JPMORGAN AMERICAN INVESTMENT TRUST PLC
UNAUDITED HALF YEAR RESULTS
FOR THE SIX MONTHS ENDED 30TH JUNE 2021
Legal Entity Identifier: 549300QNAI4XRPEB4G65
Information disclosed in accordance with the DTR 4.2.2
CHAIR'S STATEMENT
Dear Shareholders,
The first six months of 2021 has seen a continuation of the buoyant stock market conditions that characterised 2020 after the market low in March. Factors supporting these conditions include the effectiveness of Covid-19 vaccines and their rollout, a more settled political environment in the US, and continuing fiscal and monetary support for the economy. Optimism about the strength of the economic recovery has gradually grown, although with this might well come concerns about raised inflation. The main current debate amongst market participants is whether this raised inflation is temporary or will prove to be more persistent. The resolution of this matter will be material to market behaviour for the balance of the year.
Performance
The total return on net assets per share in sterling terms over the period was +15.4%. The return to Ordinary shareholders per share in sterling terms was +13.9%, reflecting a small widening of the Company's discount to net asset value per share ('NAV') at which the shares traded at the end of the period. The total return from the Company's benchmark, the S&P 500 Index in sterling terms, was +13.9%, an outperformance of +1.5% in asset terms. 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 the 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 2,498,602 shares, or 1.3% of the Company's issued share capital at the beginning of 2021 (30th June 2020: 1.9%). These shares were purchased at an average discount to NAV of 5.2%, producing a modest accretion to the NAV for continuing shareholders.
Dividend
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, particularly given the ongoing impact on dividend payments arising from the effects of the Covid-19 pandemic. In the absence of unforeseen circumstances the Board is aiming to pay out a total dividend for the financial year of at least 6.75 pence per share, unchanged from that paid in respect of the 2020 financial year.
The Company is declaring a dividend of 2.5 pence per share (2020: 2.5 pence) for the first six months of this year, which will be payable on 8th October 2021 to shareholders on the register on 3rd September 2021.
Gearing
The Board maintains strong oversight of the Company's gearing policy and the source and use of available leverage. The ability to borrow money for investment is a key differentiating feature of investment trusts.
The Company has a strategic gearing level of 10% plus or minus 2%. Last year, given the Covid-19 pandemic, the Board decided that while the strategic gearing level remained unchanged, the tactical level of gearing would be amended to 5% while the permitted range around this level would be plus or minus 5%. This meant that over the short term gearing could vary between 0% and 10% and it currently stands at 5% at the time of writing. The average gearing level in the period has been 4.6%. The purpose of the wide range around the central level of 5% is to give the Manager some additional flexibility in the current market conditions.
The Company's gearing strategy is implemented through the use of bank borrowing facilities, with the Company currently having access to a £80 million floating rate debt facility with ING Bank expiring in August 2022. The Company also has available $65 million fixed-rate unsecured loan notes via a private placement with a UK based life assurance company at a fixed interest rate of 2.55% per annum. These notes, which are due for repayment in February 2031, provide the Company with long-dated, fixed-rate financing at an attractive rate of interest over the term of the notes, diversifying the source, tenor and cost of the leverage available to the Company. With the increase in the Company's net assets, the Board is currently considering options for further debt facilities which will enable the strategic gearing level of 10% to be attained if desired. Shareholders will be kept up to date with any new facilities which are put into place.
Annual General Meeting
At the AGM held on 14th May 2021, all resolutions were duly passed by shareholders. Circumstances meant that only a purely functional meeting could be held and I am grateful to shareholders for their support and forbearance in light of the pandemic. Prior to the AGM, we held a webinar for shareholders and other interested parties on 28th April 2021, which included a presentation from our two investment managers, Timothy Parton and Jonathan Simon. This was followed by a live question and answer session. The recording of the presentation is available on our website (www.jpmamerican.co.uk) for those who were not able to attend. I would also encourage shareholders to regularly visit our website for updated information on the Company.
ESG
As reported in the 2020 Annual Report, the Board has noted with approval the increasing attention paid by the Manager to Environmental, Social and Governance (ESG) issues in their research process and stock selection decisions for the Company's portfolio. In the current period two stocks, Marathon Petroleum and Raytheon Technologies, were exited substantially on poor ESG grounds. The Manager's report below has more information on these decisions. In the Annual Report for 2021 we will expand further on the evolving incorporation of ESG factors into the construction and management of the Company's portfolio.
Board
As mentioned in the Annual Report, Mr. Simon Bragg, current Audit Committee Chair, will be retiring from the Board later this year, on 31st August 2021. Ms. Claire Binyon, who joined the Board on 1st June 2020, will then become the new Audit Committee Chair. Shareholders will be kept up to date with recruitment plans to the Board as these evolve.
On behalf of the Board and all shareholders I would like to record our sincere thanks to Simon for his expert leading of the Audit Committee and his significant contribution to the Company's affairs during his nine years on the Board. Simon made a critical contribution to the process that resulted in the Company's changed investment policy in June 2019, including the negotiations at the time with the Manager involving new fee arrangements. He has also been a significant architect of the way the Company has executed its share buyback strategy in past years.
Outlook
After the strong start to 2021 the US stockmarket appears to be entering a period of consolidation and potentially higher volatility as the 'debate' about the strength of the economic recovery, the persistence of heightened inflation, and the evolution of the Delta virus weigh upon investors' thinking. It seems likely that there will be further periods of alternating relative strength between growth and value stocks. Fortunately the Company's investment policy has explicit exposure to both of these investing styles and the managers will be able to continue their focus of bottom up stock picking in this environment without undue concern about these style rotations.
Dr Kevin Carter
Chair 23rd August 2021