LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN AMERICAN INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2023
Legal Entity Identifier: 549300QNAI4XRPEB4G65
Information disclosed in accordance with the DTR 4.1.3
JPMorgan American Investment Trust plc (‘JAM’ or the ‘Company’), the FTSE 250 trust investing in North American companies, announces its annual results for the year ended 31st December 2023 (the “Reporting Period“).
Financial highlights for the Reporting Period include:
· JAM generated a NAV total return, with debt at fair, of +24.7% in 2023 compared with +18.9% for its benchmark, the S&P 500 Index, while its share price total return was +26.6%.
· Since the change in investment approach on 1st June 2019 to the end of February 2024, JAM has generated a NAV total return of +116.3% compared with +97.3% for its benchmark. This represents an annualised outperformance of 2.2 percentage points.
· JAM’s discount narrowed from 1.7% to 0.3% in the year and it has subsequently traded at premium allowing the re-issuance of shares from treasury.
· At the end of 2023, 91.5% of JAM’s assets were invested in US large cap stocks, through a high conviction portfolio of 40 stocks. This represented a carefully curated selection of the Manager’s best growth and value investment ideas. The small cap portfolio represented 6.5% of assets, with the balance in liquidity funds.
· The Ongoing Charges Ratio for 2023 was 0.38% and JAM remains one of the most competitively priced US actively managed funds available to UK investors, in either closed-ended or open-ended form.
· Subject to shareholder approval at the AGM, a final dividend of 5.25p will be paid on 31st May 2024, making a total dividend of 7.75p per share for the 2023 Financial Year. This represents an increase of 6.9% on the previous year’s total dividend.
Operational highlights for the Reporting Period include:
· After 10 years’ service, including seven as Chair, Dr. Kevin Carter will retire at the AGM on Thursday, 15th May. He will be succeeded by Robert Talbut, who has been a Non-Executive Director since 2017.
· Ms Pui Kei Yuen was appointed as a Non-Executive Director of the Company with effect from 1st January 2023 and Mr Colin Moore was appointed as a Non-Executive Director of the Company with effect from 1st February 2024.
Outlook
· It is encouraging to see inflation trending down and the US economy performing more strongly than expected, and seemingly likely on the glide path to a soft landing.
· There is an unusually high degree of uncertainty about the implications of the US presidential election outcome later this year for both domestic US policy and for the nation’s international relations. However, the Board believes that the Company’s Manager has already demonstrated its considerable skill in navigating the many unique challenges equity markets have faced over recent years, as evidenced by their performance track record.
CHAIR’S STATEMENT
The performance of the US stock market exceeded most expectations in 2023, as the US Federal Reserve’s aggressive monetary policy stance succeeded in driving inflation down, without thus far tipping the economy into the recession many feared. A handful of the market’s largest stocks led the market higher, buoyed by optimism about the potential for Artificial Intelligence (AI) to generate growth and productivity increases. The Company’s net asset value (NAV), with debt at fair value, increased by 24.7% on a total return basis in 2023 in sterling terms, ahead of its benchmark, the S&P 500, which increased by 18.9% on the same basis. During the year, the share price traded between a discount of 7.3% and a premium of 0.4% compared to NAV.
These very satisfying annual returns extend the Company’s long-term track record of strong outright gains and benchmark outperformance. Since the Company changed its investment approach on 1st June 2019, it has outperformed the benchmark index by 18.9% in the subsequent 57 months through to the end of February 2024, providing a NAV total return to shareholders of 116.3% compared with a benchmark return of 97.3%. This is an annualised outperformance of 2.2 percentage points since the change in investment approach.
The Portfolio
At the end of the review period, 91.5% of your Company’s total assets were invested in US large cap stocks, in a high conviction portfolio of some 40 stocks. This represents a carefully curated selection of the Manager’s best growth and value investment ideas. The proportions of growth and value weightings can vary between 60% and 40% in either direction and stood at 54% in growth and 46% in value at the period end. The overall allocation to the small cap portfolio was approximately 6.5% at period end. The balance of the portfolio was invested in liquidity funds.
The Company’s small cap allocation was invested in a portfolio of stocks that replicated the portfolio of the JPMorgan US Small Cap Growth Fund until November 2023. Thereafter, the strategy was changed from a growth focus to a more blended approach, which has resulted in a portfolio which is fairly evenly balanced between growth and value small cap stocks. The Board believes the new strategy is better aligned with the large cap strategy.
More details about performance attribution and portfolio activity during the year can be found in the Investment Manager’s report in the Annual Report.
Gearing
The Company is able to deploy gearing which over time is expected to enhance performance provided the cost of the gearing is less than the performance of the Company’s equity portfolio.
The Board believes it is prudent for its gearing capacity to be funded from a mix of sources, including short- and longer-term tenors and fixed and floating rate borrowings. The Company’s gearing strategy is implemented through the use of an £80 million revolving credit facility (with an additional £20 million accordion) with Mizuho Bank Ltd. This is drawn in US Dollars to match the currency of the Company’s asset base. Alongside this bank facility, the Company has in issue a combined US$100 million of unsecured loan notes issued via private placements, US$65 million of which is repayable in February 2031 and carries a fixed interest rate of 2.55% per annum. The remaining US$35 million of this private placement matures in October 2032 and carries a fixed interest rate of 2.32%.
The Board has set the current tactical level of gearing at 5%, with a permitted range around this level of plus or minus 5%, meaning that currently gearing can vary between 0% and 10%. This tactical level of gearing remained unchanged throughout the year. The Company ended the year with gearing equivalent to 2.8% of net assets.
At the time of writing, the gearing level of the Company was 3.1%, calculated in line with the Association of Investment Companies (‘AIC’) methodology. The Board continues to review the appropriate gearing level on a regular basis.
Board Review of the Manager
As in prior years, the Board visited the Manager’s offices in New York and held meetings with the portfolio managers and the analyst teams. The Board also met with JPMorgan’s senior management team to discuss the performance of the portfolio, the Company’s strategy and to review broader aspects of the Manager’s service. During the year, as an exception, the Board, accompanied by JPM’s senior management team, also visited San Francisco. The purpose of the trip was to visit a few portfolio companies to understand the impact of AI on their businesses, how this is likely to evolve, and its implications for the wider economy.
As previously announced, Tim Parton retired as the portfolio manager of the growth team on 1st March 2024. I would like to thank Tim and wish him a happy and well-deserved retirement. The Company has been informed by the Manager, that Jonathan Simon, the portfolio manager responsible for large cap value stocks, has given notice that he intends to retire in early 2025. Jonathan will continue with his existing responsibilities until his retirement and the Company will make an announcement regarding his successor in due course.
The Manager provides other services to the Company, including accounting, company secretarial and marketing services. These have been formally assessed through the annual manager evaluation process. Taking all factors into account, the Board concluded that the ongoing appointment of the Manager is in the continuing interests of shareholders.
Ongoing Charges
The Board continues to monitor closely the Company’s cost base. The Company’s Ongoing Charges Ratio (‘OCR’) for the year under review was 0.38% (2022: 0.36%). The increase this year is primarily attributable to the additional investment in sales and marketing efforts by the Company. The Company remains one of the most competitively priced US actively managed funds available to UK investors, in either closed-ended or open-ended form.
Share Price and Premium/Discount
Throughout most of the year, the Company’s shares traded at a discount to its NAV except for a brief period later in the year. Consistent with our statements made in previous years, and because share buy-backs at a discount to NAV enhance the NAV for remaining shareholders, the Board is prepared to buy-back shares when they stand at anything more than a small discount. This undertaking has operated for several years and applies in normal market conditions.
During the year 6,314,594 shares were purchased into Treasury, at a cost of £45 million, representing 2.5% of the Company’s issued share capital (excluding shares held in Treasury) at the beginning of 2023. The average discount to NAV at which these shares were purchased was 3.8%. Most of the shares were repurchased in the first half of the year, and the most recent buyback was in July. Since the year end, the shares have traded near to NAV and the Company has been able to issue 150,000 shares from Treasury at a premium to NAV.
The Company will again ask shareholders to approve the repurchase of up to 14.99% of its capital at a discount to estimated NAV at the forthcoming Annual General Meeting. We will also be seeking shareholder permission to issue shares, where the Board is confident of sustainable market demand. The authority, if approved, will allow the Company to issue up to 10% of its issued share capital from Treasury. The Company will only issue shares at a price in excess of the estimated NAV, including income and with the value of the debt at fair value.
Dividends
Whilst capital growth is the primary aim of the Company, the Board understands that dividend receipts can be an important element of shareholder returns. As such the Board has sought to enhance shareholder returns with a progressive dividend policy.
The Company paid an interim dividend in respect of the 2023 financial year (FY23) of 2.5p on 6th October 2023 (unchanged from the interim dividend paid in FY22). Subject to shareholder approval at the AGM, a final dividend of 5.25p will be paid on 31st May 2024 to shareholders on the register on 21st April 2024, making a total dividend of 7.75p per share for FY23. The Board is happy to report that this represents an increase of 6.9% on last year’s total dividend of 7.25p per share.
After the payment of the proposed final dividend, the balance in the revenue reserves will be £22.0 million, equivalent to 12.0p per share (2022: 11.5p per share) or 1.6 times (2022: 1.6 times) the current dividend. The prudent approach of building up revenue reserves in prior years provides the Board with a means of supporting current and future dividend levels, should earnings per share drop materially in any financial year.
The Board continues to monitor the net income position of the Company and, based on current estimated dividend receipts for the year ahead, the Board aims to continue its progressive dividend policy in the forthcoming year.
Environmental, Social and Governance (‘ESG’)
The Manager continues to enhance its ESG approach, which ensures it best captures the fundamental insights of the investment team. ESG factors are integrated fully into the Portfolio Manager’s investment process, and more information can be found in the Annual Report.
The Board
It has been my pleasure and honour to serve as a member of the Board over the past ten years, including seven years as its Chair. It is my intention, as previously communicated, to retire from the Board at the Annual General Meeting (AGM) to be held in May 2024.
In keeping with the Board’s history of appointing Chairs from within its existing complement of directors to ensure continuity, I am delighted to announce that Robert Talbut will succeed me as Chair at the conclusion of the forthcoming AGM.
Sir Alan Collins retired from the Board in May 2023 and as previously reported, Ms Pui Kei Yuen was appointed as a Non-Executive Director of the Company with effect from 1st January 2023. Mr Colin Moore was appointed as a Non-Executive Director of the Company with effect from 1st February 2024. Colin has over 40 years’ experience in the investment industry. His previous roles include Global Chief Investment Officer at Columbia Threadneedle, Chief Investment Officer of International Value at Putnam Investments and Chief Investment Officer at Rockefeller & Co. For both of these appointments, the Company engaged an independent search consultancy, Odgers Berndtson.
The results of this year’s externally facilitated Board evaluation process by Lintstock confirmed that Directors possess the experience and attributes to support a recommendation to shareholders that, with the exception of myself, they seek appointment/re-appointment at the Company’s forthcoming AGM. In line with the AIC Code of Corporate Governance, additional statements to support the re-appointment of each Director are included in the Annual Report.
Shareholder engagement
The Board believes that shareholder interactions are very helpful in assisting it with the management of the Company’s affairs, and, as opportunities arise, Board members welcome and seek such meetings.
During the past year, the Manager also held meetings and regular calls with shareholders, including webinars, and provided portfolio and market updates on the Company’s website. I am pleased to report that the Company was rated as the “Best Active Fund” in the US at the 2023 AJ Bell Investment Awards.
During the year, the Board also undertook an Asset Reunification Programme, conducted by the Company’s registrar, which aimed to trace and reunite shareholders with unclaimed shares and dividends in the Company valued at c.£900,000.
Annual General Meeting
This year’s AGM will be held on Thursday, 15th May 2024 at 2.30 p.m. at Trinity House, Tower Hill London EC3N 4DH. Apart from the formal business of the meeting, shareholders will have the opportunity to hear from our portfolio managers, Jonathan Simon and Felise Agranoff, who will make a presentation by video, to be followed by a question and answer session.
Shareholders are invited to attend the meeting and raise any questions they have, either at the meeting, or in advance, by writing to the Company Secretary at the address given in the Annual Report or via email to invtrusts.cosec@jpmorgan.com. As is normal practice for the Company, all voting on the resolutions will be conducted on a poll. The Board strongly encourages all shareholders to exercise their votes by completing and returning their proxy forms in accordance with the notes to the Notice of Meeting included in the Annual Report.
For shareholders who wish to follow the AGM proceedings, but choose not to attend in person, we will be able to offer participation via video conferencing facilities. Details on how to register, together with access details, can be found on the Company’s website: www.jpmamerican.co.uk. Shareholders viewing the meeting via conferencing software will not be able to vote in the poll and we therefore especially encourage those shareholders who cannot attend in person, to exercise their votes in advance of the meeting by completing and submitting their form of proxy. Shareholders are also encouraged to send any questions to the Board, via the Company Secretary, at the email address above, ahead of the AGM. We will endeavour to answer all relevant questions at the meeting, or via the website, depending on arrangements in place at the time.
If there are any changes to the arrangements for the Annual General Meeting, the Company will update shareholders through the Company’s website and, if appropriate, through an announcement to the London Stock Exchange.
Stay Informed
The Company delivers email updates with regular news and views, as well as the latest performance. If you have not already signed up to receive these communications and you wish to do so, you can opt in via https://web.gim.jpmorgan.com/emea_investment_trust_subscription/welcome?targetFund=JAM
Outlook
It is encouraging to see inflation trending down and the US economy performing more strongly than expected, and seemingly likely on the glide path to a soft landing.
This bodes well for US equities in the year ahead, although there are, as ever, potential threats, especially on the geopolitical front. There is an unusually high degree of uncertainty about the implications of the US presidential election outcome later this year for both domestic US policy and for the nation’s international relations.
However, the Board believes that the Company’s Manager has already demonstrated its considerable skill in navigating the many unique challenges equity markets have faced over recent years, as evidenced by their performance track record.
The Board is confident that the investment process and deep resources of the Manager, in combination with the Company’s investment structure and policy, continue to present shareholders with an attractive long term investment proposition.
Dr Kevin Carter
Chair 26th March 2024