JPMorgan Amer InvTst - Annual Financial Report
27/03/2024 07:00
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RNS Number : 4194I JPMorgan American IT PLC 27 March 2024
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 1(st) 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
INVESTMENT MANAGER'S REPORT
Market Review
The year just past was a strong one for most equity markets, with the S&P
500 Index boasting a double-digit return of +26.2% in US dollars, and +19.2%
in sterling. Despite a period of turbulence in February and March 2023, when a
large west coast regional bank fell victim to the US Federal Reserve's (Fed)
aggressive tightening cycle, raising fears of much broader financial sector
instability, the market resumed its recovery from its 2022's lows. Declining
inflation and the promise of lower interest rates were the primary market
drivers, further supported by the new secular growth opportunity created by
the arrival of accessible generative artificial intelligence (Gen AI) tools.
The index performance was heavily dominated by the 'Magnificent 7' - Apple,
Microsoft, Amazon, Alphabet, NVIDIA, Meta Platforms and Tesla - whose combined
weight now comprises 28% of the S&P 500; these contributed a striking 83%
of the index's performance for the year.
The US economy proved to be more resilient in the face of aggressive monetary
tightening than many expected, as the much-anticipated full-scale US recession
has yet to materialise. But, as in the late 1980s, the economy did experience
rolling recessions across a range of industries, most notably housing, and a
very significant and widespread inventory correction, as supply chains
normalised following their pandemic-induced disruptions. The Fed's work on
inflation seems to be done, as the CPI has retreated from a peak of 9.1% in
June 2022 to 3.4% in December 2023, with further reductions in the pipeline
and numerous deflationary influences emerging.
US corporate earnings have also been stronger than expected. Earnings
forecasts for 2023 increased steadily over the course of the year as recession
fears and elevated costs subsided. Technology spending has begun to
reaccelerate after a period of optimisation and digestion, while significant
government spending programs around clean energy and reshoring of strategic
manufacturing have supported very strong capital spending by businesses.
The sharp rise in interest rates by the Fed created considerable challenges
that were felt most acutely in parts of the regional banking sector,
precipitating the dramatic failure of three banks - Silicon Valley Bank, First
Republic and Signature Bank - in the early part of the year. Monetary
tightening phases such as this one have a history of triggering high profile
failures, from Long Term Capital Management in 1998, to Lehman Brothers, Bear
Stearns and Washington Mutual in 2008. Interest rate pressure on regional
banks, and banks in general, directly impacts their willingness to lend. Not
surprisingly, bank lending surveys highlight that corporate lending standards
have tightened meaningfully, and that lending by small banks, particularly
lending for commercial real estate, is very constrained. Private credit funds
have partially stepped in to fill that vacuum, but more for commercial and
industrial business loans.
As mentioned previously, the stock market rebound was fuelled significantly by
the 'Magnificent 7', whose average return for the year was 76%, nearly three
times the return for the S&P 500. This resurgence in the mega cap tech
stocks was partly triggered by the launch of ChatGPT, which showcased recent
breakthroughs in generative AI. For the first time, individuals have direct
access to the underlying large language model that can answer complex
questions and solve problems. Companies across almost all industries have
begun to invest in AI; there appears to be considerable risk in not doing so.
The competitive disruption and the potentially favourable impact on
productivity that AI will herald are very hard to estimate but could be quite
substantial. Timing is also hard to assess.
It is no surprise given the dominance of AI that the best performing sectors
for the S&P 500 in 2023 have been tech-driven, with information
technology, communication services and consumer discretionary stocks all up
more than 40%. Energy, which was the best performing sector in 2022, was one
of the worst performers over the past year, registering a 1.3% decline due to
the drop in oil prices and fears of an economic slowdown. Defensive stocks did
not fare well either, with utilities suffering a 7% decline. Despite the
turmoil in the banking sector, financials finished the period up 13%.
Large cap stocks, as represented by the S&P 500 Index, outperformed the
small cap Russell 2000 Index, returning +26.1% compared to the 16.9% rise in
small caps. In a reversal of 2022's outcome, Value names lagged Growth by a
wide margin, as the Russell 3000 Value Index returned +11.7% while the Russell
3000 Growth Index returned +41.2%.
The following tables provide an overview of the returns of different
investment styles in the US market during 2023, as well as the sector
performance of the S&P 500.
2023 US Equities Style performance (US$)
2023 Value Blend Growth
Large 11.5% 26.3% 42.7%
Mid 12.7% 17.2% 25.9%
Small 14.6% 16.9% 18.7%
2023 S&P 500 Index performance (US$)
Source: FactSet, Russell Investment Group, Standard & Poor's, Wilshire,
J.P. Morgan Asset Management. Data as of 31st December 2023. All calculations
are cumulative total return, including dividends reinvested for the stated
period. For all time periods, total return is based on Russell style indices
with the exception of the large blend category, which is based on the S&P
500 Index. Past performance is not a reliable indicator for current and future
performance.
Performance and Overall Asset Allocation
The Company's net asset value rose 24.7% on a total return basis in 2023,
significantly outpacing the 18.9% return of the S&P 500 Index. This result
means that 2023 was the fourth year out of the past five that the Company has
delivered double digit returns.
The large cap portion of the portfolio, which at over 90% of the Company's
assets is its biggest allocation, added the most value over the period.
Gearing was also additive given the market's rally. The Company's small cap
allocation, which averaged approximately 7% over the period, detracted from
relative returns.
Performance attribution
For the year ended 31st December 2023
% %
Contributions to total returns
Net asset value (debt at fair value) total return
in sterling terms(APM) 24.7
Benchmark total return (in sterling terms) 18.9
Excess return 5.8
Combined Portfolio return in US dollar terms(1) 33.4
Benchmark total return in US dollar terms 26.0
Combined Portfolio relative return in US dollar terms 7.4
Large & Small Cap Portfolio contribution(2):
Large Cap Portfolio in US dollar terms 8.4
Small Cap Portfolio in US dollar terms -1.0
Combined Portfolio relative return in US dollar terms 7.4
Contributions to return
Equity portfolio (ex-cash and gearing) in US dollar terms 5.5
Cash and gearing impact in US dollar terms(3) 1.9
Combined Portfolio relative return in US dollar terms 7.4
Effect of foreign currency translation(4) -0.4
Combined Portfolio relative return in sterling terms 7.0 7.0
Management fee and other expenses(5) -0.4
Finance costs(5) -0.4
Share buybacks(6) 0.1
Impact of fair valuation of debt(7) -0.5
Total 5.8
Source: J.P. Morgan/Morningstar.
All figures are on a total return basis. Performance attribution analyses how
the Company achieved its recorded performance relative to its benchmark.
(1) The aggregated returns of both the Large Cap and Small Cap
portfolios.
(2) The split of returns by portfolio, relative to the benchmark. This
has been calculated using the average weighting of the Large Cap and Small Cap
portfolios over the year.
(3) Cash and gearing - measures the impact on returns of the principle
amount of borrowings or cash balances on the Company's relative performance.
(4) Effect of foreign currency translation - measures the impact of
currency exposure differences between the Company's portfolio and its
benchmark.
(5) Management fee, other expenses and finance costs - the payment of
fees, expenses and finance costs (interest paid on borrowings) reduces the
level of total assets, and therefore has a negative effect on relative
performance.
(6) Share buybacks - measures the enhancement to net asset value per
share of buying back the Company's shares for cancellation at a price which is
less than the Company's net asset value per share.
(7) The impact of fair valuation includes the effect of valuing the
combined US$100m private placements at fair value.
(APM) Alternative Performance Measure ('APM').
Large Cap Portfolio
The decisive outperformance by the large company portion of the portfolio over
the review period was mainly driven by good stock selection.
Strong stock-specific contributors included NVIDIA, the leading producer of
graphics processing units (GPUs), a class of semiconductors originally
developed for video gaming applications, but now predominantly deployed in
large data centre applications. NVIDIA's share price rallied over 200% for the
year, reflecting a sequence of huge positive earnings revisions. The highly
computer-intensive workloads undertaken by the hyperscale cloud service
providers (Amazon, Microsoft, Alphabet, etc.) require the much faster
processing speeds offered by parallel-processing GPUs. This requirement is
massively magnified when the application in question is the training of a
large language model (LLM) for generative AI, and NVIDIA is almost the only
provider of these applications.
Our overweight position in the semiconductor company Advanced Micro Devices
proved beneficial. It is known for designing and developing computer
processors and graphic technologies. The company reported strong performance
throughout the year. Tailwinds from AI optimism and a positive guidance on the
sales of AI chips for the next year, contributed to the rally.
Another top contributor was cyber security company Palo Alto Networks. The
prevalence, scope and impact of cyber-attacks continues to rise, and digital
security is now a top IT budget priority for all businesses and government
agencies. Palo Alto offers the most comprehensive suite of solutions for
larger private and public organisations. Another top contributor was online
travel services provider Booking Holdings. This company reported record
earnings throughout the year, surpassing 2019 levels as the post-COVID travel
boom continued. Like many leading companies, Booking has emerged from the
pandemic in a more favourable competitive position.
Portfolio holdings that detracted from returns during the year included
multinational pharmaceuticals company Bristol-Myers Squibb, and financial
services company Bank of America. Bristol-Myers is in transition from a
reliance on more mature products to newly launched ones, and the performance
of these new lines of business has lagged expectations. The stock's share
price decline over the year reflects these setbacks. However, we have
maintained our holding due to our ongoing confidence in the long-term outlook
for this business and the stock's unassuming valuation. Bank of America's
stock was impacted early in the year by the previously mentioned regional bank
failures, but rallied quite strongly in the fourth quarter, to end the year
essentially flat. We remain comfortable with our position in this leading
financial institution.
Performance was also hindered by our exposure to SolarEdge Technologies. This
company provides electrical inverters that convert DC power from solar panels
to AC power for domestic and commercial use. The solar market corrected during
the year due to regulatory changes in certain key US states, general economic
weakness and intensifying competition in Europe. SolarEdge's failure to
address these challenges meant that the company no longer qualified as a 'best
idea' in the growth sleeve of the portfolio, and so was sold.
Large Cap Portfolio Stock Attribution
For the year ended 31st December 2023
Relative weight Stock return Impact
Top Contributors (%) (%) (%)
NVIDIA 0.4 239.0 1.4
Advanced Micro Devices 1.8 127.6 1.2
Palo Alto Networks 1.6 111.3 1.1
Booking Holdings 1.4 76.0 0.7
Martin Marietta Materials 1.9 48.6 0.6
Relative weight Stock return Impact
Top Detractors (%) (%) (%)
Bristol Myers Squibb 1.4 -26.2 -0.9
Bank of America 1.6 4.8 -0.7
Xcel Energy -0.1 -11.6 -0.6
SolarEdge Technologies 0.0 -33.0 -0.6
Kinder Morgan 2.3 4.1 -0.6
Source: Wilshire. It is shown for illustrative purposes only and is not meant
to be representative of actual results. The portfolio is actively managed.
Holdings, sector weights, allocations and leverage, as applicable, are subject
to change at the discretion of the investment manager without notice. Past
performance is not a reliable indicator of current and future results.
Portfolio Activity
The market pullback in 2022 created some opportunities to acquire attractive,
higher growth companies at more reasonable prices. As always, we remain very
selective, only adding names with differentiated and compelling fundamentals.
Over the past year we purchased eleven new names and exited the same number.
One important re-acquisition early in the year was Meta Platforms, the holding
company for Facebook, Instagram, WhatsApp, Reels and the Oculus virtual
reality product line. After a challenging period for growth and profitability,
the company implemented measures to rein in capital expenditure and operating
expenses. It has also deployed more AI tools to enhance advertising placement,
support user protection and improve the on-line experience. To us, the company
seems re-energised and growth has reaccelerated. Its valuation remains
attractive and estimates are being revised higher as the recovery becomes more
apparent. Meta has faced numerous headwinds in the last couple of years,
including increasing competition from TikTok, the negative impact of Apple's
IDFA (Identification for Advertisers) changes, a weaker than expected
advertising environment, and concerns over its ambitions related to virtual
reality and the 'metaverse'. Now many of those headwinds have eased and the
company is able to play more offense.
The purchase of Meta was funded by the sale of Zoom Video Communications. Zoom
provides one of the two main video communications platforms, along with
Microsoft Teams, that became a must-have during the pandemic for a massively
expanded customer base of home-based and hybrid workers.
Zoom's value proposition to enterprises is compelling, as video conferencing
remains a very viable alternative to face-to-face meetings, and working from
home remains popular amongst many workers. However, video conferencing has
become another of the business applications that Microsoft is willing to
bundle with its broader enterprise offering, at no additional cost. Especially
in the small/medium business space, it is just very difficult for Zoom to
compete with free.
We also introduced a position in Intuit to the portfolio in March, funded by
exiting Ingersoll Rand. Intuit is the dominant provider of personal tax
preparation software, via its TurboTax offering. It is also the default choice
of small business accounting and other software packages, providing
QuickBooks, QuickBooks Online and now Mailchimp, and runs a personal finance
platform, Credit Karma. We believe the durability of QuickBooks's double digit
revenue growth over the next few years is underestimated by the market. The
company is well-positioned to benefit from the favourable tailwinds supporting
small/medium sized businesses. We view Intuit as a very high-quality company
with a relatively defensive business model, whose P/E valuation had corrected
back to 2018 levels. Yet it is offering a potential 10% revenue growth and
mid/high teens earnings growth.
We sold our position in Ingersoll Rand, a leading player in the compressor
industry. Compressors are fundamental to most manufacturing and other
industrial processes, and there is now a clear replacement cycle in favour of
newer, more energy-efficient models. However, the disposal was motivated by
some concerns, albeit so far unjustified, that the company might experience a
cyclical slowdown and an inventory correction in its distribution channels.
We also purchased Regency Centers, a real estate investment trust that owns
and operates retail shopping centres. We initiated our position in the stock
due to its superior property portfolio and balance sheet strength. The
company's tenants focus on necessity, service, convenience and value, to serve
the essential needs of the communities in which it has locations. Most of its
centres are in suburban areas with strong demographics and populations with
above average income levels.
To accommodate Regency Centers, we exited T-Mobile, the US's number three
wireless communications company, behind Verizon and AT&T. The company has
increased its market share aggressively, but additional accelerated growth is
likely to be harder to realise.
Within the energy sector, during the second half of the year, we bought EOG
Resources, funded by the sale of ConocoPhillips. Both companies engage in the
exploration, production and marketing of crude oil and natural gas. We view
EOG as one of the best operators in this commodity business, with a highly
differentiated culture of innovation, technology leadership, and a very
sophisticated approach to capital allocation. With over ten years of
inventory, we expect EOG Resources to make capital investments with high
returns and low reinvestment risk. We now see a more attractive risk/reward
opportunity in this name than in ConocoPhillips.
We also initiated a position in Ross Stores, an operator of discount retail
apparel and home accessories stores. Ross sells an ever-changing selection of
goods, substantially below department store prices, to a lower-income
demographic. The post-COVID period has been particularly favourable for
discount retailers, as they help other retailers clear excess inventory that
flooded in once supply chains reopened. Department stores are losing market
share over the long term as we believe they will continue to experience
reduced sales growth and Ross has ample opportunity to continue to expand its
store network, while deploying free cash flow to repurchase shares and further
enhance earnings per share growth.
To fund the acquisition of Ross Stores, we sold our position in DexCom, a
medical device company that provides continuous glucose monitors for use by
diabetics, to help them manage their disease more precisely. The stock has
been under pressure driven by the view, which we share, that new weight-loss
drugs are likely to reduce the incidence of Type 2 diabetes - a welcome
development, but one which will lower demand for DexCom's products.
In a related area of the healthcare sector, we established a position in Eli
Lilly, funded by the sale of our holding in Intuitive Surgical. Eli Lilly is a
major pharmaceutical company focused on diabetes, oncology, immunology and
neuroscience. The company has recently emerged as a leader in the field of
GLP-1 drugs, derived from compounds used to treat diabetes, which have shown
dramatic results in the successful treatment of obesity and related diseases.
These therapies must be administered indefinitely to be effective, creating
very large and long-term market opportunities. The health benefits are,
however, striking and the cost, while high, appears to be justified - this
class of drugs may be one of the most significant healthcare innovations in
decades. Intuitive Surgical is the dominant leader in robotic surgery systems.
Despite reporting earnings in line with analysts' expectations, the stock has
been under pressure due to the perceived impact of GLP-1s on bariatric, and
potentially other, surgical procedures.
In the utility sector, we replaced Xcel Energy with NextEra Energy. NextEra
Energy is the world's largest generator and supplier of clean, renewable
energy: wind and solar. The company is expected to be one of the largest
utility company beneficiaries of the Inflation Reduction Act, which offers
substantial tax credits for clean energy investments. A long-time high-flyer,
NextEra's stock suffered a substantial correction as higher interest rates and
scarcer capital availability raised questions about the returns on large solar
projects. This seemed to us to be a market over-reaction to a near-term and
temporary setback for a sector with undisputed viability over the longer-term.
Xcel Energy is also a large electricity utility, focused on central US
markets, but it lacks NextEra's scale of growth opportunities and its
technical expertise in renewables.
We also exited Charter Communications to fund the purchase of United Parcel
Service. Like many cable companies, Charter has faced a slowly decaying base
of home video customers (a phenomenon known as 'cord cutting'). Competition
also seems to be increasing in the higher growth broadband-only market, with
attractive new fixed and satellite-based wireless offerings in the market. We
bought United Parcel Service, the leading logistics and package delivery
company. We were attracted to the company on account of its strengthened
management team and its focus on improving the quality and profitability of
its revenue rather than concentrating purely on growing volumes.
One of the more recent portfolio adjustments has been the initiation of a
position in Broadcom, funded by our exit from Oracle. Oracle provides software
products and services that address many core corporate IT requirements. We
purchased the stock earlier in 2023, on the view that companies with legacy
Oracle solutions might find it convenient to stay with Oracle as they
transitioned from site-based facilities to more efficient cloud-based
services. However, the company has experienced some execution issues in the
pace of that cloud migration and we question their ability to truly compete
with very strong, established cloud competitors. We perceived a more
attractive opportunity in Broadcom, a global manufacturer and supplier of
certain key semiconductor categories, and also certain enterprise software
tools. The key defining characteristics of Broadcom (formerly Avago Systems),
have been best in class management, a very close partnership with customers,
relentless cost control and very strategic and thoughtful capital allocation.
We believe Broadcom has a sustainable franchise with very high market shares,
and we are excited about the earnings accretion from the recent large
acquisition of VMWare, a cloud service provider.
Value and growth exposure
The large cap portfolio is divided between value and growth stocks, with the
allocation allowed to vary between 60:40 and 40:60. At the end of the review
period, value stocks comprised some 46% of the large cap portfolio, and growth
stocks were higher, with a 54% allocation. This is close to the current
growth/value split of the S&P500 index. The graph is included in the
Annual Report.
Portfolio Holdings
Large Cap Portfolio
As at 31st December 2023
This table is included in the Annual Report.
The table below shows that the large cap portfolio at the year end was trading
at a 29% discount to the market on a free cash flow basis, which confirms that
we are not paying a premium for good cash flow. The portfolio is expected to
deliver earnings growth of around 14% for the next 12 months, which is in line
with the market, however, both of these figures are based on consensus
earnings, which may need to be revised. It is comforting to have the valuation
cushion provided by our holdings, relative to the market.
Characteristics Large Cap Portfolio S&P 500
Weighted Average Market Cap US$564.8bn US$588.9bn
Price/Earnings, 12-month forward1 16.7x 16.7x
Price/Free Cash Flow, last 12-months 12.2x 17.1x
EPS Growth, 12-month forward 13.9% 14.2%
Return on Equity, last 12-months 25.2% 24.5%
Predicted Beta 1.02 -
Predicted Tracking Error 2.32 -
Active Share 62% -
Number of holdings 40 500
Source: FactSet, Barra, J.P. Morgan Asset Management. Data as of 31st December
2023.
1 Including negatives.
Small Cap Portfolio
The small cap portfolio negatively impacted returns over the review period, as
it underperformed the S&P 500. The overall allocation to the small cap
portfolio was maintained at approximately 5.0% during the first six months of
the year. As the small cap selloff intensified, the allocation was increased
due to the attractive opportunities emerging in this space, and we ended the
year with an allocation of 6.5%.
Small cap valuations now look very compelling relative to large caps and we
have experienced a prolonged period of large cap stocks outperforming small
cap stocks. It feels like the stage is starting to be set for a reversal,
although timing is always hard to predict.
For more than 30 years, the Company's small cap allocation comprised small cap
growth stocks. However, in the fourth quarter of 2023, we added a small cap
value strategy to the small cap allocation, to bring the overall small cap
allocation towards a more blended style. We believe this is a more
complementary fit with the profile of the large cap portfolio.
Outlook
The US economy has so far held up better than many expected, and diminishing
inflation pressures, combined with improved growth prospects have fuelled
hopes of a soft landing. The unemployment rate has remained in a narrow range
between 3.4% and 4.0% since December 2021, and could stay in this range in the
year ahead.
However, the pace of job creation is likely to slow, so consumer spending
could grow more slowly, especially as we expect banks to gradually tighten
lending standards. However, while younger and lower income households are
showing signs of increased financial stress, overall consumer financial
conditions remain quite manageable, and with interest rates set to decline, we
do not expect to see an outright decline in consumer spending.
Inflation should continue its steady downward trend. Last year, reported
inflation was boosted by several factors, including its large housing
component, which significantly lags actual house prices and rent levels. A
restricted supply of new and used cars also contributed to inflation
pressures, as did faster wage growth and a sustained resurgence in airline
travel following the pandemic. However, all these trends are now abating,
suggesting that inflation will continue to moderate in the year ahead.
Oil prices have fallen back within a more normal range of US$ 70-80 per barrel
for West Texas Intermediate crude. Going forward, the combination of a
sluggish global economy and increased output from the US and non-OPEC nations
should more than offset any further reductions in OPEC and Russian output,
holding oil prices in check.
This combination of factors - a soft landing, lower inflation, falling rates
and relatively stable oil prices might appear to offer a 'Goldilocks' scenario
for the stock market; not too hot and not too cold. The market's valuation
certainly reflects a more optimistic consensus, although the headline number
is boosted by some multiple expansion for the highflying Magnificent 7, with
other areas of the market still offering attractive investment opportunities.
There are certainly many potential risks to a rosy outlook, including the US
presidential election, the lagged impact of higher interest rates, an
expanding fiscal deficit and very significant geopolitical tensions. But the
market is often said to climb a wall of worry, and in the current instance
such worries have resulted in the accumulation of vast amounts of cautious
cash enjoying safe, but unexciting 5.0% money market returns. As money market
returns begin to track the Fed fund rate lower, at least some of this cash is
likely to be tempted back to the more compelling and rewarding opportunities
on offer in US equity markets. Our portfolio should benefit accordingly.
Jonathan Simon
Felise Agranoff
Portfolio Managers
26th March 2024
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they have carried out a robust assessment of the
principal and emerging risks facing the Company, including those that could
threaten its business model, future performance, solvency or liquidity. The
risks identified and the ways in which they are managed or mitigated are
summarised below.
With the assistance of JPMF, the Risk Committee, chaired by Sir Alan Collins
until May 2023 and thereafter by Mr Robert Talbut, has drawn up a risk
matrix, which identifies the principal and emerging risks to the Company.
These are reviewed and discussed on a regular basis by the Board.
These risks fall broadly into the following categories:
Principal risk Description Mitigating activities
Investment Strategy and Resources
Investment Process and Strategy An inappropriate investment strategy, poor asset allocation or the level of The Board mitigates this risk through its investment policy and guidelines,
gearing, may lead to underperformance against the Company's benchmark index which are monitored and reported on regularly by the Managers. The Board
and its peer companies, resulting in the Company's shares trading on a wider monitors the implementation and results of the investment process with the
discount. Portfolio Managers and reviews data which details the portfolio's risk
profile. The Manager deploys the Company's gearing within a range set by the
Board.
Loss of Investment Team or Investment Manager The sudden departure of or failure to adequately replace one or both of the The Manager has a depth of experienced investment resources and takes steps to
Senior Portfolio Managers or several members of the wider investment reduce the likelihood of such an event by ensuring appropriate succession
management team could result in a short term deterioration in investment planning and the adoption of a team-based approach.
performance.
Technological Change and or Disruption Changes in technology may disrupt the business of investee companies impacting The Manager has extensive research resources focused on technology.
their market value.
ESG Requirements From investors The Company's policy on ESG and climate change may be out of line with The Board liaises closely with the Managers on this to understand the ESG
investors' expectations. integration process and shareholder expectations.
Performance
Market Market risk arises from uncertainty about the future prices of the Company's The Board and Manager monitor and review these market risks and their
investments. This market risk comprises three elements - equity market risk, potential impact on the portfolio. This is a risk that investors take having
currency risk and interest rate risk. invested into a single country fund
Share Price Relative to Net Asset Value The shares trading on an excessive discount or premium to Net Asset Value can The Board monitors the Company's premium/discount level and is committed to
negatively impact shareholders. buy-back shares when they stand at anything more than a small discount, and
also to issue shares at a premium where the Board is confident of sustainable
market demand, to enhance the NAV per share for remaining shareholders.
Regulatory, Compliance & Operational
Operational and Cybercrime Disruption to, or failure of, the Manager's accounting, dealing or payments The Board has received the cyber security policies for its key third party
systems or the custodian's or depositary's records could prevent accurate service providers and the Manager has assured the Directors that the Company
reporting and monitoring of the Company's financial position. The Company is benefits directly or indirectly from all elements of JPMorgan's Cyber Security
dependent on third parties for the provision of all of its services and programme. The Board keeps the services of the Manager and third-party
systems, especially those of the Manager, the Administrator and the suppliers under continuous review and receives regular control reports.
Depositary.
Accounting, Legal and Regulatory Compliance In order to qualify as an investment trust, the Company must comply with The Section 1158 qualification criteria are continually monitored by the
Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Manager and the results reported to the Board each month. In addition, the
Board seeks to ensure compliance with all relevant regulation and legislation
in the UK, Europe and the US and relies on the services of its Manager, and
its professional advisers to monitor compliance with all relevant
requirements.
Geopolitical, Macro and Other Exogenous Issues
There are numerous risks of this type. Below are some examples. There is little direct control of this type of risk possible but it is
important to monitor them.
Legislative and Regulatory Change Changes in legislation, including in the US, UK and the European Union, may The Board continues to monitor changes to the regulatory, legislative and
adversely affect the Company either directly or because of restrictions or taxation framework within which it operates, whether such changes were
enforced changes on the operations of the Manager. designed to affect it or not. In order to do this, the Board draws on the
expertise and advice of its professional advisers, including the Manager.
Widespread Social and Economic Disruption Recent examples of the Global Financial Crisis or the Covid-19 pandemic may The Board monitors the effectiveness and efficiency of service providers'
have ended or abated but disruption may reoccur for several reasons. disaster recovery processes through ongoing compliance and operational
reporting.
Climate Change Climate change has become one of the most critical issues confronting The Manager's investment process integrates ESG factors including climate
companies which could present a material risk to the value of investee change into its approach to assess the potential impact on investee companies.
companies.
Geopolitical There is an increasing risk to market stability and investment opportunities The Company addresses these global developments in regular questioning of the
from geopolitical conflicts, such as between Russia and the Ukraine, China and Manager and with external expertise and will continue to monitor these issues.
Taiwan, China and the US, and the turmoil in the Middle East.
Artificial Intelligence (AI) Advances in computing power means that AI has become a powerful tool that will The Board works with the Manager to monitor developments concerning AI as its
impact a huge range of areas and with a wide range of applications that use evolves and considers how it might threaten the Company's activities,
include the potential to disrupt and even to harm. which may, for example, include a heightened threat to cybersecurity.
Emerging risk Description Mitigating activities
Threat to liberal democracies There appears to be an increasing threat to a number of western democracies, The Board will monitor developments in this area carefully both in conjunction
including the US, as a result of the growing influence of populist, with the Manager and other external experts when appropriate, and consider how
nationalistic politicians. In addition, there would appear to be a heightened this risk might threaten the Company's activities.
threat to the orderly democratic process, which is particularly relevant given
this year's US Presidential election.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report in the
Annual Report. The management fee payable to the Manager for the year was
£4,261,000 (2022: £4,329,000) of which £nil (2022: £nil) was outstanding
at the year end.
Included in administration expenses in note 6 in the Annual Report are safe
custody fees amounting to £15,000 (2022: £12,000) payable to JPMorgan Chase
Bank N.A. of which £5,000 (2022: £2,000) was outstanding at the year end.
Handling charges on dealing transactions amounting to £12,000 (2022:
£11,000) were payable to JPMorgan Chase Bank N.A during the year of which
£5,000 (2022: £3,000) was outstanding at the year end.
The Company also holds cash in the JPMorgan USD Liquidity LVNAV Fund, which is
managed by JPMF. At the year end this was valued at £33.9 million (2022:
£33.8 million). Income amounting to £1,648,000 (2022: £611,000) was
receivable during the year of which £nil (2022: £131,000) was outstanding at
the year end.
At the year end, total cash of £280,000 (2022: £1,079,000) was held with
JPMorgan Chase Bank N.A.. The net amount of interest of £6,000 (2022:
£1,000) was receivable by the Company during the year from JPMorgan Chase of
which £nil (2022: £nil) was outstanding at the year end.
Full details of Directors' remuneration can be found in the Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report & Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare the Annual Report &
Financial Statements for each financial year. Under that law, the Directors
have elected to prepare the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the Directors must not
approve the Financial Statements unless they are satisfied that, taken as a
whole, the Annual Report & Financial Statements are fair, balanced and
understandable, provide the information necessary for shareholders to assess
the Company's position, performance, business model and strategy and that they
give a true and fair view of the state of affairs of the Company and of the
total return or loss of the Company for that period. In order to provide these
confirmations, and in preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the Company will continue in business
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The accounts are published on the www.jpmamerican.co.uk website, which is
maintained by the Company's Manager. The maintenance and integrity of the
website maintained by the Manager is, so far as it relates to the Company, the
responsibility of the Manager. The work carried out by the Auditor does not
involve consideration of the maintenance and integrity of this website and,
accordingly, the Auditor accepts no responsibility for any changes that have
occurred to the accounts since they were initially presented on the website.
The accounts are prepared in accordance with UK legislation, which may differ
from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for
preparing a Directors' Report, Strategic Report, Statement of Corporate
Governance and Directors' Remuneration Report that comply with that law and
those regulations.
Each of the Directors, whose names and functions are listed in the Annual
Report on page 47, confirms that, to the best of their knowledge:
• the financial statements, which have been prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), give a true and fair view of the
assets, liabilities, financial position and return or loss of the Company; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
The Board confirms that it is satisfied that the Annual Report & Financial
Statements taken as a whole are fair, balanced and understandable and provide
the information necessary for shareholders to assess the strategy and business
model of the Company.
The Board also confirms that it is satisfied that the Strategic Report and
Directors' Report include a fair review of the development and performance of
the business, and the position of the Company, together with a description of
the principal risks and uncertainties that the Company faces.
For and on behalf of the Board
Dr Kevin Carter
Chair
26th March 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st December 2023
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value
through profit or loss - 304,636 304,636 - (144,183) (144,183)
Net foreign currency gains/(losses) - 5,078 5,078 - (8,319) (8,319)
Income from investments 16,519 1,214 17,733 18,883 1,063 19,946
Interest receivable 1,654 - 1,654 612 - 612
Gross return/(loss) 18,173 310,928 329,101 19,495 (151,439) (131,944)
Management fee (852) (3,409) (4,261) (866) (3,463) (4,329)
Other administrative expenses (1,053) - (1,053) (835) 48 (787)
Net return/(loss) before finance costs and taxation 16,268 307,519 323,787 17,794 (154,854) (137,060)
Finance costs (627) (2,506) (3,133) (651) (2,607) (3,258)
Net return/(loss) before taxation 15,641 305,013 320,654 17,143 (157,461) (140,318)
Taxation charge (1,429) (909) (2,338) (2,943) (326) (3,269)
Net return/(loss) after taxation 14,212 304,104 318,316 14,200 (157,787) (143,587)
Return/(loss) per share 7.73p 165.41p 173.14p 7.42p (82.45)p (75.03)p
The dividends payable in respect of the year ended 31st December 2023 amount
to 7.75p (2022: 7.25p) per share, costing £14,152,000 (2022: £13,746,000).
Details of dividends paid and proposed are given in note 2.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
The net return/(loss) after taxation represents the profit/(loss) for the year
and also the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
Called up Capital
share Share redemption Capital Revenue
capital premium reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31st December 2021 14,082 151,850 8,151 1,292,152 29,885 1,496,120
Repurchase of shares into Treasury - - - (35,032) - (35,032)
Net (loss)/return - - - (157,787) 14,200 (143,587)
Dividends paid in the year (note 2) - - - - (13,418) (13,418)
At 31st December 2022 14,082 151,850 8,151 1,099,333 30,667 1,304,083
Repurchase of shares into Treasury - - - (45,108) - (45,108)
Net (loss)/return - - - 304,104 14,212 318,316
Dividends paid in the year (note 2) - - - - (13,292) (13,292)
At 31st December 2023 14,082 151,850 8,151 1,358,329 31,587 1,563,999
STATEMENT OF FINANCIAL POSITION
At 31st December 2023
2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 1,608,263 1,381,109
Current assets
Debtors 789 938
Cash and cash equivalents 34,207 34,884
34,996 35,822
Current liabilities
Creditors: amounts falling due within one year (1,121) (30,083)
Net current assets 33,875 5,739
Total assets less current liabilities 1,642,138 1,386,848
Creditors: amounts falling due after more than one year (78,139) (82,765)
Net assets 1,563,999 1,304,083
Capital and reserves
Called up share capital 14,082 14,082
Share premium 151,850 151,850
Capital redemption reserve 8,151 8,151
Capital reserves 1,358,329 1,099,333
Revenue reserve 31,587 30,667
Total shareholders' funds 1,563,999 1,304,083
Net asset value per share - debt at par 856.5p 690.3p
STATEMENT OF CASH FLOWS
For the year ended 31st December 2023
2023 2022(1)
£'000 £'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation 323,787 (137,060)
Adjustment for:
Net (gains)/losses on investments held at fair value through profit or (304,636) 144,183
loss
Net foreign currency exchange (gains)/losses (5,078) 8,319
Dividend income (17,733) (19,946)
Interest income (1,654) (612)
Realised foreign currency exchange losses on transactions (756) (1,022)
Realised foreign currency exchange (losses)/gains on JPMorgan
USD Liquidity Fund (596) 3,739
Increase in accrued income and other debtors (14) (29)
Increase/(decrease) in accrued expenses 214 (56)
Net cash outflow from operations before dividends and interest (6,466) (2,484)
Dividends received 14,423 16,413
Interest received 1,656 481
Overseas withholding tax recovered 1,182 167
Net cash inflow from operating activities 10,795 14,577
Purchases of investments (625,714) (496,876)
Sales of investments 703,254 540,264
Net cash inflow from investing activities 77,540 43,388
Dividends paid (13,292) (13,418)
Repurchase of shares into Treasury (45,108) (35,036)
Repayment of bank loan (26,929) (78,558)
Draw down of bank loan - 78,596
Loan interest paid (1,269) (906)
Private placement interest paid (2,007) (1,995)
Net cash outflow from financing activities (88,605) (51,317)
(Decrease)/increase in cash and cash equivalents (270) 6,648
Cash and cash equivalents at start of year 34,884 28,355
Foreign currency exchange movements (407) (119)
Cash and cash equivalents at end of year 34,207 34,884
Cash and cash equivalents consist of:
Cash and short term deposits 280 1,079
Cash held in JPMorgan USD Liquidity Fund 33,927 33,805
Total 34,207 34,884
(1) The presentation of the Cash Flow Statement, as permitted under
FRS 102, has been changed so as to present the reconciliation of 'net
return/(loss) before finance costs and taxation' to 'net cash inflow from
operating activities' on the face of the Cash Flow Statement. Previously, this
was shown by way of note. Interest paid has also been reclassified to
financing activities as this relates to the bank loans and private placement
note. Previously, this was shown under operating activities. Other than
changes in presentation of the certain cash flow items, there is no change to
the cash flows as presented in previous periods.
Analysis of change in net debt
As at Other As at
31st December non-cash 31st December
2022 Cash flows charges 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash and short term deposits 1,079 (799) - 280
Cash held in JPMorgan USD Liquidity LVNAV Fund 33,805 529 (407) 33,927
34,884 (270) (407) 34,207
Borrowings
Debt due within one year (29,096) 26,929 2,167 -
Debt due after one year (82,765) - 4,626 (78,139)
(111,861) 26,929 6,793 (78,139)
Net debt (76,977) 26,659 6,386 (43,932)
Other non-cash charges relate to an amortisation adjustment on borrowings and
foreign currency exchange gains/(losses).
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st December 2023
1. Accounting policies
(a) General information and basis of accounting
The Company is a closed-ended investment company incorporated in the UK. The
address of its registered office is at 60 Victoria Embankment, London, EC4Y
0JP.
The financial statements are prepared under the historical cost convention,
modified to include fixed asset investments at fair value, in accordance with
the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice
('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' and with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' (the 'SORP') issued by the Association of Investment Companies in July
2022.
All of the Company's operations are of a continuing nature.
The Directors have undertaken a rigorous review of the Company's ability to
continue as a going concern. The Board has, in particular, considered the
ongoing conflicts between Ukraine and Russia and in the Middle East, and does
not believe the Company's going concern status is affected. The Company's
assets, the vast majority of which are investments in quoted securities which
are readily realisable, exceed its liabilities significantly under all stress
test scenarios reviewed by the Board. Gearing levels and compliance with
borrowing covenants are reviewed by the Board on a regular basis. The
Directors have also assessed the ability of the Company to repay the amount
drawn down under its revolving credit facility, which expires in August 2025,
and are satisfied as to its ability to do so on account of the ability of the
Company to raise new finance via loans or share issuances, or alternatively
through the realisation of investments in the Company's highly liquid quoted
securities. Furthermore, the Directors are satisfied that the Company and its
key third party service providers have in place appropriate business
continuity plans and confirm they have been able to maintain service levels
through disruption such as that caused by the pandemic.
Accordingly, the financial statements have been prepared on the going concern
basis as it is the Directors' reasonable expectation that the Company has
adequate resources to continue in operational existence for a period of at
least 12 months from the date of approval of the financial statements.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Dividends
(a) Dividends paid and proposed and declared
2023 2022
£'000 £'000
Dividends paid
2022 Final dividend of 4.75p (2021: 4.50p) 8,727 8,646
2023 Interim dividend of 2.50p (2022: 2.50p) 4,565 4,772
Total dividends paid in the year 13,292 13,418
Dividends declared
2023 Final dividend of 5.25p (2022: 4.75p) 9,587 8,974
All dividends paid and declared in the period have been funded from the
Revenue Reserve.
The dividend proposed in respect of the year ended 31st December 2022 amounted
to £8,974,000. However, the amount paid amounted to £8,727,000 due to shares
repurchased after the balance sheet date but prior to the share register
record date.
In accordance with the accounting policy of the Company, the dividend declared
in respect of the year ended 31st December 2023, will be reflected in the
financial statements for the year ending 31st December 2024.
(b) Dividend 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 financial year, shown below.
The revenue available for distribution by way of dividend for the year is
£14,212,000 (2022: £14,200,000).
2023 2022
£'000 £'000
2023 Interim dividend of 2.50p (2022: 2.50p) 4,565 4,772
2023 Final dividend of 5.25p (2022: 4.75p) 9,587 8,974
Total 14,152 13,746
The revenue reserve after payment of the final dividend will amount to
£22,000,000 (2022: £21,693,000).
3. Return/(loss) per share
2023 2022
£'000 £'000
Revenue return 14,212 14,200
Capital return/(loss) 304,104 (157,787)
Total return/(loss) 318,316 (143,587)
Weighted average number of shares in issue during the year 183,852,137 191,374,674
Revenue return per share 7.73p 7.42p
Capital return/(loss) per share 165.41p (82.45)p
Total return/(loss) per share 173.14p (75.03)p
The total return per share represents both basic and diluted return per share
as the Company has no dilutive shares.
4. Net asset value per share
The net asset value per Ordinary share and the net asset value attributable to
the Ordinary shares at the year end are set out below. These were calculated
using 182,603,216 (2022: 188,917,810) Ordinary shares in issue at the year end
(excluding Treasury shares).
2023 2022
Net asset value attributable Net asset value attributable
£'000 pence £'000 pence
Net asset value - debt at par 1,563,999 856.5 1,304,083 690.3
Add: amortised cost of US$65 million 2.55%
Private Placement Feb 2031 50,727 27.8 53,723 28.4
Less: fair value of US$65 million 2.55%
Private Placement Feb 2031 (45,636) (25.0) (45,913) (24.3)
Add: amortised cost of US$35 million 2.32%
Private Placement Oct 2032 27,412 15.0 29,042 15.4
Less: fair value of US$35 million 2.32%
Private Placement Oct 2032 (23,328) (12.8) (23,522) (12.5)
Net asset value - debt at fair value 1,573,174 861.5 1,317,413 697.3
5. Non-statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2023 but is derived from
those accounts. Statutory accounts for the year ended 31 December 2023 will be
delivered to the Registrar of Companies in due course. The Annual Report and
Financial Statements include the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other
website) is incorporated into, or forms part of, this announcement.
26th March 2024
For further information:
Priyanka Vijay Anand
JPMorgan Funds Limited 0800 20 40 20 (or +44 1268 44
44 70)
ENDS
A copy of the Annual Report will shortly be submitted to the FCA's National
Storage Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Annual Report will be available on the Company's website at
www.jpmamerican.co.uk (http://www.jpmamerican.co.uk) where up-to-date
information on the Company, including daily NAV and share prices, factsheets
and portfolio information can also be found.
JPMORGAN FUNDS LIMITED
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