2Source: J.P. Morgan. 3The Company’s benchmark is the S&P 500 Index expressed in sterling total return terms.4Includes distributable income earned in the current period.5The fair value of the £50m debenture issued by the Company has been calculated using discounted cash flowtechniques, using the yield from a similar dated gilt plus a margin based on the five year average for the AA BarclaysSterling Corporate Bond spread.6Comparitive figures for the year ended 31st December 2013 have been restated due to the sub-division of each existingOrdinary share of 25p into five Ordinary shares of 5p each on 8th May 2014.

7Gearing represents the excess amount above shareholders’ funds of total assets expressed as a percentage of theshareholders’ funds. Total assets include total investments and net current assets/liabilities less cash/cash equivalentsand excluding bank loans of less than one year. If the amount calculated is negative, this is shown as a ‘net cash’ position.

8Estimated annualised management fee and all other operating expenses, excluding finance costs, expressed as apercentage of the average of the daily net assets during the period. Ongoing charges are calculated in accordance withguidance issued by the Association of Investment Companies in May 2012.

9Ongoing charges including any performance fee payable represents the management fee, performance fee and allother operating expenses, excluding finance costs, expressed as a percentage of the average of the daily net assetsduring the period.

Half Year Performance

JPMorgan American Investment Trust plc. Half Year Report & Accounts 20142

Chairman’s Statement

Results for the six month period

The six months to 30th June 2014 saw a further rise in US stock markets, followinga very strong 2013. This provided a further gain, in addition to those seen since thedark days of early 2009, taking the Company’s net asset value (‘NAV’) with debt at parto 247.5 pence per share.

Your Company outperformed the broad US equity market, providing a NAV totalreturn per share with debt at par (in sterling terms) of 4.1%, and a share price totalreturn of 4.2%, compared with the equivalent return of 3.6% from the S&P 500 Index,our benchmark. The large company portfolio provided a positive contribution torelative performance over the period, whilst the small company portfoliounderperformed the S&P 500. Our modest level of gearing also helped a little. Yourmanager has underperformed the market over three and five years of the ratherdramatic bull run, but has outperformed both over the longer ten year period as wellas since his taking over the mandate in 2002. He has also outperformed over the lastyear and the current year to date.

Dividend

The income account continues on an upwards trajectory. The Company will be paying1.0 pence per share for the first six months of this year. Given the sub-division ofshares mentioned below, this is the equivalent distribution to the 5.0 pence per sharepaid for the six months to the end of June 2013. This interim dividend will be payableon 8th October 2014 to shareholders on the register on 5th September 2014.Your Board will consider the rate of the final dividend when it knows the revenue forthe full year. The Board has to balance the correct level of distribution with ensuringthat the Company’s income reserves can be maintained to support dividendpayments when corporate payouts are less healthy.

Gearing

Gearing has remained within the Board’s strategic gearing level of 10%, plus or minus2% over the reporting period. Our fund manager’s ability to hold cash of up to 5% ofnet assets remains if he feels there is a real risk of capital loss.

Five for One Sub-division of the Company’s Share Capital

Following approval at the Company’s Annual General Meeting held in May, theCompany’s shares were sub-divided into five ordinary shares for every one shareheld. That means for every one share you held previously, you now hold five. Thissub-division took effect on 8th May 2014. We hope and expect that this sub-divisionwill reduce dealing costs slightly, hence increasing the attractiveness of the shares tonew investors and increasing the liquidity of the market for the Company’s shares.The share split did not affect the overall value of your holding in the Company as thereduction in the price per share was offset by a commensurate increase in thenumber of shares you hold in the Company.


Share Issuance and Repurchases

Over the period, the Company has issued the equivalent of 9,625,000 shares,adjusted for the stock split mentioned above, raising £21.8 million net of expenses.The shares were issued at a premium to estimated NAV (calculated on a with incomebasis with debt at fair value). As I always stipulate in my statements, the Board doesunderstand that having issued shares, it has an obligation not to let the discountwiden significantly.

The Company issued a Prospectus in March 2014, which allows the Company to issuemore than 10% of its shares in issue in any 12 month period. Unfortunately despitea majority of shareholders being in favour of a resolution to grant authority todisapply pre-emption rights on the allotment of Ordinary shares for up to 15% of theCompany’s then issued share capital, the 75% majority required was only achievedby the Board giving an undertaking to shareholders able to vote that the Companywould only utilise 10% of the suggested 15% authority. Instead the Company will goback to shareholders to seek further authority as and when 10% of the authority hasbeen exhausted.

The Board

Dr Kevin Carter was appointed to the Board as an independent non-executivedirector from 1st July 2014. Through his various roles within the investment industry,Dr Carter is well qualified to join the Board, having wide experience and technicalunderstanding of both fund management and the management of fund managers.He has also been involved with closed-end funds for a number of years and currentlysits on two other investment trust boards, of one of which he is chairman.

Alternative Investment Fund Managers Directive (‘AIFMD’)

I reported in my year end statement that in order to comply with the AIFMD, theCompany would be appointing a different JPMorgan entity as its Manager andCompany Secretary and was further required to appoint a Depository in additionto its existing custodian.

Further to legal advice received by the Company from Dickson Minto WS, I can reportthat JPMorgan Funds Limited, which has been approved by the Financial ConductAuthority as an Alternative Investment Fund Manager, has been appointed asManager and Company Secretary to the Company. This change of entity does not inany way affect the actual management of the portfolio which will continue to bemanaged from the US by Garrett Fish and his support team. The Company Secretarialand administration support will also continue to be conducted by the sameindividuals from the Company’s registered office in London. No extra fees are beingcharged by any JPMorgan entity as a result of the Company’s AIFMD obligations.

Although JPMorgan Chase Bank, N.A. will continue as the Company’s custodian, thenew requirements of a depositary function will be undertaken by Bank of New YorkMellon (‘BNYM’). BNYM will be paid a fee of approximately £130,000, or 0.017% of theCompany’s gross assets per annum.


Outlook

I have been saying for a while that the US corporate sector is reasonably robust andthe US economy is growing. The US stock markets have risen a long way andvaluations are no longer cheap. After some concern last year, markets seem to bemore sanguine about the tapering of quantitative easing. So far they have also takenin their stride the severe geopolitical tensions in the Ukraine and the tragedy of theMiddle East. The magic carpet on which markets are floating may well hit someturbulence over the next few months, but trying to time such setbacks is difficult.Over the longer term, the US corporate sector seems relatively well placed and ourmanager has been successful in choosing how to invest in it.

Sarah BatesChairman 7th August 2014

Chairman’s Statement continued


Investment Manager’s Report

Market Review

Over the six month review period, the US equity market has provided investors withfurther gains. The S&P 500 Index added 3.6% in the first six months of the year,returning 10.2% over the last year and almost 18% annualised over the past fiveyears, all in sterling terms.

Financial market conditions were reasonably calm. Volatility across asset classesdropped below even the levels seen during the so-called ‘Great Moderation’ of2005/06. Volatility was not just low at the level of the overall indices; within themarket the dispersion of returns between different stocks was the lowest that wehave seen in almost thirty years.

However, grabbing most of the economic headlines was the final estimate of a 2.9%decline in Q1 GDP. While a decline of this magnitude can be difficult for investors todigest, the weather blame game helped offset any fears that it was a lasting trendrather than a short term issue. This was supported by unmistakable signs ofa re-acceleration in the US economy, with both macro data points and anecdotalevidence from a host of company management teams all confirming the trend.One notable area of recent strength, has been the housing market, as both existingand new home sales for May exceeded economists’ forecasts. Following an earlierslump in which sales declined in seven of the eight months reported through toMarch, existing home sales have now increased in two consecutive months.

Profit expectations did not move much, with very little in the way of major shocks andsurprises. However, deal making is back, with global mergers and acquisitions so farin 2014 at the highest level for many years. Interestingly the stock prices of both thetarget and the acquirer have typically been rising of late, underscoring the earningsenhancing nature of cash financed deals in a very low interest rate environment.Interest rates have stayed very low, with Treasury yields actually inching down duringthe period. All in all, a very pleasing period for investors in the US stock market.

Within the market, value is ahead of growth year-to-date as the highest priced growthnames have struggled since March. Surprisingly, looking over longer time periods, thedifference between Russell’s large cap growth and value indices annualised returnsover the past five years is a single basis point. Smaller stocks also did less well aftera multi year run of exceptional performance left valuations looking a little stretched,and indeed the better performance of the largest companies has been the mostnotable factor return of late. Sector returns were surprising over the period.The outliers on the upside were utilities and energy. Utility names continue to garnerinvestor attention for those seeking higher yields, while energy names rallied ascrude oil prices responded to more unrest in the Middle East. While on the downside,consumer discretionary stocks struggled as investors queried whether brick andmortar retailers were reaching the tipping point in relation to the online threat.

Performance

The Company’s net asset value rose by 4.1% in total return terms over the firstsix months of 2014. The return was ahead of the benchmark, the S&P 500 Index,which rose by 3.6% in sterling terms. When reviewing the portfolio’s performance,

Investment Manager’s Reportcontinued


the majority of the performance was driven by our stock selection in the large capsegment which is highlighted in more detail in the following paragraphs. We havemaintained our valuation bias and this was rewarded in the first half as most earningsand cash flow metrics performed better than the market as a whole. Also, we havemaintained a gearing position around 9% for the first half and with the rise in themarkets this has also benefitted performance. Our exposure to small cap growthdetracted slightly over the time period as investors became more critical in termsof valuation multiples that they were willing to apply to the highest growth securities.Late last year we significantly reduced our exposure to the small cap growth areaas our valuation models starting to highlight the widening disparity between the two.

Overall, the portfolio benefited from strong stock selection in the informationtechnology and consumer staples sectors. Within technology our exposure toSanDisk and Apple proved beneficial. Apple’s share price rallied following theannouncement of its acquisition of Beats Music and Beats Electronics, a streamingmusic service and a headphones maker, respectively, for USD 3 billion. Given itscurrent valuation and the company’s initiatives for creative cash use, we still seeroom for additional value creation and have added incrementally to our position.Investors reacted positively to SanDisk’s announcement that it is acquiring Fusion-io,a data storage company. The acquisition will be an all-cash transaction valued atapproximately USD 1.1 billion. The transaction, which has been approved by theboards of directors of both companies, is expected to close in Q3. The deal will allowSanDisk, a flash-memory maker, to help companies better manage increasingly heavydata workloads at a lower total cost of ownership. SanDisk, known primarily for itsthumb drives and other small-storage devices, has looked to boost sales of itsenterprise solid-state devices. It has reported recent results that have markeda continued rebound from a year earlier, when weak pricing and cyclical changesweighed on results. Our performance in the consumer staples segment was rewardedby our lack of exposure to Procter & Gamble coupled with an overweight positionin Walgreen. Shares of Procter & Gamble declined over the period as the consumerproducts behemoth struggled in a challenging sales environment. In contrast,Walgreen rallied on the strength of its strategic partnership with European pharmacygroup Alliance Boots.

Our exposure to ConocoPhillips also added value. Its share price rallied on the heelsof strong quarterly results and management reiterated full year and quarterlyproduction targets. We continue to be optimistic on the company’s outlook giventheir US oil growth, which outstrips peers by a strong margin.

In contrast, the portfolio’s health care and consumer discretionary positioningdisappointed. Our health care performance was hindered by what we did not own,including Johnson & Johnson and Allergen, both of which rallied strongly over theperiod and outperformed their benchmark peer group. Additionally, our position in

Performance attribution for the sixmonths ended 30th June 2014

Six monthsended

30th June2014

%

Contributions to total returns

Net asset value total return (in sterling terms) 4.1

Benchmark total return (in sterling terms) 3.6

Excess return 0.5

Contributions to total returnsLarge cap portfolio 1.0Allocation effect –0.1

Selection effect 1.1

Small cap portfolio –0.3Allocation effect –0.3

Cost of debt –0.4Currency hedge 0.3Share issuance 0.2Management fee/expenses –0.3

Total 0.5

Source: JPMAM and Morningstar. All figures are on atotal return basis.

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


Pfizer and Merck also weighed on performance. Shares of Pfizer declined followingits unsuccessful attempt to acquire AstraZeneca, as well as first quarter top-lineresults which came in short of expectations. However, Pfizer managed the quarterwell through lower spending and a lower tax rate, leading to higher gross margins.We continue to view Pfizer as a multi-year restructuring story with an improvingpipeline and shareholder friendly capital allocation practices. Within consumerdiscretionary, overweight positions in Best Buy and General Motors weighed onperformance. Electronics retailer Best Buy reported an unexpected decline inUS comparable sales. The company said its price matching and other promotions tostay competitive also came with a higher-than-expected cost. The company’s prioritythis year is to cut costs and to grow its online sales at an accelerated pace. Thecompany is working on personalised marketing messages to better compete with thelikes of Amazon. It has outfitted its big box stores with the ability to fulfil and shiponline orders, which will be a big competitive advantage. Multiple rounds of recallsnegatively impacted General Motors performance this year. We do however believewe are at the tail end of the heavy recalls and we feel good about the company’sfundamentals. This includes regional profitability tracking better than expected aswell as market share gain despite the recent headline pressure.

Our position in Citigroup also detracted from performance. The financial concerncame under pressure after the Federal Reserve rejected its capital plan in March, dueto capital spending weaknesses. Citigroup has until January 2015 to resubmit itscapital plan. Our longer term investment thesis for Citigroup remains intact and webelieve the company will benefit from a continued reduction in costs as well as loangrowth. We do expect Citigroup to be in a position to buy back shares next year.

With regards to our portfolio positioning, our main allocation and also our largestoverweight remains in the information technology sector. We find technology to bea fertile ground for stock picking, supported by its valuation and free cash flow.We are overall optimistic on the technology sector, with a broadly diversifiedexposure to semiconductors, semi cap equipment, data processing and computerhardware. We continue to have significant overweight exposure to the energy sector.We hold positions in the super majors as well as the US based exploration andproduction companies since they are very profitable with the current price levels ofoil and natural gas. Our main underweights remain consumer staples and materials,as we are less excited about the long term growth prospects of both sectors as well astheir unappealing valuation levels relative to other sectors.

The Company’s level of gearing at 9.3% as of 30th June 2014, is relatively unchangedfrom six months ago. As always, we will look to add or trim our gearing on anopportunistic basis.


Market Outlook

We continue to believe that US stocks are a reasonable investment, with theremarkable strength in corporate profits and continuing attractive valuationscompared to bonds, there is evidence to support this constructive view.

On profits, expectations for 2014 are holding firm at an 8% gain and, longer term, webelieve that the current level of profitability is sustainable for years to come. At thetime of writing this statement, the second quarter earnings season is about to beginand operating earnings for the S&P 500 are expected to set a new quarterly record.If current estimates hold, trailing 12-month operating earnings will have grown 12.5%compared to the same 12-month period a year ago.

In that context, a price of around 16x forward earnings seems fair to the market,although more demanding than the valuations prevailing over most of the last fiveyears. The most attractive aspect of the market is still the comparison with currentinterest rates and bond yields. As well as companies borrowing to buy back stock, thisgap is now also being arbitraged with a higher level merger and acquisition activity.This trend looks likely to continue.

Of course, there are potential risks to our outlook. Given May’s higher than expectedinflation readings, many investors fear the Fed could raise interest rates earlier thanexpected. While Fed Chair Janet Yellen talked down these concerns, continuedstrength in economic data and corresponding higher bond yields could reignite them.With control of the US Congress unclear and mid-term elections a few months away,policy risk could reappear as a source of volatility. In fact, more volatility is a certaintyat some point. However, we do not believe it will bring an end to the current cycle ofprofits growth, nor seriously undermine the case for equity investing.

With expectations that the Fed’s short-term interest rates are likely to remain on holduntil mid 2015, economic growth gradually improving, and continued growth incorporate profits, we believe the fundamentals are supportive for US equity marketsin the near-term.

Garrett Fish Investment Manager 7th August 2014

Investment Manager’s Reportcontinued


ValuationCompany Sector £’000 %

Apple Technology 38,412 5.1Microsoft Technology 29,415 3.9Exxon Mobil Energy 23,528 3.1Wells Fargo Financial Services 16,593 2.2Chevron Energy 16,484 2.2Bank of America Financial Services 16,056 2.1ConocoPhillips Energy 15,179 2.0United Technologies Producer Durables 13,057 1.7Citi Financial Services 12,986 1.7Qualcomm Technology 12,893 1.7Time Warner Consumer Discretionary 12,372 1.7Capital One Financial Financial Services 11,874 1.6Cisco Systems Technology 11,845 1.6Oracle Technology 11,753 1.6Pfizer Health Care 11,686 1.6Hewlett Packard Technology 11,467 1.5Northrop Grumman Producer Durables 11,138 1.5Occidental Petroleum Energy 10,970 1.5Best Buy Consumer Discretionary 10,599 1.4General Dynamics Producer Durables 10,359 1.4Sandisk Technology 9,837 1.3Energizer Holdings Consumer Staples 9,815 1.3AT&T Utilities 9,344 1.2CenturyLink Utilities 9,322 1.2American International Financial Services 9,166 1.2Ingersoll-Rand Materials & Processing 8,825 1.2Wellpoint Health Care 8,746 1.2Hartford Financial Services Financial Services 8,517 1.1Devon Energy Energy 8,424 1.1CVS Consumer Staples 8,162 1.1Medtronic Health Care 8,108 1.1Time Warner Cable Consumer Discretionary 8,088 1.1Schlumberger Energy 8,085 1.1Discover Financial Services Financial Services 7,886 1.1Home Depot Consumer Discretionary 7,864 1.1Merck Health Care 7,774 1.0KeyCorp Financial Services 7,616 1.0Google Technology 7,536 1.0KLA-Tencor Technology 7,511 1.0Parker-Hannifin Producer Durables 7,411 1.0Broadcom Technology 7,319 1.0Boston Scientific Health Care 7,237 1.0Pepsico Consumer Staples 7,104 1.0Illinois Tool Works Producer Durables 7,062 0.9Gilead Sciences Health Care 6,910 0.9Viacom ‘B’ Consumer Discretionary 6,645 0.9Fifth Third Bancorp Financial Services 6,638 0.9General Motors Consumer Discretionary 6,507 0.9Walgreen Consumer Staples 6,254 0.8

List of Investmentsat 30th June 2014


ValuationCompany Sector £’000 %

Dow Chemical Materials & Processing 6,005 0.8Morgan Stanley Financial Services 5,977 0.8Terex Producer Durables 5,961 0.8AbbVie Health Care 5,651 0.8Prudential Financial Financial Services 5,519 0.7Suntrust Banks Financial Services 5,369 0.7Delphi Automotive Consumer Discretionary 5,301 0.7Stryker Health Care 5,137 0.7AES Utilities 5,122 0.7Phillips Energy 5,079 0.7Cigna Health Care 5,072 0.7Yahoo Technology 5,024 0.7General Electric Producer Durables 4,667 0.6Expedia Consumer Discretionary 4,638 0.6US Bancorp Financial Services 4,535 0.6Constellation Brands Consumer Staples 4,521 0.6Anadarko Petroleum Energy 4,353 0.6Molson Coors Brewing Consumer Staples 4,332 0.6Peabody Energy Energy 4,201 0.6Starz Consumer Discretionary 4,181 0.6Archer Daniels Midland Consumer Staples 4,166 0.6EMC Technology 4,012 0.5UGI Utilities 3,927 0.5Southwest Airlines Producer Durables 3,784 0.5Garmin Consumer Discretionary 3,744 0.5Comcast ‘A’ Consumer Discretionary 3,689 0.5Caterpillar Producer Durables 3,654 0.5Ingredion Consumer Staples 3,647 0.5Lorillard Consumer Staples 3,626 0.5Kohls Consumer Discretionary 3,521 0.5McKesson Health Care 3,495 0.5Cardinal Health Health Care 3,463 0.5CareFusion Health Care 3,387 0.5IBM Technology 3,315 0.4TripAdvisor Consumer Discretionary 3,164 0.4Wynn Resorts Consumer Discretionary 3,022 0.4Mead Johnson Nutrition Consumer Staples 2,986 0.4Goldman Sachs Financial Services 2,888 0.4United Health Health Care 2,830 0.4Bristol-Myers Squibb Health Care 2,827 0.4CBRE Financial Services 2,658 0.4AGL Resources Utilities 2,307 0.3Aruba Networks Technology 2,044 0.3Tyson Foods ‘A’ Consumer Staples 1,908 0.3Manpower Producer Durables 1,801 0.2Kane Holdings Health Care 1,047 0.1123 other investments individually valued at less than £1 million 27,079 3.6

Total investments excluding investments in liquidity funds 747,015 100.0

List of Investments continued


Sector Analysis30th June 2014 31st December 2013

Portfolio Benchmark Portfolio Benchmark%1 % %1 %

Technology 21.6 18.8 19.8 16.0Financial Services 16.5 16.1 17.7 17.7Energy 12.9 10.9 11.5 10.3Health Care 11.4 13.3 12.2 12.8Consumer Discretionary 11.3 11.8 15.0 14.4Producer Durables 10.3 10.5 9.7 11.3Consumer Staples 7.7 9.5 5.6 8.5Utilities 3.9 5.6 3.6 5.1Materials & Processing 0.8 3.5 1.8 3.9Small and unquoted companies2 3.6 — 3.1 —

Total 100.0 100.0 100.0 100.0

1Based on total investments, excluding liquidity funds, of £747.0m (2013: £702.1m).2This includes small companies’ assets of 3.5% and unquoted companies of 0.1%.

Asset Analysis30th June 2014 31st December 2013

%1 %1

Large Companies 97.7 98.3Small Companies 3.7 2.9Unquoted Investments 0.1 0.2Net current liabilities2 (1.5) (1.4)

Total 100.0 100.0

1Based on total assets less current liabilities of £735.5m (2013: £692.4m).2Includes investments in liquidity funds.

Portfolio Analyses


Income Statementfor the six months ended 30th June 2014

(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended30th June 2014 30th June 2013 31st December 2013

Revenue Capital Total Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss — 23,586 23,586 — 97,792 97,792 — 140,791 140,791

Net foreign currency gains/(losses)1 — 2,168 2,168 — (1,784) (1,784) — 3,346 3,346Income from investments 7,131 — 7,131 5,261 — 5,261 11,241 — 11,241Other interest receivable

and similar income — — — 28 — 28 27 — 27

Gross return 7,131 25,754 32,885 5,289 96,008 101,297 11,268 144,137 155,405Management fee (353) (1,412) (1,765) (287) (1,148) (1,435) (611) (2,446) (3,057)Performance fee2 — (469) (469) — — — — (426) (426)Other administrative expenses (233) — (233) (271) — (271) (558) — (558)

Net return on ordinary activities before finance costs and taxation 6,545 23,873 30,418 4,731 94,860 99,591 10,099 141,265 151,364

Finance costs (361) (1,444) (1,805) (343) (1,374) (1,717) (704) (2,814) (3,518)

Net return on ordinary activitiesbefore taxation 6,184 22,429 28,613 4,388 93,486 97,874 9,395 138,451 147,846

Taxation (1,195) — (1,195) (742) — (742) (1,632) — (1,632)

Net return on ordinary activitiesafter taxation 4,989 22,429 27,418 3,646 93,486 97,132 7,763 138,451 146,214

Return per share3 (note 4) 1.82p 8.18p 10.00p 1.44p 36.94p 38.38p 3.00p 53.58p 56.58p

1Includes gains and losses on forward foreign currency contracts which are used to hedge the currency risk in respect of some of the geared portion of the portfolio. Details of thehedging contracts can be found in note 5.2During the period ended 30th June 2014, the Company’s net asset value capital return outperformed the capital return of the S&P 500 Index, expressed in sterling terms, by2.5 percentage points. This resulted in a positive performance fee calculation accrual of £469,000. Further details on the fee are given on the features page at the front of the report.

3Comparative figures for the six months ended 30th June 2013 and year ended 31st December 2013 have been restated due to the sub-division of each existing Ordinary share of 25pinto five Ordinary shares of 5p each on 8th May 2014.

The interim dividend declared in respect of the six months ended 30th June 2014 amounts to 1.0p (2013: 1.0p) per share,costing £2,768,000.

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

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.


Reconciliation of Movements inShareholders’ Funds

Called up CapitalSix months ended share Share redemption Capital Revenue30th June 2014 capital premium reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 31st December 2013 13,411 119,791 8,151 485,676 15,184 642,213Issue of ordinary shares to the market 430 19,729 — — — 20,159Net return on ordinary activities — — — 22,429 4,989 27,418Dividends appropriated in the period — — — — (4,676) (4,676)

At 30th June 2014 13,841 139,520 8,151 508,105 15,497 685,114

Called up CapitalSix months ended share Share redemption Capital Revenue30th June 2013 capital premium reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 31st December 2012 12,560 82,996 8,151 347,225 13,802 464,734Issue of ordinary shares to the market 214 8,699 — — — 8,913Net return on ordinary activities — — — 93,486 3,646 97,132Dividends appropriated in the period — — — — (3,784) (3,784)

At 30th June 2013 12,774 91,695 8,151 440,711 13,664 566,995

Called up CapitalYear ended share Share redemption Capital Revenue31st December 2013 capital premium reserve reserves reserve Total(Audited) £’000 £’000 £’000 £’000 £’000 £’000

At 31st December 2012 12,560 82,996 8,151 347,225 13,802 464,734Issue of ordinary shares to the market 851 36,795 — — — 37,646Net return on ordinary activities — — — 138,451 7,763 146,214Dividends appropriated in the year — — — — (6,381) (6,381)

At 31st December 2013 13,411 119,791 8,151 485,676 15,184 642,213


Balance Sheetat 30th June 2014

(Unaudited) (Unaudited) (Audited)30th June 2014 30th June 2013 31st December 2013

£’000 £’000 £’000

Fixed assetsInvestments held at fair value through profit or loss 747,015 592,954 702,067Investments in liquidity funds held at fair value through

profit or loss 10,280 15,466 8,494

Total investments 757,295 608,420 710,561

Current assetsDerivative financial instruments (note 5) 1,078 — 1,920Debtors 1,140 4,739 782Cash and short term deposits 23 16,501 10

2,241 21,240 2,712Creditors: amounts falling due within one year (24,083) (12,350) (20,907)Derivative financial instruments (note 5) — (461) —

Net current (liabilities)/assets (21,842) 8,429 (18,195)

Total assets less current liabilities 735,453 616,849 692,366Creditors: amounts falling due after more than one year (49,884) (49,854) (49,869)Performance fees (455) — (284)

Net assets 685,114 566,995 642,213

Capital and reservesCalled up share capital 13,841 12,774 13,411Share premium 139,520 91,695 119,791Capital redemption reserve 8,151 8,151 8,151Capital reserves 508,105 440,711 485,676Revenue reserve 15,497 13,664 15,184

Shareholders’ funds 685,114 566,995 642,213

Net asset value per share1 (note 6) 247.5p 221.9p 239.4p

1Comparative figures for the six months ended 30th June 2013 and year ended 31st December 2013 have been restated due to the sub-division of each existing Ordinary share of 25pinto five Ordinary shares of 5p each on 8th May 2014.


Cash Flow Statementfor the six months ended 30th June 2014


£’000 £’000 £’000

Net cash inflow from operating activities (note 7) 3,896 2,565 5,794

Returns on investments and servicing of financeInterest paid (1,837) (1,721) (3,440)

TaxationOverseas tax recovered 11 2 2

Capital expenditure and financial investmentPurchases of equity investments (152,583) (173,514) (365,193)Purchases of liquidity fund (53,493) (101,394) (216,686)Sales of equity investments 127,942 145,210 268,522Sales of liquidity fund 51,356 128,417 248,273Other capital charges (4) (4) (10)

Net cash outflow from capital expenditure and financial investment (26,782) (1,285) (65,094)

Management of liquid resourcesNet (purchase)/sales of Time Deposits (5) (14,713) 2,085

Dividends paid (4,676) (3,784) (6,381)

Net cash outflow before financing (29,393) (18,936) (67,034)

FinancingIncrease in short term loans 7,036 — 17,045Issue of ordinary shares to the market 19,889 8,913 37,664

Decrease in cash for the period (2,468) (10,023) (12,325)

Reconciliation of net cash flow to movement in net debtNet cash movement (2,468) (10,023) (12,325)Net loans drawn down in the period (7,041) — (14,960)Management of liquid resources 5 14,713 (2,085)Other movements (15) (14) (29)Exchange movements 3,029 (528) 135

Movement in net debt in the period (6,490) 4,148 (29,264)Net debt at the beginning of the period (66,765) (37,501) (37,501)

Net debt at the end of the period (73,255) (33,353) (66,765)

Represented by:Cash and short term deposits 23 16,501 10Debt falling due within one year (23,394) — (16,906)Debt falling due after more than one year (49,884) (49,854) (49,869)

Net debt at the end of the period (73,255) (33,353) (66,765)


Notes to the Accountsfor the six months ended 30th June 2014

1. Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by theCompany’s auditors.

The figures and financial information for the year ended 31st December 2013 are extracted from the latest published accountsof the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar ofCompanies and included the report of the auditors which was unqualified and did not contain a statement under eithersection 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’)and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture CapitalTrusts’ issued in January 2009.

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

The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the yearended 31st December 2013.

3. Dividends


£’000 £’000 £’000

Final dividend paid in respect of the year ended31st December 2013 of 1.5p (2012: 1.5p)1 4,676 3,784 3,784

Interim dividend paid in respect of the six months ended 30th June 2013 of 1.0p (2012: 1.0p)1 — — 2,597

4,676 3,784 6,381

1Dividend rates have been restated due to the sub-division of each existing Ordinary share of 25p into 5p each on 8th May 2014.

An interim dividend of 1.0p has been declared in respect of the six months ended 30th June 2014, costing £2,768,000.


4. Return per share(Unaudited) (Unaudited) (Audited)

Six months ended Six months ended Year ended30th June 2014 30th June 2013 31st December 2013

£’000 £’000 £’000

Return per share is based on the following:Revenue return 4,989 3,646 7,763Capital return 22,429 93,486 138,451

Total return 27,418 97,132 146,214

Weighted average number of shares in issue1 274,256,822 253,080,570 258,411,335

Revenue return per share1 1.82p 1.44p 3.00pCapital return per share1 8.18p 36.94p 53.58p

Total return per share1 10.00p 38.38p 56.58p

1Comparative figures for the six months ended 30th June 2013 and year ended 31st December 2013 have been restated due to the sub-division of each existing Ordinary share of25p into five Ordinary shares of 5p each on 8th May 2014.

5. Derivative financial instrument

The Company has hedged against the currency risk arising from its £50 million debenture liability. The forward currencycontracts settled on 15th January 2014 and were for the purpose of hedging the risk of fluctuation in the £/US$ exchange rate.Upon maturity, these contracts were rolled over with the same counterparties and the settlement date of these new contractsis 11th July 2014. These contracts continue to be rolled over on a quarterly basis.

6. Net asset value per share

Net asset value per share is calculated by dividing the funds attributable to ordinary shareholders by the number of ordinaryshares in issue at 30th June 2014 of 276,818,910 (30th June 2013: 255,482,210 and 31st December 2013: 268,218,911).Comparative figures for the six months ended 30th June 2013 and year ended 31st December 2013 have been restated due tothe sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each as 8th May 2014.

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


£’000 £’000 £’000

Net return on ordinary activities before finance costs and taxation 30,418 99,591 151,364

Less capital return before finance costs and taxation (23,873) (94,860) (141,265)

Scrip dividends received as income (4) — —Increase in net debtors and accrued income (22) (174) (192)(Decrease)/increase in accrued expenses (20) (87) 386Overseas withholding tax (1,049) (757) (1,627)Management fee charged to capital (1,412) (1,148) (2,872)Performance fee paid (142) – –

Net cash inflow from operating activities 3,896 2,565 5,794


Interim Management Report

The Company is required to make the following disclosures inits half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Companyremain unchanged and fall into the following broadcategories: investment and strategy; market; accounting,legal and regulatory; corporate governance and shareholderrelations; operational; financial; political and economic.Information on each of these areas is given in the BusinessReview within the Annual Report and Accounts for the yearended 31st December 2013.

Related Parties Transactions

During the first six months of the current financial year, notransactions with related parties have taken place which havematerially affected the financial position or the performance ofthe Company.

Going Concern

The Directors believe, having considered the Company’sinvestment objectives, risk management policies, capitalmanagement policies and procedures, nature of the portfolioand expenditure projections, that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theyconsider there is reasonable evidence to continue to adopt thegoing concern basis in preparing the accounts.

Directors’ Responsibilities

The Board of Directors confirms that, to the best of itsknowledge:

(i) the condensed set of financial statements contained withinthe half yearly financial report has been prepared inaccordance with the Accounting Standards Board’sStatement ‘Half Yearly Financial Reports’ and gives a trueand fair view of the state of affairs of the Company and ofthe assets, liabilities, financial position and net return of theCompany, as at 30th June 2014, as required by the UKListing Authority Disclosure and Transparency Rules 4.2.4R;and

(ii) the interim management report includes a fair review ofthe information required by 4.2.7R and 4.2.8R of the UKListing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing thesefinancial statements, the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and accounting estimates that arereasonable and prudent;

• 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.

For and on behalf of the Board

Sarah BatesChairman 7th August 2014


Glossary of Terms and Definitions

Return to shareholders

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

Return on Net Assets

Total on net asset value (‘NAV’) return per share, on a bidvalue to bid value basis, assuming that all dividends paid outby the Company were reinvested in the shares of theCompany at the NAV per share at the time the shares werequoted ex-dividend.

In accordance with industry practice, dividends payablewhich have been declared but which are unpaid at thebalance sheet date are deducted from the NAV whencalculating the total return on net assets.

Benchmark return

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested, without transaction costs, in the shares ofthe underlying companies at the time the shares were quotedex-dividend.

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

Gearing/Net Cash

Gearing represents the excess amount above shareholders’funds of total assets expressed as a percentage of theshareholders’ funds. Total assets include total investmentsand net current assets/liabilities less cash/cash equivalentsand excluding bank loans of less than one year. If the amountcalculated is negative, this is shown as a ‘net cash’ position.

Share price discount/premium to net asset value per share

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 theNAV. The opposite of a discount is a premium. It is morecommon for the shares of an investment trust to trade ata discount than at a premium.

Ongoing Charges

Estimated annualised management fee and all otheroperating expenses, excluding finance costs, expressed asa percentage of the average of the daily net assets during theperiod. Ongoing charges are calculated in accordance withguidance issued by the Association of Investment Companiesin May 2012.

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

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority


Notes

HistoryThe Company has its origins in the Alabama, New Orleans, Texas and PacificJunction Railways Company Limited which was formed in 1881 to acquireinterests in, and to undertake the completion of, three Americanrailroads – the Vicksburg and Meridian, the Vicksburg, Shreveport andPacific and the New Orleans and North Eastern. In 1917 the Company wasreorganised, a proportion of the railroad interests were sold, and theinvestment powers were widened enabling its assets to be invested inseveral countries including the United Kingdom. To reflect the newobjectives the name was changed to The Sterling Trust. The Company’sinvestment policy reverted to North American securities in 1982 when thename was changed to The Fleming American Investment Trust plc. Thename was changed to JPMorgan Fleming American Investment Trust plcin April 2002 and to its present form in 2006. JPMorgan has been theCompany’s manager and secretary since 1966.

DirectorsSarah Bates (Chairman)Kate BolsoverSimon Bragg (Audit Committee Chairman)Dr Kevin Carter (appointed from 1st July 2014)Sir Alan CollinsJames Williams

Company NumbersCompany registration number: 15543London Stock Exchange Sedol code: BKZGVH6ISIN: GB00BKZGVH64Bloomberg code: JAM LN

Market InformationThe Company’s shares are listed on the London Stock Exchange. The marketprice is shown daily in the Financial Times, The Times, The Daily Telegraph,The Scotsman and on the J.P. Morgan internet site atwww.jpmamerican.co.uk, where the share price is updated every fifteenminutes during trading hours.

Websitewww.jpmamerican.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbroker,intermediary or professional adviser acting on an investor’s behalf. They mayalso be purchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all available on theonline wealth manager service, J.P. Morgan WealthManager+ available atwww.jpmorganwealthmanagerplus.co.uk

Manager and SecretaryJPMorgan Funds Limited

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JP

Telephone: 020 7742 4000

For company secretarial and administrative matters please contactAlison Vincent.

DepositaryBNY Mellon Trust and Depositary (UK) LimitedBNY Mellon Centre1 Queen Victoria StreetLondon EC4V 4LA

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

RegistrarsEquinitiReference 1077Aspect HouseSpencer RoadLancingWest Sussex BN99 6DA

Telephone: 0871 384 2316

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to the Registrarquoting reference 1077.

Registered shareholders can obtain further details on their holdings on theinternet by visiting www.shareview.co.uk.

Independent AuditorDeloitte LLPChartered Accountants and Statutory AuditorStonecutter Court1 Stonecutter StreetLondon EC4A 4TR

BrokersWinterflood Securities LimitedThe Atrium Building Cannon Bridge25 Dowgate HillLondon EC4R 2GA

Telephone number: 020 7621 0004

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

Information about the Company

Financial CalendarFinancial year end 31st DecemberFinal results announced MarchHalf year end 30th JuneHalf year results announced AugustInterim Management Statements announced April and OctoberDividends on Ordinary shares paid October and MayAnnual General Meeting April/May


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.jpmamerican.co.uk

Half Year Report JPMorgan American Investment …Half Year Report & Accounts 2014 Chairman’s...

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Transcript of Half Year Report JPMorgan American Investment …Half Year Report & Accounts 2014 Chairman’s...