JPMORGAN AMERICAN INVESTMENT TRUST PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2022
Legal Entity Identifier: 549300QNAI4XRPEB4G65
Information disclosed in accordance with the DTR 4.2.2
CHAIR'S STATEMENT
Dear Shareholders,
The first six months of 2022 has been a difficult period for the US stockmarket with growing concerns about high and persistent inflation, rising interest rates and more subdued economic growth. Notwithstanding this environment, the portfolio outperformed the S&P 500. The total return on net assets per share in sterling terms over the period was -8.4%. The return to Ordinary shareholders per share in sterling terms was -11.2%, reflecting a small widening of the Company's discount to net asset value per share ('NAV') at which the shares traded over the period. The total return from the Company's benchmark, the S&P 500 Index in sterling terms, was -10.8%, resulting in an outperformance of 2.4% in asset terms.
In the 38 months since the change in investment policy under the management of our Portfolio Managers, Jonathan Simon and Tim Parton, the Company's NAV has grown by an annualised 18.9% compared to 16.6% by the benchmark. This represents an annualised outperformance of 2.0% (calculated on a geometric basis). More information about the portfolio and individual stock performance can be found in the Investment Manager's report below.
Share price and Discount Management
The Company's shares have traded at a discount to NAV throughout the period under review and the Company has continued to buy back its shares in line with the Board's longstanding position of buying shares back when they stand at anything more than a small discount to NAV. The Company bought into Treasury a total of 2,221,771 shares, or 1.2% of the Company's issued share capital as at end of June 2022 (30th June 2021: 1.3%). These shares were purchased at an average discount to NAV of 3.9%, producing a modest accretion to the NAV for continuing shareholders.
Dividend
The Company is declaring a dividend of 2.5 pence per share (2021: 2.5 pence) for the first six months of this year, which will be payable on 7th October 2022 to shareholders on the register on 2nd September 2022.
Whilst capital growth is the primary aim of the Company, the Board is aware that dividend receipts can be an important element of shareholder returns. The Board continues to monitor the net income position of the Company and in the absence of unforeseen circumstances, the Board is aiming to pay an increased total dividend for the financial year compared to the 7.0 pence per share paid in respect of the 2021 financial year.
Gearing
The Board has maintained the current tactical level of gearing at 5% over the period with a permitted range around this level of plus or minus 5%, meaning that currently gearing can vary between 0% and 10%. The Company ended the period with gearing of 5.2%.
On 12th August 2022, the Company entered into a three-year revolving credit facility of £80 million (including an option to expand the facility by a further £20 million) with Mizuho Bank Ltd of which $30 million was drawn as at 16th August 2022. This new facility replaces the facility with ING Bank which expired on 16th August 2022. In addition, the Company has in issue $65 million of unsecured loan notes repayable in February 2031 with a fixed interest rate of 2.55% per annum and $35 million of unsecured loan notes repayable in October 2032 with a fixed coupon of 2.32%.
Environment, Social and Governance
The Manager has continued to evolve its approach to the assessment of ESG factors at individual company level, and integrate further its analysis of these in the construction of the Company's portfolio. The continuing Russia/Ukraine war has brought renewed focus on global energy security and food supplies with an impact on how to factor these new realities into the ESG analysis of affected companies.
Investment Manager
As announced previously, the Company has been informed by its Manager that Mr Timothy Parton, one of the Company's two Large Cap Portfolio Managers, has given notice that he intends to retire in early 2024. Tim will continue with his existing responsibilities until his retirement. Following discussions between the Board and the Manager, I am pleased to announce that Ms Felise Agranoff, who has been with the Manager for 18 years, is being named as a Portfolio Manager with effect from 23rd August 2022, working alongside Tim on the growth stocks in the Large Cap Portfolio. Felise has been working closely with Tim on this portfolio's growth stocks for a number of years and is also the named portfolio manager alongside Tim on other of the Manager's flagship funds. The intention is that Felise will become the sole Portfolio Manager responsible for the growth stocks in the Large Cap Portfolio upon Tim's retirement. Jonathan Simon will remain as the Portfolio Manager responsible for the value stocks in the Large Cap Portfolio. The change is not expected to have any material impact on how the portfolio is run.
Board
As mentioned in the Annual Report, Sir Alan Collins, current Senior Independent Director and Chair of the Risk and Remuneration Committees, will be retiring from the Board at the conclusion of the May 2023 AGM. The Board is currently in the process of searching for a new director and shareholders will be kept up to date with recruitment plans to the Board as these develop.
Auditor Review
As explained previously in our 2021 Annual Report, Deloitte LLP informed the Board of their intention to step down as external Auditor of the Company as they continued to review and prioritise their current audit appointments. The Board underwent a formal audit tender process, as a result of which BDO LLP was appointed as Auditor by the Company with effect from 19th August 2022. Deloitte LLP therefore ceased to be Auditor to the Company with effect from the same date and their statement of reasons, none of which relates to the Company itself, will be sent to shareholders along with this Report.
Outlook
The current period of stagflation (heightened inflation accompanied by slow growth) appears likely to continue for the rest of 2022. The US central bank, the Federal Reserve, is still mid cycle in its process of raising short term interest rates, and the behaviour of the yield curve at longer maturities suggests an increasing possibility of a recession in the US economy before this cycle is complete. The Company's benchmark, the S&P 500 index has already declined by 11.28% in US dollar terms year to date at the time of writing, thereby discounting some or most of these factors. Key now for the market's near term direction will be the earnings expectations at company level over the next one to two years. Our portfolio managers, assisted by the extensive team of analysts at their disposal, will be monitoring this very closely. Over the longer term the depth and resilience of the US stockmarket and its world class companies will continue to provide our managers with excellent opportunities for inclusion in the Company's portfolio.
Dr Kevin Carter
Chair 23 August 2022