JPMorgan American Regulatory News (JAM)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN AMERICAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2019

Legal Entity Identifier: 549300QNAI4XRPEB4G65

Information disclosed in accordance with the DTR 4.1.3

CHAIR'S STATEMENT

Any review of 2019 must begin with the recognition that events associated with COVID-19 have caused unprecedented turmoil in global equity markets, rendering 2019 performance and market levels looking like ancient history in a very short space of time. Indeed the speed and extent of downward collapse in the US stock market has been literally unprecedented, drawing comparisons only with the most dramatic of past declines. At the time of writing historically large daily movements in the US stock market are continuing as investors attempt to understand and assess the ultimate impact of COVID-19. This volatility is likely to persist for some time until the resolution of the global pandemic is much clearer.

Nevertheless, investors in US equities enjoyed strong returns in the year to 31st December 2019 with the S&P 500 Index on a total return basis producing a return of +31.5% to US investors in dollar terms. Taking account of the effect of withholding taxes and a strengthening of sterling over the period, this return translated into a return of +26.0% for UK investors.

Over the year, your Company underperformed its benchmark returning +21.6%. The discount of the share price to NAV tightened from 5.2% to 4.3%, producing a total return to shareholders for the year of +22.8%. More information is provided in the attribution report detailed on page 12 in the Investment Manager's Report within the Company's Annual Report & Financial Statements for the year ended 31st December 2019 ('2019 Annual Report').

The Large Cap Investment Process

As was reported to shareholders during the year, after considerable due diligence, the Board decided to change the large cap process offered by the Manager. This change has resulted in a new focussed approach including a reduction in the number of holdings in the large cap portfolio and a reduction in the size of the portfolio tail, resulting in a higher-conviction portfolio. Shareholders approved this new investment policy at the Annual General Meeting last year, and it was implemented with effect from 1st June 2019.

This investment approach has co-lead investment managers, Jonathan Simon and Tim Parton, and sees the large cap element of your Company's asset base invested in a portfolio typically around 40 stocks. The growth and value components of the portfolio are approximately equal, with a maximum tilt in either direction of 60:40. We were pleased that we could quickly and easily transition the portfolio. This transition resulted in $1.68 billion of trading activity with all but one stock traded over a three day period. This trading represented about 4.5% of the average daily volume of the traded stocks. The Manager had agreed in advance to recompense the Company for all costs involved in transitioning the portfolio, which it has done.

The Small Cap Portfolio

The Company has the benefit of exposure to small cap stocks, which is achieved through exposure to the JPM US Small Cap Growth Strategy. The Company's flexibility to invest a component of its asset base in a portfolio of small cap equities managed by Eytan Shapiro has remained unchanged.

Over the year under review, the exposure to small cap stocks has been very much at the lower end of the 0% to 10% range permitted by the Company's investment policies, closing the year at close to 1.0% of the Company's portfolio having reached approximately 2.8% in June. The JPM US Small Cap Growth portfolio outperformed its own Russell 2000 Growth benchmark and the Company's benchmark, adding 0.1% to performance.

The Board continues to work with the Manager in the development and review of tools to guide its allocation to small cap stocks, which have had a record of adding value for shareholders in recent years.

Liquidity

At the year end, analysis provided by the Manager suggests that in normal market conditions 80% of the portfolio could be liquidated in one day, 96.5% in five days and 99% in ten days. Furthermore, as we have demonstrated, the transition of the large cap portfolio at the beginning of June was carried out in a short time. Shareholders can take comfort that in normal market conditions the Company's portfolio is highly liquid. In a recent Board call with the investment managers they confirmed that even in these current stressed market conditions they are not experiencing any material liquidity constraints in the portfolio activity they are undertaking for the Company.

Gearing

The use of gearing to enhance returns is another key differentiating feature of investment trusts. As gearing can introduce risk as well as enhancing returns, the Board maintains strong oversight of the Company's gearing policy and the source and use of available leverage.

The Company's gearing policy is to operate within a range of 5% net cash to 20% geared in normal market conditions. The Board considers the present strategic level, and the expected long term gearing level in normal market conditions, to be 10% plus or minus 2%. In response to the turbulent market conditions that can cause reported gearing levels to change as market levels change, the Board announced that the range around the present 10% level would be changed temporarily to plus or minus 4%. This change was announced to the stock exchange on 16th March 2020 and gives the investment managers more flexibility to manage the portfolio in shareholders' best interests.

In the latter part of 2018, the Company reduced gearing from the 10% level to the point where it was essentially ungeared, operating with a tactical gearing range of 0% (plus or minus 2%). Although this decision to reduce gearing was value-enhancing for shareholders in 2018, in 2019 the returns were held back. Over the course of 2019, gearing levels remained low, with gearing being reintroduced into the Company's structure late in the year with the result that the Company ended the year with gearing of approximately 3%.

The Company's gearing strategy is implemented through the use of bank borrowing facilities, with the Company currently having access to a £80 million floating rate debt facility with ING Bank following a decision taken by the Board to increase the amount available by £40 million post the year end. A further post year end decision was taken to retire a £25 million floating rate loan facility with National Australia Bank, at no cost, ahead of its original expiry date of April 2020.

As announced on 27th February 2020, the leverage available to the Company has been increased further through the issue of $65 million of fixed-rate 11 year unsecured loan notes via a private placement with a UK based life assurance company at a fixed interest rate of 2.55% per annum. The ability to borrow money for investment is a key differentiating feature of investment trusts. Further, the long-term fixed rate borrowings negotiated by the Board offer an attractive source of debt for the Company at rates that we believe will look competitive over the term of the notes.

These notes, which are due for repayment in February 2031, provide the Company with long-dated, fixed-rate financing at an attractive rate of interest, diversifying the source, tenor and rate of the leverage available to the Company. Together with the £80 million revolving credit facility, these loan notes provide the Company with sufficient debt to ensure that it can operate at the Board's expected strategic gearing level.

As at 31st March 2020 the gearing level of the Company was 10.3% calculated in line with the Association of Investment Companies ('AIC') methodology. The Board continues to review the appropriate gearing level on a regular basis using a variety of qualitative and quantitative tools.

Board Review of the Manager

As in prior years, the Board visited the Manager's offices in New York. In addition to the meetings held as part of the exercise to review and amend the large cap investment process held early in 2019, it held meetings in the last quarter of the year with the new investment managers, Jonathan Simon and Tim Parton and also the investment manager of the smaller companies' portfolio, Eytan Shapiro. The Board further met with JPMorgan's senior management team to discuss the transition of the portfolio arising from the change in investment strategy.

Alongside the management of the portfolio, 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. The Board concluded that it was generally satisfied with J.P. Morgan's performance. Thus, 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 closely monitor the Company's cost base. Following the change in investment approach for the large cap portfolio, approved by shareholders at the 2019 Annual General Meeting, the Company has enjoyed the benefits of a negotiated fee waiver from 1st June 2019 through to 29th February 2020, saving the Company £2.0 million over the year ended 31st December 2019. At the same time the fee arrangements were simplified with the removal of the performance fee that had previously been in place.

As management fees are the Company's biggest cost, the fee waiver has had a material effect on the Company's ongoing charges ratio, which has fallen from 0.38% in 2018 to 0.18% in 2019. This effect is temporary and, had the management fee been in effect for the full year, the Company's ongoing charges ratio would have been 0.39%. Next year's ongoing charges will be reduced to a lesser extent by the two months remaining of the fee waiver.

This means the Company remains one of the most competitively priced US actively managed funds, in either closed-ended or open-ended form, available to UK investors. However, the Board is aware that the major competition for investors' attention and funds remain passively invested exchange traded funds and open-ended funds which represent the largest pools of capital invested into US equity markets.

In line with recent years, we repeat the table below illustrating the movements in the capital base of the Company, showing the returns generated from our investing activities and the effect of costs, dividends and buy-backs. By combining items found in the revenue statement and items charged to capital, we believe this analysis provides a clear summary of your Company's affairs over the course of the year.

1 Includes transaction costs of £169,000 relating to the transition of the portfolio following the change in investment policy.

Share Price and Premium/Discount

Throughout the year, the Company's shares have traded at a discount to the NAV. Consistent with our statements made in previous years and because share buy-backs at a discount to NAV are enhancing to the net assets per share for remaining shareholders, the Board is committed to buy-back shares when they stand at anything more than a small discount. This commitment has operated for several years and applies to normal markets conditions. As a result, the Company has continued with its buy-back policy, repurchasing 9,151,590 shares into Treasury, at a cost of £42.2 million, representing 4.2% of the Company's issued share capital at the beginning of 2019.

This is a reduction in the amount repurchased in the previous year when £52.5 million was spent repurchasing 5.5% of the issued share capital, which itself was approximately one half of the amount spent on buy-backs in 2017. This reduction does not represent any reduction in the Board's commitment to buy-back shares, but rather reflects the balance of supply and demand for the Company's shares in the period. Indeed, the average discount over the year of 4.95% is near identical to the average discount in 2018. Since the year end and at the time of writing the Company has repurchased a further 1,807,055 shares into Treasury, at a cost of £8.6 million.

The Company will again ask shareholders to approve the repurchase of up to 14.99% of its capital at a discount to estimated NAV of the Company's shares at the forthcoming Annual General Meeting. We will also be seeking shareholder permission to issue shares, where Directors are 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 with the value of the debt deducted at market price.

Dividends

As highlighted to shareholders in my Half-Year statement, the Company's new investment policy is likely to reduce the revenue per share generated by the portfolio. Whilst capital growth is the primary aim of the Company, the Board is aware that dividend receipts can be an important element of shareholder returns. Alongside this, investment trust rules mean the Company is obliged to retain no more than 15% of its income in any accounting period.

As predicted, the net revenue for the full year ending 31st December 2019 was lower than 2018, at 7.54p per share compared with 7.71p in 2018. This year's earnings includes the effect of five months in which the old higher-yielding large cap process was followed and of seven months of the fee waiver, both of which contributed positively to earnings. This means that we can expect net revenue to fall again in the 2020 financial year as the Company sees the adverse revenue effects of a full year of the new investment process and the expiry of the fee waiver at the end of February 2020.

The Company paid an interim dividend in respect of the 2019 financial year of 2.5p on 4th October 2019. Historically the Company has paid an interim and a final dividend each year, with the final dividend being subject to a shareholder vote (by ordinary resolution) at the Annual General Meeting each year. In light of the potential adjournment of the Company's Annual General Meeting due to the ongoing COVID-19 crisis (see below for more detail), the Board has resolved to pay an additional interim dividend, in lieu of the usual final dividend, so that in the event of the Company's Annual General Meeting not being able to take place on 7th May 2020, the payment of the dividend will not be delayed. Accordingly, the Directors are announcing that an interim dividend of 4.0p will be paid on 18th May 2020 to shareholders on the register on 24th April 2020, resulting in a total dividend of 6.5p per share for the year ended 31st December 2019, unchanged from last year's total of 6.5p per share. As this dividend will be announced as an interim dividend, shareholders will not have an opportunity to approve the dividend by ordinary resolution. To ensure that shareholders can still have a say on the Company's dividend distributions, and in line with good corporate governance practice where shareholders do not have an opportunity to approve a final dividend, a resolution will be included in the forthcoming Notice of Annual General Meeting seeking shareholder approval of the Company's general dividend policy.

After the payment of this additional interim dividend, the Company will have a balance in the revenue reserves of £23.5 million which is equivalent to 9.6p per share or 1.5 times the current dividend - both measures being materially the same as at the end of 2018, reflecting a dividend policy which has seen the Board retain an element of earned revenue in recent years. This prudent approach in building up revenue reserves provides the Board with a means of supporting dividend levels in the future should earnings per share drop materially in any financial year.

Subject to the effects of the expected US recession arising from the COVID-19 pandemic and associated events, the Board aims to maintain the aggregate 2019 dividend in the forthcoming year.

Corporate Governance

The Board is committed to maintaining and demonstrating high standards of corporate governance. The Board has considered the principles and provisions of the 2019 Association of Investment Companies Code of Corporate Governance (the 'AIC Code'). The AIC Code addresses all the principles and provisions set out in the UK Corporate Governance Code which applies for the year ended 31st December 2019, as well as setting out additional principles and provisions on issues that are of specific relevance to investment companies. The Board considers that reporting in accordance with the principles and provisions of the AIC Code provides more relevant and comprehensive information to shareholders.

I am pleased to report that throughout the year ended 31st December 2019, the Company complied with the recommendations of the AIC Code except, as explained in the Directors' Report, where it was not appropriate for the Company to comply.

Environmental, Social and Governance ('ESG') Update

The Board continues to discuss with the Manager the integration of ESG issues into the investment process followed by the Company, reflecting the growing importance of these issues to the Board and the Company's shareholders. As well as being an important issue for society as a whole, we believe that ESG considerations are important in identifying the sustainable and durable businesses we look to invest in.

The Manager is in the process of a formal integration of ESG factors into its investment process which we understand will be completed over the course of the year. We look forward to discussing this approach in more detail with them and reporting more fully on ESG matters in next year's Report.

The Board

There has been no change to the composition of the Board during the year. The Board continues to manage succession so that it has an appropriate balance of skills and diverse approaches to its tasks. As mentioned last year, the Board has decided to increase its size to six directors and has been in the process of appointing an additional director. Following a search exercise conducted by Ridgeway Partners, I am delighted to report that Ms Claire Binyon will be joining the Board with effect from 1st June 2020. Claire is a qualified Chartered Accountant and has had a varied career in global businesses with roles in strategy, corporate development, mergers and acquisitions. She will bring wide-ranging international expertise to Board discussions, combined with business appraisal, financial and public markets experience. More details on the Board can be found on page 27 of the 2019 Annual Report. The Board will continue to manage succession and refresh its own composition over time.

Annual General Meeting and Shareholder Contact

This year's Annual General Meeting is the Company's 104th and it will be held on Thursday, 7th May 2020 at 11.00 a.m. at 60 Victoria Embankment, London EC4Y 0JP.

Due to the ongoing situation surrounding COVID-19, and in the light of the compulsory 'Stay at Home' measures that have been implemented by the UK Government, the Board has, in order to ensure compliance with applicable Government guidance and to ensure the safety of the Company's shareholders, resolved to amend the format of the Annual General Meeting for this year. Whilst the formal business of the Annual General Meeting will be considered, the meeting will be purely functional and will follow only the minimum legal requirements for an Annual General Meeting. There will be no presentation from the investment managers, Tim Parton and Jonathan Simon and no refreshments. The Board intends to comply with prevailing Government guidance in relation to the pandemic at all times and therefore shareholders will be refused entry to the meeting if the current Stay at Home measures are extended and/or if prevailing Government guidance so requires. Arrangements will be made by the Company to ensure that the minimum number of shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business concluded.

However, the Board is keen to ensure shareholders are not denied the opportunity to hear from the Manager and therefore, a presentation with the investment managers will be placed on the Company's website shortly after the Annual General Meeting. In addition, shareholders are encouraged to raise any questions in advance of the meeting with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the 'Ask US A Question' link which can be found in the 'Contact Us' section on the Company's website. Any questions received will be replied to by either the Manager or Board via the Company Secretary after the Annual General Meeting.

In addition, it is the intention of the Board to hold an investor forum at the Manager's 60 Victoria Embankment offices later in the year when it is hoped that Stay at Home and social distancing measures will have been relaxed and shareholders can attend safely. Shareholders will be able to meet the Directors and the investment managers at this event. Such notification will also be posted on the Company's website and given via an announcement on the London Stock Exchange.

Given the Stay at Home measures currently in place, the Board strongly encourages all shareholders to submit their votes in advance of the meeting, so that these are registered and recorded at the Annual General Meeting. Proxy votes can be lodged in advance of the Annual General Meeting either by post or electronically by 5th May 2020: detailed instructions are included in the Notes to the Notice on pages 76 to 78 of the Notice of Annual General Meeting within the 2019 Annual Report and on the proxy form that accompanies it.

If there are any changes to the above Annual General Meeting arrangements, the Company will update shareholders through the Company's website and, as appropriate, through an announcement on the London Stock Exchange.

The Board would like to thank shareholders for their understanding and co-operation at this difficult time. We very much hope that you and your families are safe and well and look forward to meeting with you later in the year when we hope normality has returned.

Outlook

2019 was a remarkable year for investors in the US stock market. 2020 looks like being even more remarkable for entirely different reasons. At the close of business on 31st March 2020, the Company's benchmark, the S&P 500 index, was down 14.2% in sterling terms year to date, while the Company's NAV calculated on the same basis had declined by 19.0%. It seems clear that there will be a sharp and deep global recession in 2020, including in the US, while measures are progressively introduced to combat the virus. The Federal Reserve and US government respectively have introduced extreme monetary and fiscal responses to the economic impact of the health related measures. What is presently unclear is how long and deep this recession could be, or how successful the measures to counteract COVID-19 will turn out to be. Profitability of some businesses will certainly be adversely affected as economic growth declines. Investor assessment of these matters will oscillate and we must expect considerable bouts of market turbulence and volatility to result.

The Manager has introduced special work practices, in common with most businesses, as the crisis progresses through and beyond its anticipated peak later this year. The Board held a recent call with senior representatives at the Manager, along with the two lead investment managers for the Company, and was comforted by the Manager about its resilience to function through this period.

Notwithstanding the present extraordinary situation, it is worth remembering that the US remains home to large numbers of exceptional companies and that the Company's Manager has a brief to construct a concentrated portfolio from amongst them. The Company has been in existence through various reinventions for nearly 140 years, so a long term perspective comes naturally to the Company and those who serve it.

No investment process can avoid bouts of extreme market volatility and your Company's investment approach will be no exception. Following its adoption last year, I am hopeful that the new investment process will serve shareholders well in the years ahead.

Dr Kevin Carter

Chair

7th April 2020

investment manager's report

Market Review

The S&P 500 Index ended 2019 with a return of +31.5% in US dollar terms and +26.0% in sterling terms. It was a strong performance but came from a low base as 2018 finished on a very weak note. Relative to other major markets, the US outperformed Europe as well as emerging markets in 2019, a trend that has now been in place over the last ten years.

Despite the strong market performance in 2019, it was certainly not all smooth sailing as investors faced plenty of concerns, including an inverted Treasury yield curve in the early part of the year which prompted fears of slowdown or even recession. Also adding to volatility was the escalation in trade tensions between the US and China. The summer brought with it a significant change in direction by the Federal Reserve as it moved from interest rate raising to rate cutting. In spite of this more accommodative policy shift, further trade fears and weakening global manufacturing data prompted a sharp but brief August pullback (as is quite often seen in the slow summer months).

These and other potential headwinds were nevertheless absorbed by the market and overall economic data remained quite resilient, supported by stimulative fiscal and monetary policy, both unusual to see at this later stage of the economic cycle with such historically low levels of unemployment. The consequent market rally was powerful and steady, an acknowledgement that the Fed effectively had the market's back, and a Goldilocks environment could continue. In such a liquidity-driven phase, and with profit growth subdued, the big driver of stock price gains was an expansion in valuations, as the S&P 500 ended the year with a forward P/E of 18.2x, rising above its 25-year average of 16.3x. Valuations in sought-after higher growth areas inflated considerably more.

While all sectors of the S&P 500 posted positive returns for the year, the clear leader was the information technology sector which surged nearly 20 percentage points more than the S&P 500 with a gain of 50%, and was also far ahead of the next best performing sector, communication services, which includes Google, Facebook and Netflix and posted a gain of 33%. Energy and health care names were significant laggards as oil prices and election rhetoric weighed on these two sectors.

In terms of style and market capitalisation, growth strongly outperformed value by almost ten percentage points, a trend that has been in place for several years; and large cap stocks outperformed their small cap peers.

Performance and Overall Asset Allocation

The Company's net asset value rose by +21.6% in total return terms for the full year ending 2019. The return was below the benchmark, the S&P 500, which rose +26.0% in sterling terms.

As mentioned in the half-year report, management of the Company's large cap portfolio was transitioned to a higher conviction approach combining the best ideas from the Manager's value and growth investment teams on 1st June 2019. This investment approach resulted in a reduction in the number of stocks in the large cap portfolio. The rationale for amending the Company's investment process, together with full details of the new strategy, was set out in detail in the Chair's statement which accompanied the Company's results for the year ended 31st December 2018.

With regards to the small cap growth allocation, the vast majority of the Company's assets remain in the large companies portfolio. After several years of extremely strong performance, 2019 began with a nominal allocation of 1% to our small cap growth portfolio, which is at the bottom of our historical range. It was modestly increased during the middle part of the year based on the valuation data from our asset allocation tool, but ended the year back where it started.

In 2019, the Company's gearing increased from -1% at the beginning of the year to 3% at year end. The level of gearing has been adjusted at regular intervals within the gearing guidelines laid down by the Board. Given the market concerns during the first half of the year, the Company did not deploy gearing during the period. With the rising market environment in the first six months of 2019, this decision saw us forego the opportunity to earn higher returns. However, we increased our gearing in two tranches during the second half of the year.

Large Cap Portfolio

The large companies portfolio posted a positive return, but underperformed the benchmark over the 12 months to the end of December 2019. A poor start to the year relative to the market proved difficult to overcome. Looking at relative performance, our stock selection was disappointing during the period, with the largest detractors coming from the information technology and real estate sectors. It is worth mentioning that the US market is now dominated by five mega cap companies, Apple, Microsoft, Alphabet (better known as Google), Amazon and Facebook, together comprising almost 17% of the index at year end. Remarkably, the combined market capitalisation of these five companies is 2.5 times that of the entire Russell 2000 small cap universe (comprising 2,000 companies).

While the information technology sector is a significant component of the portfolio, we are moderately underweight the sector relative to the S&P 500, especially many of the 'old tech' companies that are in the process of being disrupted by cloud upstarts. We also reduced exposure to some of the higher-flyers as the year progressed. With the sector rising approximately 50% for the year, in aggregate our names lagged a little returning 44%. There were however a number of bright spots, notably our significant exposure to Microsoft as well as at Qualcomm and Advanced Micro Devices.

PERFORMANCE ATTRIBUTION

for the year ended 31st December 2019

Source: JPMAM and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.

Microsoft is one of the few 'old tech' software companies that has successfully executed a transition to a cloud-based subscription model. New leadership has been the key to this outcome, along with the power of their existing enterprise relationships. The market was very open to a strong alternative to the dominant Amazon Web Services, and Microsoft Azure seized that mantle. Qualcomm was added to the portfolio last year after it resolved long-standing conflicts with major customers, who now need their expertise to execute a 5G wireless roll-out. The stock was also very attractive on a valuation basis after several years of underperformance. In another dramatic turnaround Advanced Micro Devices, so long Intel's punch-bag in the CPU space, has sprinted to a position of technological leadership under new management, while Intel has struggled to catch up. This feels quite durable to us, and we see considerable earnings upside for Advanced Micro Devices.

With regards to the real estate sector, our position in Public Storage, a REIT that owns and operates self-storage facilities, was an underperformer. Its share price came under pressure after this long time winner reported disappointing earnings in the later part of the year. Another REIT holding, Federal Realty, was also a laggard during the year. Nevertheless, we continue have conviction in these names and also believe these positions can provide stability and ballast when we inevitably encounter less favourable market conditions.

At the individual stock level, our overweight position in the consumer staples name Walgreens Boots Alliance was the largest detractor from relative performance for the year. The company faced pressures in both its retail and wholesale pharmacy businesses, and these are likely to persist. However, we retain confidence in the management and hold on to a more modest-sized position, especially given that we are already significantly underweight the staples area that today offers little enticement to either growth or value investors. For Walgreens, we believe a lot of negative news is priced at the names trades at less than nine times earnings and a free cash flow yield of almost 10%, which makes it a very attractive holding from a valuation perspective.

Our strongest stock selection came in the materials, financials and consumer discretionary sectors which are three of the biggest overweight sectors in the portfolio. In materials Martin Marietta Materials, which supplies aggregates for roads and commercial construction, was a strong performer. The aggregates industry is characterized by high barriers to entry, local oligopolies and strong pricing power which give it the potential for strong returns. The sector is a late cycle performer and has only recently really started to work as some Federal, state and local funding has been unlocked for much-needed infrastructure projects.

Within financials, our overweight position in Bank of America was among the largest contributors. The company performed well on the heels of strong earnings, broadly beating lowered expectations. Banks are one of the cheapest areas of the market, and have been managed very conservatively since the financial crisis, now over a decade ago. However they have been pressured by persistently low interest rates that have squeezed their net interest margins, and have been forced to cut costs to compensate. We appreciate Bank of America's diversified business mix with a demonstrated ability to post healthy top line growth, steadily manage margins and return capital to shareholders via dividends and buybacks.

On an individual stock basis, the best performing stock in the portfolio for the year was DexCom, a medical device company that is helping to transform the diabetes market with its continuous glucose monitoring (CGM) systems. The diabetes market is very large and growing, partly a consequence of poor western diets, and still relies on quite primitive techniques to measure blood sugar and administer insulin. With continuous monitoring, and also automated wearable pumps, the disease can be managed much more precisely, and the consumption of expensive insulin reduced. DexCom's latest G6 model has seen strong acceptance and its even more compact G7, developed in conjunction with Alphabet's Verily division, should be available later this year, further extending their lead in this space.

In terms of portfolio positioning, our sector weights remain a by-product of our bottom-up stock picking and our disciplined approach to portfolio construction. Financials and information technology remain the largest allocations in the portfolio and represent nearly 40% of the overall portfolio. However their representation relative to the S&P 500 diverge. Financials is the largest overweight in the portfolio as we continue to find a number of compelling investments in the space and the valuations remain attractive. For example, Bank of America traded at about 1.3x book value and a forward P/E of 12x at year end, compared with the market at 18x forward multiple. Information technology is by far the largest sector in the S&P500 now and our allocation in the portfolio is about 2% underweight that, as mentioned previously.

Our large underweight to the consumer staples sector reflects the better risk/reward opportunities that we have identified in other sectors. In particular, we have found names with similar defensive characteristics such as Ball Corp., the leading manufacturer of aluminium beverage cans, in the materials space. Ball benefits from tight industry capacity, and the prospect of more beverages moving from single-use plastic and heavy glass to aluminium.

The construction of the large cap portfolio allocates between value and growth stocks, with the allocation allowed to vary between 60:40 and 40:60. At the year end, value stocks comprised some 51% of the large-cap portfolio and growth stocks comprised the remaining 49%. Below is an overview of the split between value and growth in the strategy over the long term. At times in the past growth names have been prominent, but today we are more inclined to take profits in that area and reallocate to value. The trigger for a growth-to-value rotation is impossible to predict, but will come eventually, and it may be swift.

We combine our separate growth and value 'sleeves' in the large cap portfolio but we think about the portfolio holistically and we review the key characteristics, and manage risk, at the portfolio level. The large cap portfolio is trading at about a 25% discount to the market on a free cash flow basis as we are clearly not paying a premium for good cash flow. Additionally, we believe our holdings can deliver better earnings per share growth than the market over the next few years.

Source: Factset, BARRA, J.P. Morgan Asset Management. Data as of 31st December 2019.

Small Cap Portfolio

While US smaller companies lagged their large cap brethren in 2019, our small cap growth allocation positively contributed to the Company's overall results as our stock positions outperformed the S&P 500 Index in 2019.

The primary driver of our strong performance was our stock selection with a number of sectors proving beneficial. Our stock selection in the health care, producer durables and consumer staples sectors contributed to performance. Within health care, several names emerged among the top contributors, including Spark Therapeutics and Nevro. Shares of Spark Therapeutics, a company developing gene therapies rose during the year after Roche announced the acquisition of Spark Therapeutics at a hefty premium. Shares of Nevro rose throughout the year after the company reported strong quarterly results and also raised its revenue guidance for 2019. The company is well-poised for growth, backed by strong international presence, solid prospects in the spinal cord stimulation market and commitment toward innovation.

On the other hand, our stock selection in the consumer discretionary and technology sectors detracted. Within consumer discretionary, our exposure to Farfetch, a luxury e-commerce platform, detracted after the company reported wider than expected losses, a disappointing outlook and a decision to limit promotional activity. For now we maintain a very modest position in that stock.

Market Outlook

We continue to focus on the fundamentals of the economy and of company earnings. Our expectation entering the year was for moderate economic expansion and continued earnings growth predicated in particular on a healthy US consumer. The outbreak of the COVID-19 virus in China, and subsequent rapid expansion globally has injected significant uncertainty into our near term outlook in particular, though we believe the economy entered this period of uncertainty in a strong fundamental position. While impossible to quantify at this point, we expect economic growth to be materially impacted in the first half of 2020, despite an emergency rate cut by the Fed and growing fiscal and monetary stimulus globally. If the virus is contained in the near term, there's a possibility for re-acceleration in the second half of the year as pent up demand is released, though the bottom is unclear at this point.

We continue to monitor COVID-19 developments closely, and remain steadfast in our focus on owning high quality businesses with durable competitive advantages and robust cash flow generation, which we believe will continue to provide investors with downside protection should uncertainty persist and economic fundamentals deteriorate.

Timothy Parton

Jonathan Simon

Investment Managers

7th April 2020

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 would 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, 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:

• Investment and Strategy: An inappropriate investment strategy, poor asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and its peer companies, resulting in the Company's shares trading on a wider discount. The Board mitigates this risk by insisting on diversification of investments through its investment restrictions and guidelines which are monitored and reported on regularly by the Managers. JPMF provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the investment managers, who attend the majority of Board meetings, and review data which details the portfolio's risk profile. The investment managers employ the Company's gearing within a strategic range set by the Board.

• Market: Market risk arises from uncertainty about the future prices of the Company's investments. This market risk comprises three elements - equity market risk, currency risk and interest rate risk. The Board considers the split in the portfolio between small and large companies, sector and stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by JPMF. The Board monitors the implementation and results of the investment process with the Manager. However, the fortunes of the portfolio are significantly determined by market movements in US equities, the rate of exchange between the US dollar and sterling and interest rate changes. This is a risk that investors take having invested into a single country fund.

• Operational and Cybercrime: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the custodian's or depositary's records could prevent accurate reporting and monitoring of the Company's financial position. On 1st July 2014, the Company appointed Bank of New York Mellon (International) Limited to act as its depositary, responsible for overseeing the operations of the custodian, JPMorgan Chase Bank, N.A., and the Company's cash flows. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included in the Internal Control section of the Corporate Governance report on pages 34 and 35 of the 2019 Annual Report. The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Board has received the cyber security policies for its key third party service providers and JPMF has assured the Directors that the Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by independent reporting accountants and reported every six months against the AAF Standard.

• Loss of Investment Team or Investment Managers: The sudden departure of the investment managers or several members of the wider investment management team could result in a short term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach.

• Share Price Relative to Net Asset Value ('NAV') per Share: 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. Throughout 2019, the Company's shares traded at a discount. The Board monitors the Company's premium/discount level and, although the rating largely depends upon the relative attractiveness of the trust, the Board is committed to buy-back shares when they stand at anything more than a small discount to enhance the NAV per share for remaining shareholders.

• Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given on page 21 within the 2019 Annual Report. Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMF and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, as its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure & Transparency Rules ('DTRs'). A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing, which in turn would breach Section 1158. The Directors seek to comply with all relevant regulation and legislation in the UK, Europe and the US and rely on the services of its Company Secretary, JPMF, and its professional advisers to monitor compliance with all relevant requirements.

• Political and Economic: Changes in legislation, including in the US, UK and the European Union, may adversely effect the Company either directly or because of restrictions or enforced changes on the operations of the Manager. JPMF makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to political risks, such as the imposition of restrictions on the free movement of capital. The Company is therefore at risk from changes to the regulatory, legislative and taxation framework within which it operates, whether such changes were designed to affect it or not. The Board will continue to keep under review the impact of the UK's decision to leave the European Union. The negotiations between the UK and European Union may introduce further complexity, risk and currency volatility to the Company's affairs.

• Climate Change: Climate change, which barely registered with investors a decade ago, has today become one of the most critical issues confronting asset managers and their investors. Investors can no longer ignore the impact that the world's changing climate will have on their portfolios, with the impact of climate change on returns now inevitable. The Board is pressing its Manager to ensure the formal integration of ESG factors into its investment process over the course of the coming year. Financial returns for long-term diversified investors should not be jeopardised given the investment opportunities created by the world's transition to a low-carbon economy. The Board is also considering the threat posed by the direct impact on climate change on the operations of the Manager and other major service providers. As extreme weather events become more common, the resiliency, business continuity planning and the location strategies of our services providers will come under greater scrutiny.

• Global Pandemics: The recent emergence and spread of coronavirus (COVID-19) has raised the emerging risk of global pandemics, in whatever form a pandemic takes. COVID-19 poses a significant risk to the Company's portfolio. At the date of this report, the virus has contributed to significant volatility in trading recently. The global reach and disruption to markets of this pandemic is unprecedented, so we have no direct comparatives from history to learn from. However, seismic events and situations in the past have also been the catalyst for violent market contractions, to include the Great Depression of 1929. Time after time, markets have recovered, albeit over varying and sometimes extended time periods, and so we do have an expectation that the portfolio's holdings will not suffer a material long-term impact and should recover once containment measures ease. Should the virus spread more aggressively or become more virulent than the experts are predicting, it may present risks to the operations of the Company, its Manager and other major service providers.

Should efforts to control a pandemic prove ineffectual or meet with substantial levels of public opposition, there is the risk of social disorder arising at a local, national or international level. Even limited or localised societal breakdown may threaten both the ability of the Company to operate, the ability of investors to transact in the Company's securities and ultimately the ability of the Company to pursue its investment objective and purpose.

• US and China Technology Competition: Since the end of the second world war, the world has enjoyed a technology and economic hegemony with the US at its core. With the development of China as a political, cultural, technological and economic rival, there is the risk that alongside the trade tensions we have seen in recent years, there may develop a rival technology and economic infrastructure which is not compatible with or available to the US companies in which we invest. This may limit the ability of US companies to innovate and address large elements of the global market with the result that a Company with an investment objective focused on the United States may find future returns to be muted or find itself eclipsed by the investment opportunities and returns available elsewhere. The Company addresses these global developments in regular questioning of the Manager and external expertise and will continue to monitor these issues, should they develop.

Transactions with the Manager and related parties

Details of the management contract are set out in the Directors' Report on page 28 of the 2019 Annual Report. The management fee payable to the Manager for the year was £1,149,000 (includes the reimbursement of transaction costs of £169,000 in relation to the change in the portfolio following the change in investment policy) (2018: £3,191,000) of which £nil (2018: £nil) was outstanding at the year end.

With effect from 1st June 2019, for a period of nine months, the management fee was waived. Therefore, the management fee figure quoted above reflects the five months paid to 31st May 2019.

Included in administration expenses in note 6 on page 58 of the 2019 Annual Report are safe custody fees amounting to £9,000 (2018: £9,000) payable to JPMorgan Chase Bank N.A. of which £2,000 (2018: £2,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £16,000 (2018: £14,000) were payable to JPMorgan Chase Bank N.A during the year of which £2,000 (2018: £1,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £nil (2018: £nil) of which £nil (2018: £nil) was outstanding at the year end.

The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMF. At the year end this was valued at £8.6 million (2018: £7.9 million). Income amounting to £317,000 (2018: £443,000) was receivable during the year of which £nil (2018: £nil) was outstanding at the year end.

At the year end, total cash of £24,000 (2018: £53,000) was held with JPMorgan Chase Bank N.A.. A net amount of interest of £nil (2018: £1,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2018: £nil) was outstanding at the year end.

Full details of Directors' remuneration can be found on page 39 and in note 6 on page 58 of the 2019 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 on page 27 of the 2019 Annual Report confirm 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 BoardDr Kevin CarterChair

7th April 2020

statement of comprehensive income

for the year ended 31st December 2019

1 Management fee reduced by £169,000 (£34,000 allocated to revenue, £135,000 allocated to capital) due to the reimbursement of transaction costs. This was in relation to the transition of the portfolio following the change in investment policy.

statement of changes in equity

for the year ended 31st December 2019

1 These reserves form the distributable reserves of the Company and may be used to fund distributions to investors.

statement of financial position

as at 31st December 2019

statement of cash flows

for the year ended 31st December 2019

Reconciliation of net debt

Notes to the financial statements

for the year ended 31st December 2019

1. Accounting policies

Basis of accounting

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 October 2019.

All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 36 of the 2019 Annual Report form part of these financial statements.

The policies applied in these financial statements are consistent with those applied in the preceding year.

2. Return/(loss) per share

3. Dividends paid and proposed/declared

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 2018 amounted to £8,739,000. However the amount paid amounted to £8,657,000 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 2019, will be reflected in the financial statements for the year ending 31st December 2020.

4. Net asset value per share

Status of results announcement

2018 Financial Information

The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 31st December 2018 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

2019 Financial Information

The figures and financial information for 2019 are extracted from the published Annual Report and Accounts for the year ended 31st December 2019 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included 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.

7th April 2020

For further information:

Alison Vincent,

JPMorgan Funds Limited 020 7742 4000

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

The annual report will shortly be available on the Company's website at 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