AI Terminal
JPMorgan American Investment Trust PLC
Quarterly Report • Aug 15, 2024
5167_ir_2024-08-15_9323b792-e2c8-435e-82c3-2f594dde3ef3.pdf
Quarterly Report
Open in ViewerOpens in native device viewer
JPMorgan American Investment Trust plc
Half Year Report & Financial Statements for the six months ended 30th June 2024
Investment Objective
To achieve capital growth from North American investments by outperformance of the Company's benchmark. It aims to outperform a benchmark, which is the S&P 500 Index, with net dividends reinvested, expressed in sterling terms.
Investment Policies
- To invest in North American quoted companies including, when appropriate, exposure to smaller capitalisation companies.
- To emphasise capital growth rather than income.
Gearing
The Company's gearing policy is to operate within a range of 5% net cash to 20% geared in normal market conditions. Within this range, the Board reviews and sets a strategic gearing level, which is currently 10% + or – 2%. The current tactical level of gearing is 5% with a permitted range around this level of + or – 5%, meaning that currently gearing can vary between 0% and 10%.
ESG
The Manager of the Company considers Environmental, Social and Governance (ESG) factors as an integrated element of each stage of the investment process, including research, company engagement and portfolio construction.
These ESG views are one of multiple informational inputs into the investment process and so are not the sole driver of decision making. For further information, please refer to page 22 of the 2023 Annual Report which is available on the Company's website.
Benchmark Index
The S&P 500 Index, with net dividends reinvested, expressed in sterling terms.
Capital Structure
As at 30th June 2024, the Company's share capital comprised 281,633,910 ordinary shares of 5p each, including 99,631,042 shares held in Treasury.
During the period under review, the Company had an £80 million revolving credit facility (including an option to expand the facility by a further £20 million) expiring in August 2025, a US\$65 million fixed-rate unsecured loan note at an annual coupon of 2.55%, which will mature in February 2031, and a US\$35 million fixed-rate unsecured loan note at an annual coupon of 2.32% maturing in October 2032. All facilities are drawn in US dollars.
Management Fee
The management fee is charged on a tiered basis as follows:
- 0.35% on the first £500 million of net assets;
- 0.30% on net assets above £500 million and up to £1 billion; and
- 0.25% on any net assets above £1 billion.
Management Company
The Company employs JPMorgan Funds Limited ('JPMF' or the 'Manager' or the 'Investment Manager') as its Alternative Investment Fund Manager. JPMF delegates the management of the Company's portfolio to JPMorgan Asset Management (UK) Limited ('JPMAM') which further delegates the management to JPMorgan Asset Management, Inc. All of these entities are wholly owned subsidiaries of J.P. Morgan Chase & Co.
Association of Investment Companies ('AIC')
The Company is a member of the AIC.
Website
More information about the Company can be found online at www.jpmamerican.co.uk.
Dividend on ordinary shares paid May/October ISA Millionaire
FINANCIAL CALENDAR
Financial year end 31st December Final results announced March/April Annual General Meeting May Half year end 30th June Half year results announced August
| Half Year Performance | |
|---|---|
| Financial Highlights | 5 |
| Chair's Statement | |
| Chair's Statement | 8 |
| Investment Review | |
| Investment Manager's Report | 12 |
| Portfolio Information | 18 |
| List of Investments | 19 |
| Financial Statements | |
| Condensed Statement of Comprehensive Income | 21 |
| Condensed Statement of Changes in Equity | 22 |
| Condensed Statement of Financial Position | 23 |
| Condensed Statement of Cash Flows | 24 |
| Notes to the Condensed Financial Statements | 25 |
| Interim Management Report | |
| Interim Management Report | 29 |
| Shareholder information | |
| Glossary of Terms and Alternative Performance Measures ('APMs') | 31 |
| Investing in JPMorgan American Investment Trust plc | 34 |
| Share Fraud Warning | 35 |
| Information About the Company | 36 |
Image: Governors Island National Monument near New York and Manhattan.
Financial Highlights
Total returns (including dividends reinvested) to 30th June 2024
1 Source: Morningstar.
2 Source: Morningstar/J.P. Morgan, using cum income net asset value per share, with debt at fair value.
3 The Company's benchmark is the S&P 500 Index, with net dividends reinvested, expressed in sterling terms.
4 Annualised returns calculated on a geometric basis. Six month returns are not annualised.
APM Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 31 to 33.
Financial Highlights
Summary of results
| 30th June 2024 |
31st December 2023 |
% change | |
|---|---|---|---|
| Shareholders' funds (£'000) | 1,845,784 | 1,563,999 | 18.0 |
| Shares in issue (excluding shares held in Treasury)1 | 182,002,868 | 182,603,216 | –0.3 |
| Net asset value per share with: – debt at fair value2, APM |
1,020.1p | 861.5p | 18.4 |
| – debt at par valueAPM | 1,014.2p | 856.5p | 18.4 |
| Share price | 997.0p | 859.0p | 16.1 |
| Share price (discount)/premium to net asset value per share with: – debt at fair valueAPM |
(2.3)% | (0.3)% | |
| – debt at par valueAPM | (1.7)% | 0.3% | |
| GearingAPM | 4.3% | 2.8% | |
| Ongoing Charges RatioAPM | 0.36% | 0.38% | |
| Exchange rate | 1 = 1.2641 £ \$ |
1 = 1.2748 £ \$ |
The percentage changes in net asset value per share and share price, as shown in the table above, represent the returns achieved after dividends have been distributed for the period. The percentage changes for the total returns, which assume dividends paid out by the Company are reinvested, would be +19.1% and +19.1% for the net asset value with debt at fair value and debt at par value, respectively, and the share price total return would be +16.7%.
1 Excluding 99,631,042 (31st December 2023: 99,030,694) shares held in Treasury.
2 The fair value of the combined US\$100m private placements issued by the Company was calculated using discounted cash flow techniques, using the yield from a similarly dated treasury note plus a margin based on the US Broad Market AA 10-15 year spread.
APM Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 31 to 33.
Chair's Statement
Robert Talbut Chair
I became Chair of the Company following the conclusion of the AGM in May 2024, having joined the Board in 2017. I took over the chairmanship from Dr Kevin Carter who had been a Director of the Company since 2014 and Chair since 2017. I would like to take this opportunity on behalf of the Board to thank Kevin for his leadership and dedication during his tenure, first as a Director, and then as Chair of the Company.
Performance
The first six months of 2024 remained positive for the US market. Despite some continuing economic and political uncertainty, US equities extended their streak of new all-time highs, buoyed by hopes of a soft economic landing, a favourable prognosis for corporate earnings and further gains in the handful of stocks expected to benefit most from the rapid adoption of artificial intelligence (AI) tools. US interest rates peaked in August last year, and have remained steady in the year to date, ensuring further modest declines in US inflation towards the Federal Reserve's 2% target. This steady rate stance disappointed some investors who were hoping the Fed would begin to reduce rates in the first half of 2024, but it seems likely that the easing cycle will commence soon, especially now the labour market appears to be slowing.
Against this supportive background, the Company's total return on net assets per share in sterling terms over the period was +19.1%. The return to Ordinary shareholders per share in sterling terms was +16.7%, 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 +16.1%, resulting in outperformance of +3.0 percentage points, in NAV terms.
Since the Company changed its investment approach on 1st June 2019, it has outperformed the benchmark index by +22.4 percentage points in the subsequent 61 months through to the end of June 2024, providing a NAV total return to shareholders of +134.8% compared with a benchmark return of +112.4%. This represents an annualised outperformance of +2.3% since this change.
Share Price and Premium/Discount
The Company's shares have traded between a discount of 5.0% and a premium of 2.1% to NAV throughout the period under review, and the Company has continued to both buy back and issue shares in line with the Board's longstanding position of buying back shares when they stand at anything more than a small discount to NAV and issuing shares at a sufficient premium to NAV (to cover the costs of issuance). The Company bought into Treasury a total of 1,450,348 shares, or 0.8% of the Company's issued share capital during the six months to end of June 2024, excluding shares held in treasury (30th June 2023: 3.4%). These shares were purchased at an average discount to NAV of 3.4%, producing a modest accretion to the NAV for continuing shareholders. The Company issued a total of 850,000 shares from treasury during the same period at an average premium to NAV of 0.95%.
Dividends
The Company is declaring a dividend of 2.75 pence per share (2023: 2.5 pence) for the first six months of this year, which will be payable on 7th October 2024 to shareholders on the register on 30th August 2024. This represents a 10% increase on the constant 2.5 pence per share interim dividend paid since 2018.
While 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 aims to continue its progressive dividend policy.
Gearing
The Board has set the current tactical level of gearing at 5% of net assets, 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 past six months. Gearing stood at 2.8% at the beginning of 2024 and ended the six-month period at 4.3%.
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 has an
Chair's Statement
£80 million revolving credit facility (with an additional £20 million accordion) with Mizuho Bank Ltd. It also has in issue a combined total of US\$100 million unsecured loan notes issued via private placements, US\$65 million of which are repayable in February 2031 and carry a fixed interest rate of 2.55% per annum. The remaining US\$35 million of loan notes mature in October 2032 and carry a fixed interest rate of 2.32%.
Manager Succession
As previously announced, Jonathan Simon, the portfolio manager responsible for the value stocks in the Company's large cap portfolio, has given notice that he intends to retire in early 2025. Jonathan will continue with his existing responsibilities until his retirement. Following this announcement, the Board was able to visit the Manager's offices in New York and held a series of meetings with the portfolio managers and other senior members of the Manager's US equities investment team.
As announced on 7th August, following these meetings it has been agreed that Jack Caffrey will work alongside Jonathan on the value stocks in the large cap portfolio and Eric Ghernati will work alongside Felise Agranoff on the growth stocks in the large cap portfolio. The Board believes in the merit of additional portfolio manager resources and considers that the Company will benefit from four portfolio managers (two growth, two value) on the large cap portfolio as a key element of the Company's ongoing management structure.
Jack has 32 years' experience and is a portfolio manager on a focused dividend growth strategy as well as being a member of the Manager's Value team, which is supported by more than 20 career research analysts. Eric has 24 years' experience and is currently a portfolio manager on a technology fund, as well as having analytical responsibilities covering US technology stocks in the Manager's Growth team, which is supported by over 15 career research analysts.
Change of Registrar
Following a competitive tender process, the Company has transferred the management of its share register from Equiniti Financial Services Limited to Computershare Investor Services PLC ('Computershare') with effect from 24th June 2024.
A notification letter from Computershare was sent to all registered shareholders advising of this change. The letter included an invitation to shareholders to create an online account which will provide access to the details of their shareholdings and an opportunity to participate in the Company's Dividend Reinvestment Plan (DRIP).
Task Force on Climate-related Financial Disclosures (TCFD)
As a regulatory requirement, JPMorgan Asset Management (JPMAM) published its UK Task Force on Climate-related Financial Disclosures ('TCFD') Report for the Company in respect of the year ended 31st December 2023 on 30th June 2024. The report discloses estimates of the Company's portfolio climate-related risks and opportunities according to the Financial Conduct Authority (FCA) Environmental, Social and Governance (ESG) Sourcebook and the Task Force on Climate-related Disclosures (TCFD). The report is available on the Company's website under the ESG documents section: https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/regulatory/esginformation/jpm-american-investment-trust-plc-combined-fund-tcfd-report.pdf
Board
As mentioned in the Company's 2023 Annual Report, Mr Colin Moore joined the Board from 1st February 2024 and Dr Kevin Carter, the previous Chair, retired from the Board at the conclusion of the May 2024 Annual General Meeting. Ms Pui Kei Yuen became the Chair of the Risk Committee following my appointment as Chair of the Board.
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 or by scanning the QR code on this page.
Chair's Statement
Outlook
The Board shares the Manager's positive assessment of the outlook for US equities, and your Company, over the near-term, and beyond. November's US Presidential election may spark some market jitters, due to uncertainty regarding the winner's domestic political priorities and their stance on various geopolitical situations, but the economy appears to be on a sound footing and should benefit from interest rate cuts later this year and next.
The Company's long-term performance track record attests to the Manager's skill at negotiating the unusual, challenging and varied market conditions that have confronted investors in recent years. The Board welcomes the Manager's ongoing efforts to identify the most attractive investment opportunities on offer in the US and other North American markets, and remains confident in the Manager's ability to continue delivering capital growth and outperformance for shareholders over the medium term.
Robert Talbut
Chair 14th August 2024
Image: American highway with historical name Route 66.
Jonathan Simon
Felise Agranoff
Market Review
2023 was all about 'expect the unexpected': the US economy avoided recession; inflation was tamed; interest rates peaked and looked set to decline soon; and a flare-up in the banking sector proved to be just that, and no more, despite fears of widespread global contagion. US equity markets therefore had good reason to start this year in a positive mood, and continuing optimism around a 'soft landing' propelled markets to an all-time high over the first half of the year. The S&P 500 advanced 15% in US dollar terms and 16% in sterling terms in the six months to 30th June 2024. This surge was fuelled by a solid earnings outlook and advances in the development of artificial intelligence (AI). However, the market is deeply polarised, as the rally so far was driven by the so-called 'Magnificent 7' stocks considered to be the major beneficiaries of the AI revolution. Together, gains in these seven stocks were responsible for over 60% of the index's returns over the period.
The other big surprise was the resilience of investment spending in the face of higher interest rates and a credit crunch exacerbated by last year's mini banking crisis. This resilience largely reflected healthy corporate balance sheets, federal government incentives and a surge in demand for AI-related technology.
However, labour market conditions are beginning to moderate. The unemployment rate edged up to 4% in May 2024, the highest since January 2022. Still, the unemployment rate has now remained near or below 4% for two and a half years, the longest such stretch since the late 1960s. Over that stretch, the economy has created over 9.2 million new jobs and somehow managed to find the workers to fill them all.
The best performing sectors of the S&P 500 so far this year have been information technology (IT), communication services and energy, each of which rallied between 11% to 28% over the review period. Utilities, which was one of the worst performing sectors in 2023, saw a change in its narrative in the first half of this year, due to growing demand for electricity, which is needed to power data centres and AI programs. The worst performing sectors during the period were real estate, materials, and consumer discretionary, where returns ranged between –2% to 6%.
Large cap stocks, as represented by the S&P 500 Index, returned 15% (in US dollar terms), as mentioned above, outperforming the small cap Russell 2000 Index, which returned 2%. As in 2023, growth stocks dominated value names, as the Russell 3000 Growth Index rallied 20%, while the Russell 3000 Value Index returned 6%.
Performance attribution
For the six months ended 30th June 2024
| % | % | |
|---|---|---|
| Contributions to total returns | ||
| Net asset value (debt at fair value) total return | ||
| in sterling termsAPM | 19.1 | |
| Benchmark total return (in sterling terms) | 16.1 | |
| Excess return | 3.0 | |
| Combined Portfolio return in US dollar terms1 | 18.3 | |
| Benchmark total return in US dollar terms | 15.2 | |
| Combined Portfolio relative return in US dollar terms | 3.1 | |
| Large & Small Cap Portfolio contribution2 : |
||
| Large Cap Portfolio in US dollar terms | 3.8 | |
| Small Cap Portfolio in US dollar terms | –0.7 | |
| Combined Portfolio relative return in US dollar terms | 3.1 | |
| Contributions to return | ||
| Equity portfolio (ex-cash and gearing) in US dollar terms | 2.5 | |
| Cash and gearing impact in US dollar terms3 | 0.6 | |
| Combined Portfolio relative return in US dollar terms | 3.1 | |
| Effect of foreign currency translation4 | 0.0 | |
| Combined Portfolio relative return in sterling terms | 3.1 | |
| Management fee and other expenses5 | –0.2 | |
| Finance costs5 | –0.1 | |
| Share buybacks and issuances6 | 0.0 | |
| Impact of fair valuation of debt7 | 0.0 | |
| Technical differences8 | 0.2 | |
| Total excess | 3.0 |
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 and issuance – 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. Share issuances will increase the net asset value of the Company as they are issued at a price above the net asset value.
7 The impact of fair valuation includes the effect of valuing the combined US\$100m private placements at fair value.
8 A portion of the technical differences arise as a result of rounding to 1 decimal place of the individual line items shown in the table.
APM Alternative Performance Measure ('APM').
Performance and overall asset allocation
The Company's net asset value rose 19.1% on a total return basis in the first half of 2024, significantly outpacing the 16.1% return of the S&P 500 Index. The large cap portion of the portfolio, which, at over 94% of the Company's assets is its biggest allocation, added the most value over the period. Gearing was also slightly additive given the market's rally. The Company's small cap allocation, which averaged approximately 5.7% over the period, modestly detracted from relative returns.
Large Cap Portfolio
The outperformance by the large cap portion of the portfolio over the review period was the result of strong stock selection.
Within the IT sector, an overweight position in NVIDIA, the leading producer of the advanced semiconductors required by AI processes, and a lack of exposure to Intel, which also makes semiconductors and related components, proved beneficial. During the six-month period, NVIDIA's shares delivered a 150% return, as the company remained an outsized beneficiary of rapidly accelerating AI infrastructure demand. We believe its addressable market will grow exponentially in the coming five to ten years, and the company's market leadership position suggests it is well-placed to meet this demand. Intel has been the long-term leader of the semiconductor industry, but it has been outpaced by NVIDIA and other names during the AI rally. Intel had disclosed widening losses and sales declines for its foundry business, which leave us comfortable with our decision not to hold this stock.
The largest contributor to performance was social networking and advertising company Meta Platforms. The stock rallied after the company reported higher revenues due to improved customer engagements with Instagram, which benefited from AI utilisation.
Portfolio holdings that detracted from performance during the review period included the US's pre-eminent owner, operator and developer of shopping centres, Regency Centers. Concerns around tenant creditworthiness and slower lease commencements have negatively impacted the entire real estate sector. We continue to believe grocery-anchored shopping centres like Regency Centers will hold up relatively well, and we therefore remain comfortable with our holding. Another real estate company which detracted from performance was Public Storage. This company is one of the largest US players in the self-storage market. It did well during the pandemic as people moved out of big cities and rented space to store their belongings during their absence. However, demand has subsequently declined as this trend reversed in the post-pandemic period. We like the stock, due to its strong balance sheet, and looking at the combination of scale as well as cost of capital advantage.
The performance of our overweight position in transportation and logistics company J.B. Hunt Transport Services proved lacklustre over the past six months. This was due to a drop in volumes in J.B. Hunt's truck-trail intermodal business, which accounts for a large part of the company's revenue. At the same time, J.B. Hunt is increasing capital spending to support future growth. However, we consider these headwinds to be cyclical and remain confident about the company's longer-term prospects.
Portfolio Activity
During the first six months of the year, we added six new names and exited the same number.
One new acquisition was Morgan Stanley, a financial company offering institutional securities trading, investment management and other financial services through its subsidiaries. We like the company's exposure to the wealth management space, which tends to generate relatively stable revenues, in comparison to investment banking, which is more cyclical and volatile. We initiated this position based on the stock's attractive valuation. This acquisition was funded by the sale of Tesla, a leading electric vehicle producer, as the company experienced a dip in US demand and is facing increased competition from Chinese and European players. Tesla has also been facing other challenges – a slowdown in output at its Chinese factory and the Gulf shipping crisis are expected to adversely impact deliveries.
We initiated a new position in Kenvue, which offers a variety of self-care, beauty and essential health products. This company was formerly the consumer healthcare division of Johnson & Johnson. We believe its recent separation from Johnson & Johnson should allow management to focus on opportunities within the consumer health sector, without the constraints previously imposed by its parent company's umbrella. In particular we see scope for Kenvue to introduce innovative, premium products to capitalise on broader health and wellness trends.
Within healthcare, we added Thermo Fisher Scientific and exited Bristol-Myers Squibb. Thermo Fisher Scientific is a diversified life science tools and diagnostics company with a strong portfolio of assets. The company has four business segments, each of which is a market leader in its respective field: 1) Life Science Solutions, 2) Specialty Diagnostics, 3) Analytical Instruments, and 4) Lab Products and Biopharma Services. We like its broad portfolio of high-quality analytical instruments, lab products and services, and the solutions it offers in a variety of life science and diagnostic areas. The company also has a long-term track record of differentiated growth and market outperformance, thanks to the breadth of its products and services, which makes it a one-stop solution for customers. We feel comfortable with both the resilience and attractiveness of the life sciences industry and this company's capacity to maintain its market leadership over the long-term.
Bristol-Myers Squibb is a specialty biopharmaceutical company engaged in the discovery, marketing, distribution and sale of medicines and related medical products. The company needs to offset major patent expirations over the next several years by finding alternative sources of revenue. However, its share price has underperformed due to the disappointing pace of growth in its new product portfolio, so we decided to switch into more attractive risk/reward opportunities.
AutoZone is a retailer of aftermarket automotive parts and accessories. We exited the company on concerns over diminishing demand within the auto part industry, as new car sales accelerate, and inflation subsides.
Another name we initiated this year was multinational fast food chain McDonald's. The company is well positioned in the current higher cost environment, as the franchisee model gives it low direct cost exposure, while delivering the benefit of higher royalties from pricing taken by operators. McDonald's is an iconic brand and has a very defensive model. It is highly franchised, it owns the real
estate on which these franchises operate, it is modestly leveraged, with low cyclicality and low risk from rising interest rates. This defensive model, combined with increasing global unit growth, should produce consistent returns over the long term. During the same month, we exited United Parcel Service, a multinational shipping and supply chain company which has been experiencing a decline in shipping volumes in domestic and international markets.
One of our latest acquisitions is Honeywell International. This is a well-run, well-positioned, diversified industrial company with consistent growth across a range of market conditions. We like the fact that the company is levered to the recovery in the aerospace industry. Additionally, the company has exposure to the transition to low carbon energy sources. This purchase was funded by the sale of Weyerhaeuser, a REIT specialising in timberlands. REITs have underperformed so far this year, due to persistently high interest rates, and we opted to close this position in favour of opportunities in which we have higher conviction.
In the consumer discretionary sector, we bought TJX and exited its competitor, Ross Stores, due to TJX's better risk/reward profile. TJX is one of the leading US off-price retailers of apparel and home fashions. It is a scale player with a disruptive model in a rapidly consolidating market. The company's product range is large and diversified. It is differentiated not only by its buying power and the scale of its outlets, but also by its broad demographic reach, given that it owns multiple brands (Marshalls, TJX Maxx, Home Goods, International), and is investing in its ecommerce offerings.
These recent acquisitions and disposals have not had a significant impact on the portfolio's structure. The Information technology and Financials sectors remain the largest sectoral allocations, which together represent approximately 45% of the overall large cap allocation, consistent with positioning at the start of the year. Financials remain the largest overweight in the portfolio relative to the benchmark, although the allocation is slightly lower than at the start of the year, as we have been trimming modestly to manage position sizes, given that imminent interest rate cuts are likely to have an adverse impact on this sector. Conversely, we remain underweight information technology, but have been adding to our allocation based on our view that this sector is still attractive. The portfolio also remains underweight industrials, communication services and consumer staples, as we continue to find names with better risk/reward profiles in other sectors.
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 around 43% of the large cap portfolio, not much lower than the 45% value allocation at the start of the year. The allocation to growth stocks has increased accordingly.
Value and growth exposure
As of 30th June 2024
Source: J.P. Morgan Asset Management. 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.
The table below shows that the large cap portfolio is trading at a 24% discount to the market on a free cash flow basis, which confirms that we are still not paying a premium for good cash flow. Additionally, the portfolio is expected to deliver earnings growth of around 18% for the next 12 months, slightly ahead of the market. While earnings may come under pressure over the next year, and may not deliver the forecast double digit growth, 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\$ 918.9bn | US\$ 943.0bn |
| Price/Earnings, 12-month forward1 | 21.5x | 20.8x |
| Price/Free Cash Flow, last 12-months | 18.5x | 24.3x |
| EPS Growth, 12-month forward | 18.3% | 17.3% |
| Return on Equity, last 12-months | 23.9% | 24.8% |
| Predicted Beta | 1.01 | — |
| Predicted Tracking Error | 2.38 | — |
| Active Share | 60% | — |
| Number of holdings | 40 | 500 |
Source: FactSet, Barra, J.P. Morgan Asset Management. Data as of 30th June 2024.
1 Including negatives.
Small Cap portfolio
The Small Cap portfolio generated a positive return over the period but lagged the S&P 500 as the market preference was for stocks higher up the market cap spectrum. The overall allocation to the small cap portfolio was maintained at approximately 6% during the first six months of the year, broadly unchanged from the start of the year.
Outlook
There will always be some risks and uncertainties for investors to consider, and for us, at this moment, one such risk is the labour market, which we expect will continue to slow. While the overall employment market is still experiencing excess job openings, in some key sectors, including construction and retail, job openings are now below their five-year averages. If this trend broadens out, it may create a headwind for consumer spending growth over the remainder of this year and beyond. Investors are also watching developments in the US presidential race, which may increase uncertainty regarding the outcome. The result could possibly aggravate existing geopolitical tensions between the US and China, while also complicating America's relations with its western allies. Any such outcomes could increase market volatility both in the run up to the November vote, and in its aftermath.
However, with economic growth solid, unemployment low, most of the journey back to 2% inflation completed, and rates set to decline, the US economy should continue to provide a rising tide to support most investment boats for the rest of this year and into 2025.
Jonathan Simon Felise Agranoff Portfolio Managers 14th August 2024
Portfolio Information
Ten largest equity investments
| 30th June 2024 | 31st December 2023 | ||||
|---|---|---|---|---|---|
| Valuation | Valuation | ||||
| Company | Sector | £'000 | %1 | £'000 | %1 |
| Microsoft | Information Technology | 142,181 | 7.4 | 118,626 | 7.4 |
| NVIDIA | Information Technology | 126,921 | 6.6 | 52,228 | 3.3 |
| Amazon.com | Consumer Discretionary | 108,718 | 5.6 | 81,647 | 5.1 |
| Meta Platforms | Communication Services | 89,355 | 4.6 | 62,239 | 3.9 |
| EOG Resources2 | Energy | 53,732 | 2.8 | 39,222 | 2.4 |
| Apple | Information Technology | 53,483 | 2.8 | 60,398 | 3.8 |
| Berkshire Hathaway | Financials | 51,871 | 2.7 | 47,679 | 3.0 |
| Regeneron Pharmaceuticals2 | Health Care | 51,803 | 2.7 | 42,901 | 2.7 |
| Kinder Morgan2 | Energy | 51,593 | 2.7 | 35,630 | 2.2 |
| Broadcom2 | Information Technology | 51,047 | 2.7 | 24,150 | 1.5 |
| Total | 780,704 | 40.6 |
1 Based on total investments of £1,925.5m (2023: £1,608.3m).
2 Not included in the ten largest equity investments at 31st December 2023.
At 31st December 2023 the value of the ten largest equity investments amounted to £616.7 million representing 38.7% of total investments.
List of Investments
List of investments
As at 30th June 2024
| Company | Valuation £'000 |
%1 |
|---|---|---|
| Large Companies | ||
| Microsoft NVIDIA |
142,181 126,921 |
7.4 6.6 |
| Amazon.com | 108,718 | 5.6 |
| Meta Platforms | 89,355 | 4.6 |
| EOG Resources | 53,732 | 2.8 |
| Apple | 53,483 | 2.8 |
| Berkshire Hathaway | 51,871 | 2.7 |
| Regeneron Pharmaceuticals | 51,803 | 2.7 |
| Kinder Morgan | 51,593 | 2.7 |
| Broadcom | 51,047 | 2.7 |
| Loews | 50,670 | 2.6 |
| Capital One Financial | 49,020 | 2.5 |
| Alphabet | 48,670 | 2.5 |
| Procter & Gamble | 48,345 | 2.4 |
| Bank of America | 43,831 | 2.3 |
| AbbVie | 41,745 | 2.2 |
| Trane Technologies | 41,570 | 2.2 |
| Mastercard | 41,541 | 2.2 |
| M&T Bank | 40,557 | 2.1 |
| Eli Lilly | 38,579 | 2.0 |
| NextEra Energy | 37,229 | 1.9 |
| Public Storage | 37,186 | 1.9 |
| Honeywell International | 34,981 | 1.8 |
| Lam Research | 34,763 | 1.8 |
| Intuit | 34,464 | 1.8 |
| UnitedHealth | 34,377 | 1.8 |
| Advanced Micro Devices | 34,274 | 1.8 |
| Morgan Stanley | 33,990 | 1.8 |
| Home Depot | 32,378 | 1.7 |
| Regency Centers | 31,528 | 1.6 |
| McDonald's | 30,136 | 1.6 |
| Palo Alto Networks | 29,213 | 1.5 |
| Kenvue | 27,116 | 1.4 |
| Martin Marietta Materials | 25,393 | 1.3 |
| Packaging Corp. of America | 24,125 | 1.3 |
| Quanta Services | 23,888 | 1.2 |
| Thermo Fisher Scientific | 23,546 | 1.2 |
| Booking | 22,946 | 1.2 |
| TJX | 22,319 | 1.2 |
| JB Hunt Transport Services | 15,567 | 0.8 |
| 1,814,651 | 94.2 |
| Company | Valuation £'000 |
%1 |
|---|---|---|
| Small Companies | ||
| Applied Industrial Technologies | 1,732 | 0.1 |
| Matador Resources | 1,212 | 0.1 |
| Cactus | 1,112 | 0.1 |
| Independent Bank | 1,097 | 0.1 |
| Selective Insurance | 1,060 | 0.1 |
| PennyMac Financial Services | 1,055 | 0.1 |
| Hamilton Lane | 1,048 | 0.1 |
| Encompass Health | 1,015 | 0.0 |
| Verra Mobility | 984 | 0.0 |
| Chord Energy | 942 | 0.0 |
| Other small companies (234 holdings) | 99,598 | 5.1 |
| 110,855 | 5.8 | |
| Total Investments (284 holdings) | 1,925,506 | 100.0 |
Based on total value of investments.
1
Large companies are generally defined as companies which have a market capitalisation of more than US\$3 billion and small companies are generally defined as companies which, at the date of investment, have a market capitalisation of less than US\$3 billion.
The full breakdown of the portfolio including all the small company holdings as at 30th June 2024 can be found on the Company's website.
Condensed Statement of Comprehensive Income
| (Unaudited) Six months ended |
(Unaudited) Six months ended |
(Audited) Year ended |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| 30th June 2024 | 30th June 2023 | 31st December 2023 | |||||||
| Revenue | Capital | Total Revenue | Capital1 | Total Revenue | Capital | Total | |||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains on investments held | |||||||||
| at fair value through | |||||||||
| profit or loss | — | 290,667 | 290,667 | — | 183,232 | 183,232 | — | 304,636 | 304,636 |
| Net foreign currency | |||||||||
| (losses)/gains | — | (798) | (798) | — | 3,908 | 3,908 | — | 5,078 | 5,078 |
| Income from investments | 11,281 | — | 11,281 | 7,867 | 365 | 8,232 | 16,519 | 1,214 | 17,733 |
| Interest receivable and similar | |||||||||
| income | 750 | — | 750 | 672 | — | 672 | 1,654 | — | 1,654 |
| Gross return | 12,031 | 289,869 | 301,900 | 8,539 | 187,505 | 196,044 | 18,173 | 310,928 | 329,101 |
| Management fee | (499) | (1,995) | (2,494) | (412) | (1,649) | (2,061) | (852) | (3,409) | (4,261) |
| Other administrative expenses | (619) | — | (619) | (554) | — | (554) | (1,053) | — | (1,053) |
| Net return before finance | |||||||||
| costs and taxation | 10,913 | 287,874 | 298,787 | 7,573 | 185,856 | 193,429 | 16,268 | 307,519 | 323,787 |
| Finance costs | (236) | (939) | (1,175) | (371) | (1,482) | (1,853) | (627) | (2,506) | (3,133) |
| Net return before taxation | 10,677 | 286,935 | 297,612 | 7,202 | 184,374 | 191,576 | 15,641 | 305,013 | 320,654 |
| Taxation | (1,212) | (70) | (1,282) | (468) | (528) | (996) | (1,429) | (909) | (2,338) |
| Net return after taxation | 9,465 | 286,865 | 296,330 | 6,734 | 183,846 | 190,580 | 14,212 | 304,104 | 318,316 |
| Return per share (note 3) | 5.18p | 156.93p | 162.11p | 3.64p | 99.31p | 102.95p | 7.73p | 165.41p | 173.14p |
1 For the six months ended 30th June 2023, income in respect of capital dividends from Real Estate Investment Trusts (REITs), has been reclassified to gains on investments held at fair value through profit or loss. This is similar to the presentation adopted in the 31st December 2023 Annual Financial Report. There is no change to the return per share or net asset value per share as a result of this change.
The interim dividend declared in respect of the six months ended 30th June 2024 amounts to 2.75p (2023: 2.5p) per share, costing £5,003,000 (2023: £4,565,000).
All revenue and capital items in the above statement derive from continuing operations. The return/(loss) per share represents the profit/(loss) per share for the period and also the total comprehensive income per share.
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.
Condensed Statement of Changes in Equity
| Called up | Capital | |||||
|---|---|---|---|---|---|---|
| share | Share redemption | Capital | Revenue | |||
| capital | premium | reserve | reserves1 | reserve1 | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Six months ended 30th June 2024 (Unaudited) | ||||||
| At 31st December 2023 | 14,082 | 151,850 | 8,151 | 1,358,329 | 31,587 | 1,563,999 |
| Repurchase of shares into Treasury | — | — | — | (13,910) | — | (13,910) |
| Shares re-issued from Treasury | — | 4,443 | — | 3,715 | — | 8,158 |
| Proceeds from share forfeiture2 | — | — | — | 731 | — | 731 |
| Net return | — | — | — | 286,865 | 9,465 | 296,330 |
| Dividends paid in the period (note 4) | — | — | — | — | (9,595) | (9,595) |
| Refund of unclaimed dividends2 (note 4) |
— | — | — | — | 71 | 71 |
| At 30th June 2024 | 14,082 | 156,293 | 8,151 | 1,635,730 | 31,528 | 1,845,784 |
| Six months ended 30th June 2023 (Unaudited) | ||||||
| At 31st December 2022 | 14,082 | 151,850 | 8,151 | 1,099,333 | 30,667 | 1,304,083 |
| Repurchase of shares into Treasury | — | — | — | (44,079) | — | (44,079) |
| Net return | — | — | — | 183,846 | 6,734 | 190,580 |
| Dividends paid in the period (note 4) | — | — | — | — | (8,727) | (8,727) |
| At 30th June 2023 | 14,082 | 151,850 | 8,151 | 1,239,100 | 28,674 | 1,441,857 |
| Year ended 31st December 2023 (Audited) | ||||||
| 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 return | — | — | — | 304,104 | 14,212 | 318,316 |
| Dividends paid in the year (note 4) | — | — | — | — | (13,292) | (13,292) |
| At 31st December 2023 | 14,082 | 151,850 | 8,151 | 1,358,329 | 31,587 | 1,563,999 |
1 This reserve forms the distributable reserve of the Company and may be used to fund distributions to investors.
2 During the period the Company undertook an Asset Reunification Program for its shareholders. In accordance with the Company's Articles of Association, shares that could not be traced to shareholders over 12 years old were forfeited. These shares were sold in the open market and the proceeds returned to the Company. In addition, unclaimed dividends over 12 years old were also returned to the Company.
Condensed Statement of Financial Position
| (Unaudited) | (Unaudited) | (Audited) | |
|---|---|---|---|
| At | At | At | |
| 30th June | 30th June | 31st December | |
| 2024 | 2023 | 2023 | |
| £'000 | £'000 | £'000 | |
| Fixed assets | |||
| Investments held at fair value through profit or loss | 1,925,506 | 1,515,890 | 1,608,263 |
| Current assets | |||
| Debtors | 4,245 | 729 | 789 |
| Cash and cash equivalents | 15,435 | 34,025 | 34,207 |
| 19,680 | 34,754 | 34,996 | |
| Current liabilities | |||
| Creditors: Amounts falling due within one year | (4,760) | (30,458) | (1,121) |
| Net current assets | 14,920 | 4,296 | 33,875 |
| Total assets less current liabilities | 1,940,426 | 1,520,186 | 1,642,138 |
| Creditors: amounts falling due after more than one year | (94,642) | (78,329) | (78,139) |
| Net assets | 1,845,784 | 1,441,857 | 1,563,999 |
| Capital and reserves | |||
| Called up share capital | 14,082 | 14,082 | 14,082 |
| Share premium | 156,293 | 151,850 | 151,850 |
| Capital redemption reserve | 8,151 | 8,151 | 8,151 |
| Capital reserves | 1,635,730 | 1,239,100 | 1,358,329 |
| Revenue reserve | 31,528 | 28,674 | 31,587 |
| Total shareholders' funds | 1,845,784 | 1,441,857 | 1,563,999 |
| Net asset value per share (note 5) | 1,014.2p | 789.0p | 856.5p |
The financial statements on pages 21 to 24 were approved and authorised for issue by the Directors on 14th August 2024 and were signed on their behalf by:
Claire Binyon
Director
The notes on pages 25 to 27 form an integral part of these financial statements.
Company registration number: 15543.
Condensed Statement of Cash Flows
| (Unaudited) | (Unaudited) | (Audited) | |
|---|---|---|---|
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30th June | 30th June | 31st December | |
| 2024 | 2023 | 2023 | |
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Net return before finance costs and taxation | 298,787 | 193,429 | 323,787 |
| Adjustment for: | |||
| Net gains on investments held at fair value through | |||
| profit or loss | (290,667) | (183,232) | (304,636) |
| Net foreign currency exchange losses/(gains) | 798 | (3,908) | (5,078) |
| Dividend income | (11,281) | (8,232) | (17,733) |
| Interest income | (750) | (672) | (1,654) |
| Realised foreign currency exchange losses on transactions | (337) | (915) | (756) |
| Realised foreign currency exchange losses on | |||
| JPMorgan USD Liquidity Fund | (335) | (718) | (596) |
| Increase in accrued income and other debtors | — | (5) | (14) |
| (Decrease)/increase in accrued expenses | (11) | 170 | 214 |
| Net cash outflow from operations before dividends and interest | (3,796) | (4,083) | (6,466) |
| Dividends received | 9,704 | 6,137 | 14,423 |
| Interest received | 826 | 803 | 1,656 |
| Overseas withholding tax recovered | 259 | 1,183 | 1,182 |
| Net cash inflow from operating activities | 6,993 | 4,040 | 10,795 |
| Purchases of investments | (321,362) | (244,076) | (625,714) |
| Sales of investments | 293,680 | 293,007 | 703,254 |
| Settlement of foreign currency contracts | — | 4 | — |
| Net cash (outflow)/inflow from investing activities | (27,682) | 48,935 | 77,540 |
| Dividends paid | (9,595) | (8,727) | (13,292) |
| Shares issued from Treasury | 8,158 | — | — |
| Repurchase of shares into Treasury | (12,622) | (42,788) | (45,108) |
| Proceeds from share forfeiture | 731 | — | — |
| Refund of unclaimed dividends (note 4) | 71 | — | — |
| Repayment of bank loan | — | — | (26,929) |
| Drawdown of bank loan | 15,790 | — | — |
| Loan interest paid | (208) | (732) | (1,269) |
| Private placement interest paid | (975) | (1,100) | (2,007) |
| Net cash inflow/(outflow) from financing activities | 1,350 | (53,347) | (88,605) |
| Decrease in cash and cash equivalents | (19,339) | (372) | (270) |
| Cash and cash equivalents at start of period/year | 34,207 | 34,884 | 34,884 |
| Foreign currency exchange movements | 567 | (487) | (407) |
| Cash and cash equivalents at end of period/year | 15,435 | 34,025 | 34,207 |
| Cash and cash equivalents consist of: | |||
| Cash and short term deposits | 12 | 168 | 280 |
| Cash held in JPMorgan USD Liquidity Fund | 15,423 | 33,857 | 33,927 |
| Total | 15,435 | 34,025 | 34,207 |
For the six months ended 30th June 2024
1. Financial statements
The information contained within the condensed financial statements in this half year report has not been audited or reviewed by the Company's auditors.
The figures and financial information for the year ended 31st December 2023 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies, including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The condensed financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in July 2022.
FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 30th June 2024.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st December 2023.
3. Return per share
| (Unaudited) | (Unaudited) | (Audited) | |
|---|---|---|---|
| Six months ended | Six months ended | Year ended | |
| 30th June | 30th June | 31st December | |
| 2024 | 2023 | 2023 | |
| £'000 | £'000 | £'000 | |
| Return per share is based on the following: | |||
| Revenue return | 9,465 | 6,734 | 14,212 |
| Capital return | 286,865 | 183,846 | 304,104 |
| Total return | 296,330 | 190,580 | 318,316 |
| Weighted average number of shares in issue | 182,799,838 | 185,119,371 | 183,852,137 |
| Revenue return per share | 5.18p | 3.64p | 7.73p |
| Capital return per share | 156.93p | 99.31p | 165.41p |
| Total return per share | 162.11p | 102.95p | 173.14p |
Notes to the Condensed Financial Statements
4. Dividends paid
| (Unaudited) Six months ended 30th June 2024 |
(Unaudited) Six months ended 30th June 2023 |
(Audited) Year ended 31st December 2023 |
||||
|---|---|---|---|---|---|---|
| Pence | £'000 | Pence | £'000 | Pence | £'000 | |
| Dividend paid | ||||||
| Final dividend in respect of prior year | 5.25 | 9,595 | 4.75 | 8,727 | 4.75 | 8,727 |
| Interim dividend in respect of the six months | — | — | — | — | 2.50 | 4,565 |
| Total dividends paid | 5.25 | 9,595 | 4.75 | 8,727 | 7.25 | 13,292 |
| Refund of unclaimed dividends over 12 years old | — | (71) | — | — | — | — |
| Net dividends paid | 5.25 | 9,524 | 4.75 | 8,727 | 7.25 | 13,292 |
All the dividends paid in the period/year have been funded from the Revenue Reserve.
An interim dividend of 2.75p (2023:2.5p) has been declared in respect of the six months ended 30th June 2024, amounting to £5,003,000 (2023: £4,565,000).
5. Net asset value per share
The net asset value per Ordinary share and the net asset value attributable to the Ordinary shares at the period/year end are shown below. These were calculated using 182,002,868 (June 2023: 182,736,008; December 2023: 182,603,216) Ordinary shares in issue at the period/year end (excluding Treasury shares).
| (Unaudited) Six months ended 30th June 2024 Net asset value attributable |
(Unaudited) Six months ended 30th June 2023 Net asset value attributable |
(Audited) Year ended 31st December 2023 Net asset value attributable |
||||
|---|---|---|---|---|---|---|
| £'000 | pence | £'000 | pence | £'000 | pence | |
| Net asset value - debt at par | 1,845,784 | 1,014.2 | 1,441,857 | 789.0 | 1,563,999 | 856.5 |
| Add: amortised cost of US\$65 million 2.55% Private | ||||||
| Placement Feb 2031 | 51,174 | 28.1 | 50,848 | 27.8 | 50,727 | 27.8 |
| Less: fair value of US\$65 million 2.55% Private | ||||||
| Placement Feb 2031 | (45,125) | (24.8) | (43,844) | (24.0) | (45,636) | (25.0) |
| Add: amortised cost of US\$35 million 2.32% Private | ||||||
| Placement Oct 2032 | 27,646 | 15.2 | 27,481 | 15.0 | 27,412 | 15.0 |
| Less: fair value of US\$35 million 2.32% Private | ||||||
| Placement Oct 2032 | (22,903) | (12.6) | (22,466) | (12.3) | (23,328) | (12.8) |
| Net asset value - debt at fair value | 1,856,576 | 1,020.1 | 1,453,876 | 795.5 | 1,573,174 | 861.5 |
Notes to the Condensed Financial Statements
6. Fair valuation of instruments
The fair value hierarchy analysis for financial instruments held at fair value at the period end is as follows:
| (Unaudited) Six months ended 30th June 2024 |
(Unaudited) Six months ended 30th June 2023 |
(Audited) Year ended 31st December 2023 |
||||
|---|---|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Level 1 | 1,925,506 | — | 1,515,890 | — | 1,608,263 | — |
| Total value of investments | 1,925,506 | — | 1,515,890 | — | 1,608,263 | — |
7. Analysis of change in net debt
| As at | Other | As at | ||
|---|---|---|---|---|
| 31st December | non-cash | 30th June | ||
| 2023 | Cash flows | charges | 2024 | |
| £'000 | £'000 | £'000 | £'000 | |
| Cash and cash equivalents | ||||
| Cash and short term deposits | 280 | (268) | — | 12 |
| Cash held in JPMorgan USD Liquidity Fund | 33,927 | (19,071) | 567 | 15,423 |
| 34,207 | (19,339) | 567 | 15,435 | |
| Borrowings | ||||
| Debt due after one year | (78,139) | (15,790) | (713) | (94,642) |
| (78,139) | (15,790) | (713) | (94,642) | |
| Net debt | (43,932) | (35,129) | (146) | (79,207) |
Other non-cash charges relate to an amortisation adjustment on borrowings and foreign currency exchange gains/(losses).
Image: Brooklyn Bridge, New York City.
Interim Management Report
The Company is required to make the following disclosures in its half year report.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company fall into the following broad categories: Investment Process and Strategy, Loss of Investment Team or Investment Manager, Technological Change and or Disruption, ESG Requirements From investors, Market Performance, Share Price Relative to Net Asset Value, Operational and Cyber-crime, Accounting, Legal and Regulatory Compliance, Legislative and Regulatory Change, Widespread Social and Economic Disruption, Climate Change, Geopolitical and Artificial Intelligence (AI). The Board has recently reviewed these risks and concluded that the emerging risk of Threat to Liberal Democracies should now be considered within the Geopolitical principal risk. In addition, a State-backed Cyber Security Attack has been identified as an emerging risk. The Board believes that a State-backed Cyber Security Attack could result in widespread disruption to the financial system and markets leading to financial loss, loss of confidential data, or disruption to the Company's operations and its service providers.
Information on each of these risks, apart from the new emerging risk, is given in the Strategic Report within the Annual Report and Financial Statements for the year ended 31st December 2023. In the view of the Board, these principal risks and uncertainties are as much applicable to the remaining six months of the financial year as they were to the six months under review.
Related Parties Transactions
During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.
Going Concern
In accordance with The Financial Reporting Council's guidance on going concern and liquidity risk, 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 impact of market volatility from 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. Furthermore, the Directors are satisfied that the
Company's key third party service providers have in place appropriate business continuity plans to ensure their operational resilience and the performance of these service providers is reviewed at least annually by the Management Engagement Committee.
Accordingly, having assessed the principal and emerging risks and other matters, the Directors believe that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least 12 months from the date of the approval of this half yearly financial report.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
- (i) the condensed set of financial statements contained within the half year financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company, and of the assets, liabilities, financial position and net return of the Company as at 30th June 2024 as required by the UK Listing Authority Disclosure Guidance and Transparency Rules 4.2.4R; and
- (ii) the interim management report includes a fair review of the information required by Rules 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure Guidance and Transparency Rules.
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 the 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.
For and on behalf of the Board
Robert Talbut
Chair 14th August 2024
Image: Hardwood trees in the Appalachian Mountains near Asheville, North Carolina.
Glossary of Terms and Alternative Performance Measures ('APMs')
Alternative Performance Measure (APM)
Alternative Performance Measures (APMs) are numerical measures of current, historical or future financial performance, financial position or cash flow that are not GAAP measures. APMs are intended to supplement the information in the financial statements, providing useful industry-specific information that can assist shareholders to better understand the performance of the Company.
Where a measure is labelled as an APM, a definition and reconciliation to a GAAP measure is set out below.
Return to Shareholders (APM)
Total return to shareholders, on a last traded price to last traded price basis, assuming that all dividends received were reinvested, without transaction costs, into the shares of the Company at the time the shares were quoted ex-dividend.
| Six months ended | |||
|---|---|---|---|
| Total return calculation | Page | 30th June 2024 | |
| Opening share price as at 31st December 2023 (p) | 6 | 859.0 | (a) |
| Closing share price as at 30th June 2024 (p) | 6 | 997.0 | (b) |
| Total dividend adjustment factor1 | 1.005446 | (c) | |
| Adjusted closing share price (p) (d = b x c) | 1,002.4 | (d) | |
| Total return to shareholders (e = (d/a) – 1) | 16.7% | (e) |
1 The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the last traded price quoted at the ex-dividend date.
Return on Net Assets with Debt at Fair Value (APM)
Total return on net asset value ('NAV') per share, with debt at fair value, assuming that all dividends paid out by the Company were reinvested into shares of the Company at the NAV per share at the time the shares were quoted ex-dividend.
The Company's debt (including the private placements) is valued in the Statement of Financial Position (on page 23) at amortised cost, which is materially equivalent to the repayment value of the debt on the assumption that it is held to maturity. This is often referred to as 'Debt at Par Value'.
The current replacement or market value of the debt, which assumes it is repaid and renegotiated under current market conditions, is often referred to as the 'Debt at Fair Value'.
The difference between fair and par values of the debt is subtracted from the NAV to derive the NAV with debt at fair value. The fair value of the combined US\$100 million private placements has been calculated using discounted cash flow techniques, using the yield from similar dated treasury notes plus a margin based on the US Broad Market AA 10-15 year spread.
| Six months ended | |||
|---|---|---|---|
| Total return calculation | Page | 30th June 2024 | |
| Opening cum-income NAV per share with debt at fair value as at | |||
| 31st December 2023 (p) | 6 | 861.5 | (a) |
| Closing cum-income NAV per share with debt at fair value as at | |||
| 30th June 2024 (p) | 6 | 1,020.1 | (b) |
| Total dividend adjustment factor1 | 1.005541 | (c) | |
| Adjusted closing cum-income NAV per share with debt at | |||
| fair value (p) (d = b x c) | 1,025.8 | (d) | |
| Total return on net assets with debt at fair value (e = (d/a) – 1) | 19.1% | (e) |
1 The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the cum-income NAV at the ex-dividend date.
Glossary of Terms and Alternative Performance Measures ('APMs')
Return on Net Assets with Debt at Par Value (APM)
Total return on net asset value ('NAV') per share, with debt at par value, assuming that all dividends paid out by the Company were reinvested into the shares of the Company at the NAV per share at the time the shares were quoted ex-dividend.
| Six months ended | |||
|---|---|---|---|
| Total return calculation | Page | 30th June 2024 | |
| Opening cum-income NAV per share with debt at par value as at | |||
| 31st December 2023 (p) | 6 | 856.5 | (a) |
| Closing cum-income NAV per share with debt at par value as at | |||
| 30th June 2024 (p) | 6 | 1,014.2 | (b) |
| Total dividend adjustment factor1 | 1.005577 | (c) | |
| Adjusted closing cum-income NAV per share with debt at par (p) (d = b x c) | 1,019.9 | (d) | |
| Total return on net assets with debt at par value (e = (d/a) – 1) | 19.1% | (e) |
1 The dividend adjustment factor is calculated on the assumption that the dividends paid out by the Company are reinvested into the shares of the Company at the cum-income NAV at the ex-dividend date.
Net asset value per share (APM)
The value of the Company's net assets (total assets less total liabilities) divided by the number of ordinary shares in issue. Please see note 5 on page 26 for detailed calculations.
Benchmark Total Return
Total return on the benchmark, on a closing-market value to closing-market value basis, assuming that all dividends received were reinvested, without transaction costs, in the shares of the underlying companies at the time the shares were quoted ex-dividend.
The benchmark is a recognised index of stocks which should not be taken as wholly representative of the Company's investment universe. The Company's investment strategy does not 'track' this index and consequently, there may be some divergence between the Company's performance and that of the benchmark.
Annualised return on net assets relative to benchmark (APM)
This is the difference between the return on net assets, with debt at fair value, and the benchmark return. For periods greater than one year, the relative return has been annualised.
Gearing/(Net Cash) (APM)
Gearing represents the excess amount above shareholder's funds of total investments, expressed as a percentage of the shareholders' funds. If the amount calculated is negative, this is shown as a 'net cash' position.
| Six months ended | Year ended | |||
|---|---|---|---|---|
| 30th June | 31st December | |||
| 2024 | 2023 | |||
| Gearing calculation (excluding effect of futures) | Page | £'000 | £'000 | |
| Investments held at fair value through profit or loss | 23 | 1,925,506 | 1,608,263 | (a) |
| Net assets | 23 | 1,845,784 | 1,563,999 | (b) |
| Gearing (c = (a/b) – 1) | 6 | 4.3% | 2.8% | (c) |
Ongoing Charges Ratio (APM)
The ongoing charges represent the Company's management fee and all other operating expenses excluding finance costs payable, expressed as a percentage of the average of the daily cum-income net assets during the year and is calculated in accordance with guidance issued by the Association of Investment Companies.
The figure as at 30th June 2024 is an estimated annualised figure based on the numbers for the six months ended 30th June 2024.
| Six months ended | Year ended | |||
|---|---|---|---|---|
| 30th June | 31st December | |||
| 2024 | 2023 | |||
| Ongoing charges ratio calculation | Page | £'000 | £'000 | |
| Management Fee | 21 | 2,494 | 4,261 | |
| Other administrative expenses | 21 | 619 | 1,053 | |
| Total management fee and other administrative expenses | 3,113 | 5,314 | (a) | |
| Average daily cum-income net assets | 1,729,243 | 1,416,971 | (b) | |
| Ongoing charges (c = (a/b) x 2) | 6 | 0.36% | (c) | |
| Ongoing charges (d = a/b) | 0.38% | (d) |
Share Price Discount/Premium to Net Asset Value ('NAV') per Share (APM)
If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount, meaning there are more sellers than buyers.
The discount is shown as a percentage of the NAV per share. The opposite of a discount is a premium. It is more common for an investment trust's shares to trade at a discount than at a premium (see page 6).
Discount to net asset value with debt at fair value
| Six months ended | Year ended | |||
|---|---|---|---|---|
| 30th June | 31st December | |||
| Page | 2024 | 2023 | ||
| Share price (p) | 6 | 997.0 | 859.0 | (a) |
| Net asset value per share with debt at fair value (p) | 6 | 1,020.1 | 861.5 | (b) |
| Discount to net asset value with debt at fair value (c = (a–b)/b) | 6 | (2.3)% | (0.3)% | (c) |
(Discount)/Premium to net asset value with debt at par value
| Six months ended | Year ended | |||
|---|---|---|---|---|
| 30th June | 31st December | |||
| Page | 2024 | 2023 | ||
| Share price (p) | 6 | 997.0 | 859.0 | (a) |
| Net asset value per share with debt at par value (p) | 6 | 1,014.2 | 856.5 | (b) |
| (Discount)/premium to net asset value with debt at par value (c = (a–b)/b) 6 | (1.7)% | 0.3% | (c) |
Portfolio Turnover
Portfolio turnover is based on the average equity purchases and sales expressed as a percentage of average opening and closing portfolio values (excluding liquidity funds).
Investing in JPMorgan American Investment Trust plc
You can invest in JPMorgan American Investment Trust plc through the following:
1. Via a third party provider
Third party providers include:
| AJ Bell Investcentre |
|---|
| Barclays Smart investor |
| Charles Stanley Direct |
| Fidelity Personal Investing |
Halifax Share Dealing Hargreaves Lansdown interactive investor
Please note this list is not exhaustive and the availability may vary depending on the provider. These are third party providers and the Company does not endorse or recommend any. Please observe each provider's privacy and cookie policies as well as their platform charges structure.
The Board encourages all of its shareholders to exercise their rights and notes that many specialist platforms provide shareholders with the ability to receive company documentation, to vote their shares and to attend general meetings, at no cost. Please refer to your investment platform for more details, or visit the Association of Investment Companies' ('AIC') website at
www.theaic.co.uk/aic/shareholder-voting-consumer-platforms for information on which platforms support these services and how to utilise them.
2. Through a professional adviser
Professional advisers are usually able to access the products of all the companies in the market and can help you find an investment that suits your individual circumstances. An adviser will let you know the fee for their service before you go ahead. You can find an adviser at unbiased.co.uk
You may also buy investment trusts through stockbrokers, wealth managers and banks.
To familiarise yourself with the Financial Conduct Authority (FCA) adviser charging and commission rules, visit fca.org.uk
Share Fraud Warning
Investment and pension scams are òé÷èñöòóëìö÷ìæä÷èçäñççìĦæøï÷÷òöóò÷
Be a ScamSmart investor and spot the warning signs
Fraudsters will often:
- contact you out of the blue
- apply pressure to invest quickly
- downplay the risks to your money
- promise tempting returns that sound too good to be true
- öäü÷ëä÷÷ëèüđõèòñïüðäîìñê÷ëèòģèõäùäìïäåïè÷òüòøòõ even ask you to not tell anyone else about it
How to avoid investment and pension scams Òéüòøđõèöøöóìæìòøöõèóòõ÷ì÷
Ûèíèæ÷øñèûóèæ÷èçòģèõö Scammers usually cold call, but contact can also come by email, post, word of mouth òõä÷äöèðìñäõÒéüòøđùèåèèñòģèõèçäñ investment out of the blue, chances are it's 1
a high risk investment or a scam.
Check the FCA Warning List
2
3
Use the FCA Warning List to check the risks of a potential investment – you can also search ÷òöèèìé÷ëèĤõðìöîñòúñ÷òåèòóèõä÷ìñêúì÷ëòø÷ our authorisation.
Ðè÷ìðóäõ÷ìäïäçùìæè
Get impartial advice before investing – don't use äñäçùìöèõéõòð÷ëèĤõð÷ëä÷æòñ÷äæ÷èçüòø
Yòøæäñõèóòõ÷÷ëèĤõðòõöæäð÷òøöåü contacting our Consumer Helpline on 0800 111 6768 or using our reporting form using the link below.
If you've lost money in a scam, contact Action Fraud on 0300 123 2040 or www.actionfraud.police.uk
Be ScamSmart and visit úúúéæäòõêøî¦öæäðöðäõ÷
Information About the Company
History
The Company has its origins in the Alabama, New Orleans, Texas and Pacific Junction Railways Company Limited which was formed in 1881 to acquire interests in, and to undertake the completion of, three American railroads – the Vicksburg and Meridian, the Vicksburg, Shreveport and Pacific and the New Orleans and North Eastern. In 1917 the Company was reorganised, a proportion of the railroad interests were sold, and the investment powers were widened enabling its assets to be invested in several countries including the United Kingdom. To reflect the new objectives the name was changed to The Sterling Trust. The Company's investment policy reverted to North American securities in 1982 when the name was changed to The Fleming American Investment Trust plc. The name was changed to JPMorgan Fleming American Investment Trust plc in April 2002 and to its present form in 2006. JPMorgan, and its predecessor company, has been the Company's manager and secretary since 1966.
Directors
| Robert Talbut | (Chair of the Board, Nomination Committee and |
|---|---|
| Management Engagement Committee) | |
| Claire Binyon | (Chair of Audit Committee) |
| Nadia Manzoor (Senior Independent Director and Chair of | |
| Remuneration Committee) | |
| Pui Kei Yuen | (Chair of Risk Committee) |
| Colin Moore |
Company Numbers
Company registration number: 15543 Country of registration: England and Wales London Stock Exchange number: 08456505 ISIN: GB00BKZGVH64 SEDOL Code: BKZGVH6 Bloomberg code: JAM LN LEI: 549300QNAI4XRPEB4G65
Market Information
The Company's shares are listed on the London Stock Exchange. The market price is shown daily in the Financial Times and on the J.P. Morgan website at www.jpmamerican.co.uk, where the share price is updated every 15 minutes during trading hours.
Website
www.jpmamerican.co.uk
A member of the AIC London EC2V 6ET
Share Transactions
The Company's shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf.
Manager and Company Secretary
JPMorgan Funds Limited
Company's Registered Office
60 Victoria Embankment London EC4Y 0JP Telephone: 0800 20 40 20 or +44 1268 44 44 70 email: [email protected]
For company secretarial and administrative matters, please contact Priyanka Vijay Anand at the above address.
Depositary
The Bank of New York Mellon (International) Limited 160 Queen Victoria Street London EC4V 4LA The Depositary has appointed JPMorgan Chase Bank, N.A. as the Company's custodian.
Registrar
The Company has transferred the management of its share register from Equiniti Financial Services Limited to Computershare Investor Services PLC ('Computershare') with effect from 24th June 2024.
Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol, BS99 6ZZ Telephone number: +44 (0) 370 707 1519
Lines open 8.30 a.m. to 5.30 p.m. Monday to Friday. Calls to the helpline will cost no more than a national rate call to a 01 or 02 number. If calling from outside of the UK, please ensure the country code is used.
Shareholders can manage their shareholding online by visiting Investor Centre at www.investorcentre.co.uk. Shareholders just require their Shareholder Reference Number ('SRN'), which can be found on any communications previously received from Computershare.
Independent Auditor
BDO LLP (Statutory Auditor) 55 Baker Street London W1U 7EU
Brokers
Stifel Nicolaus Europe Limited 4th floor, 150 Cheapside,
CONTACT
60 Victoria Embankment London EC4Y 0JP Freephone: 0800 20 40 20 Calls from outside the UK: +44 1268 44 44 70 Website: www.jpmamerican.co.uk
