Annual Financial Report

RNS Number : 2822A

JPMorgan American IT PLC

18 March 2013

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN AMERICAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2012

The Directors of JPMorgan American Investment Trust plc announce the Company's results for the year ended 31st December 2012.

Chairman's Statement

Having become Chairman in May 2012, I wrote to shareholders for the first time in the Company's half-year report which was sent to shareholders in July 2012. I am now pleased to be reporting on the Company's results for the full year to December 2012.

Of course, by the time you read this statement, some months have passed and markets have moved on since the end of our financial year. As the Company's net asset value ('NAV') is published daily and fact sheets are published monthly, you may well be aware of how things have changed since that point. Therefore I think it is worth trying to use my statement to give some longer term historic context and to discuss what the Board has been thinking about and doing over the year.

For the 12 months to the end of December 2012, the US equity market, as measured by the S&P 500 Index, provided a return, including dividends reinvested, of 10.5% (in sterling terms). This is despite the euroturmoil in the middle of the year, the US presidential election, the fiscal cliff challenge, worries about the strength of the US recovery and concerns over US corporate growth. The old phrase 'markets climb a wall of worry' seems particularly appropriate. Sterling strengthened during the year from US$1.55 to the pound, to US$1.63 to the pound.

It is worth remembering that 2012 was a continuation of a recovery from the dark days of 2008.The S&P 500 Index has now risen by 71% from the low reached on 27th February 2009 in response to, or because of, the measures taken to stabilise the US financial system and economy.

Shareholders might be interested to look at the ten year financial record tables on page 14 of the annual report, to be published shortly. In some ways it feels as if the last 10 years have not been particularly profitable for equity investment. However, following the very difficult period for the Company during the unwinding of the dotcom boom, it is worth noting that since the end of December 2002, the NAV has risen from 502.3p per share to 925p per share (taking debt at its par value). The dividend per share has risen from 4.8p per share to 12.5p per share, giving a total return over the last 10 years of 108%, or 7.6% per annum (the share price total return is higher). That compares with our benchmark, which has provided a total return of 89.8% over the same period.

Performance of the Company

NAV and Gearing

Over the last year, the Company provided a positive NAV return, including income of 8.6%, which is somewhat less than the 10.5% return provided by the market (all in sterling terms). Over five years, which covers the downturn and the upturn, the NAV is just ahead of the S&P 500 Index and over 10 years (for all of which time Garrett Fish has had responsibility for the investment management of the Company) the NAV is ahead significantly. Looking at individual years, the NAV has outperformed in five out of the last 10, and the greatest margin of out-performance was in the market collapse in 2008. These facts are unusual and something to be pleased about. For the technicians amongst you, we are looking at the NAV with debt at par here, so are not taking account of movements in the estimated price of our debt. We think that is probably a fair way of assessing the Manager's performance.

The reasons for our underperformance compared with the market index this year were almost all to do with the gearing and its use. Our debenture costs the Company approximately 0.8% per annum. In addition, your investment manager was perhaps understandably rather cautious at various points, and held some cash. In the event (and we will probably not know how close it came) the worst did not happen, and markets bounced significantly in the last six months. The Company did not benefit quite as much as it might have done from that bounce.

We have been considering the way we use gearing. We do think the ability to use borrowings in a reasonably cautious way is an advantage to our structure and will add to returns, given our view of the long term outlook for investment in US equities. The debenture we have in place is expensive, with a coupon of 6.85%, costing us some 0.8% of NAV per annum, but to repay it at this point would involve paying a further premium which seems unwarranted to us. However, we think the level of gearing which it provides, at approximately 10% of net assets, is appropriate.

We think shorter term or tactical market timing is very difficult and not the most reliable source of return for anyone. In particular, the use of JPMAM's gearing models in current times, when quantitative easing is affecting the price of long and short term interest rates, is problematic. Our attribution systems show that Garrett Fish's large cap investment approach has resulted in out-performance or performance in line with the S&P 500 Index in eight out of the last 10 years at portfolio level (that is the large capitalisation portfolio compared with the index, before costs). Over the last five years, however, the cost of debt and tactical asset allocation have detracted from our returns relative to our benchmark.

We have therefore reassessed the way we use gearing and will not seek to vary the level of gearing in normal circumstances to any significant extent (that means by more than approximately 2% above or below the 10% level). However, we do value our investment manager's conservatism which served shareholders very well in 2008, and will permit him, if he feels that there is a real risk of loss of capital, to hold cash up to 5% of net assets. All of this remains within our stated gearing policy.

Dividend

We are pleased that the recovery in dividend payments from the US market has flowed through, to allow an increase in the dividend of 13.6% to 12.5p per share for the full year. In order to provide shareholders with more frequent income payments, the Company paid an interim dividend this year of 5.0p on 8th October 2012. Subject to shareholder approval at the AGM, a final dividend of 7.5p will be paid on 8th May 2013 to shareholders on the register on 12th April 2013. For some years, the Company's dividend policy has been to distribute all, or most, of the available income in each year. This year's payment does not necessitate drawing on the Company's reserves. However, we do normally charge 80% of our costs to capital in line with our expected long term split of revenue and capital returns from the Company's investments.

Shareholders should note that dividends could vary significantly both with the level of dividends we received and the translation of those dividends into sterling. However, after the payment of the proposed final dividend, we will have a balance in the revenue reserves of £10.0 million (equivalent to 19.9p per share or 1.6 times the current dividend). We are, in addition, proposing to take the power to pay dividends out of capital. We do not foresee doing so if things continue as they are, but we do believe that there may be circumstances in which shareholders would prefer to see us maintain a dividend if we thought any shortfall in our income was temporary.

Share Price and premium/discount

Our share price rose during 2012 from 859p to 906p. Compared to NAV taking debt at fair value, the shares have traded at a premium for most of the year, although that premium decreased a little.

We have issued a significant number of shares during the year: 4,037,545 to be precise, or 8.7% of the issued share capital at the beginning of the year. We have always issued shares at a premium to estimated NAV calculated after deducting the estimated market value of our debt, and have added 0.2% to NAV calculated on that basis during the year. We are asking your permission to continue to issue shares where we are confident of sustainable market demand and are putting the relevant resolutions to shareholders at our Annual General Meeting in May.

I would like to reiterate what we said in the half-year report: as a Board, we have demonstrated our willingness to buy shares back when the shares stand at anything more than a small discount. Between 2003 and 2007 we bought back approximately 30% of the outstanding share capital. Having issued shares, we are aware of our obligation not to let the discount widen significantly and are proposing to renew our buy back powers by asking shareholders to approve the relevant resolutions at the forthcoming Annual General Meeting.

Investment Manager

The Company's objective is to achieve capital growth from North American investments by out-performance of the Company's benchmark, which is the S&P 500 Index (with both net asset value and benchmark measured in sterling total return terms).

The Board has once again thoroughly reviewed the capabilities of the investment manager in order to assess whether J.P. Morgan Asset Management ('JPMAM') should remain the Manager of the Company's assets. We have met with the investment managers and the investment company team in London, had conversations over a remarkable teleconference system and visited the investment management offices in New York. We have spent some time seeking to understand the growth in JPMAM's asset management business in the US and where the management of the Company fits within the business. We spent time too reviewing the investment managers' methodologies and understanding how these evolve.

We do look at comparisons with an appropriate peer group both in the UK and the US (with regard to performance, fee rates and costs of management) and spent time reviewing the investment management operation whilst in New York for a Board Meeting. In addition to investment management, the Manager provides many other services to the Company, including marketing, accounting and company secretarial services. We have concluded that the ongoing appointment of JPMAM is in the continuing interests of shareholders.

Alternative Investment Fund Managers Directive

The European Securities and Markets Authority (ESMA) has published its final advice on implementing the measures of the Alternative Investment Fund Managers Directive (the 'Directive').

How the UK Financial Services Authority chooses to implement the Directive, and therefore the implications for the Company, is currently the subject of consultation and discussion within the investment company industry. The Board in conjunction with the Association of Investment Companies (the 'AIC') and JPMAM is monitoring developments closely and considering how best to deal with these new regulatory requirements (as they become somewhat more clear).

Foreign Account Tax Compliance Act ('FATCA')

The United States has introduced provisions commonly referred to as 'FATCA', which introduce reporting requirements for foreign financial institutions ('FFI's') in respect of their unit or account holders. Last year, my predecessor noted that these requirements appeared very onerous and compliance would be difficult to achieve. However, it does seem that inter-government negotiations conducted by HMRC have resulted in a framework that will allow the Company, as an investment trust, to be deemed as a 'non-reporting FFI' and thus be spared most of the difficulties which might have arisen.

The Board

The Board has put in place procedures to ensure that the Company complies fully with the Association of Investment Companies (the 'AIC') Code on Corporate Governance.

In accordance with corporate governance best practice, all continuing Directors will seek reappointment at the Annual General Meeting. Accordingly, I, along with Kate Bolsover and James Williams, all being eligible, offer ourselves for reappointment at this year's Annual General Meeting. Having been appointed on 4th May 2012 and after the 2012 Annual General Meeting, Simon Bragg and Sir Alan Collins will both be standing for initial appointment by shareholders. I am pleased to be able to report that both Directors have already significantly contributed to the Board's deliberations and are proving to be excellent additions to the Board.

Having served as a Director since 2003, James Fox will be retiring from the Board at the forthcoming Annual General Meeting. James has served as Audit Committee Chairman throughout this time on the Board. His understanding of the US, knowledge of investment and investment company matters and rigour as Chairman of the Audit Committee have contributed significantly to the success of the Company over the last 10 years.

The Nomination and Remuneration Committee will continue to manage the process of Board succession and refreshment over the next year, to make sure your Board has the skills and experience to add value to shareholders. It has also reviewed the fees paid to Directors and recommended that no increase should be made this year. Details of the fee levels can be found in the Directors' Remuneration Report in the forthcoming annual report. However, it has recommended that the aggregate maximum level of fees payable to Directors be increased from £175,000. This level was last increased in 2004, and we are proposing to shareholders that the level be raised to £225,000. Although we currently have six board members, James Fox's retirement will reduce the number of Directors to five following the AGM. However, an increased maximum would give us flexibility to manage the board succession process and recruit good candidates in the future.

Annual General Meeting

This year's Annual General Meeting will be held on Wednesday, 1st May 2013 at 2.30 p.m. at Holborn Bars, 138-142 Holborn, London EC1N 2NQ. As in previous years, in addition to the formal part of the meeting, there will be a presentation from our investment manager, who will answer questions on the portfolio and performance. There will also be an opportunity to meet the Board, Garrett Fish and representatives of JPMAM after the meeting. I look forward to welcoming as many shareholders as possible to this meeting.

Outlook

The US market has risen a long way both since March 2009, and even since last summer. Investor confidence has returned for the time being. As Garrett Fish indicates in his Investment Manager's Report, the corporate sector looks robust, in particular when compared to our own. However, in the short term, equity valuations are not particularly cheap. The distortions created by the Federal Reserve's aggressive monetary policy do make historic comparisons difficult and bond market investors nervous. Several commentators are discussing whether there is a bubble in fixed income markets. On the other hand the extraordinary changes in the US oil and gas industry which may lead to US self-sufficiency in energy could have a profound effect on the outlook for the US economy. Given the alternatives, the US equity market does look like a reasonable place to be over the next few years, but it would be unwise to assume that market turmoil has disappeared.

Sarah Bates

Chairman                                                                                                                                 18th March 2013

Investment Manager's Report

Market Review

With the chances of another round of credit defaults seemingly receding (especially in Europe) 2012 rewarded investors who stayed with equities, and the US equity market was no exception. The S&P 500 returned 10.5% (in sterling terms) for the year. Reduced uncertainty within markets was a major theme; there were of course some uncomfortable moments but equity investors experienced much less drama than in the previous five years, and by the end of 2012 market measures of volatility had fallen to the lowest levels since the beginning of the financial crisis in 2007. The US equity market has returned only 6% over the past five years with 17% volatility, so last year's strong returns and realised volatility of only 6% (well below long run averages) were especially welcome.

The market improved considerably as the year progressed, helped by better returns from smaller stocks, better returns from value investing, and a sharp drop in intra-stock correlations. The market's focus on high dividend paying names faded considerably in the last few months and for the year, the financial sector provided many of the best returns as the S&P financials gained 29%. Unmistakable signs of a better housing market (homebuilder stocks gained a spectacular 54% on average) were one key factor for the financial stocks, and investors now appear to believe that the worst of the impact from the 2008 credit crisis has passed. Unimpressive returns came from those sectors most exposed to the weakness in the global economy that was still very much a concern late in the year; energy and basic industry names underperformed the broader market and a few groups (steel and gold miners) actually fell sharply. Many of the more defensive sectors also lagged the broader market, with utility stocks and consumer staples returning 3.5% and 5% respectively. It was not always clear that this would be the case, but in the end the winning ingredients for stock selection in 2012 were stocks with more volatile characteristics, less predictable earnings and higher price/earnings valuations.

The Company's net asset value total return (in sterling terms) rose by 8.6%, which was 1.9% less than our benchmark, the S&P 500 Index.

Overall Asset Allocation and Performance

The investment management team is responsible for managing the allocation between the large and the small cap portfolios, together with the levels of cash and gearing. In 2012, the Company's gearing/(net cash) ranged between (4.4)% and (0.5)% of shareholders' funds, with the level at the year end being (0.6)%. The level of gearing has been adjusted at regular intervals within the overall gearing guidelines laid down by the Board to reflect the outlook on risk and return for both equities and bonds. We remained ungeared throughout 2012 due to our concerns over the challenging economic and political backdrop. Our cautious stance was, however, a negative factor in that the Company held a relatively high cash weighting and this resulted in a drag on performance of 1.1% as the market rallied for the period under review.

The weighting in the small cap portfolio ranged between 3.0% and 5.4% of the Company's total assets less current liabilities and ended the year at 5.4%. We believe that our ability to move between the two segments enhances returns to shareholders and helps to balance our overall risk.

Attribution data for 2012 shows that our larger companies portfolio was flat for the period and our smaller companies portfolio was a marginal detractor.

Large Companies Portfolio

Our investment methodology continues to focus on investing in high quality, reasonably valued companies. This style leads us to invest in companies that exhibit good growth characteristics with growing earnings, strong cash flows and reasonable valuations.

The large companies portfolio performed in line in terms of contribution for the period under review. In terms of sectors where we added value, the portfolio's consumer staples, utilities and technology positioning proved beneficial. Our consumer staples performance was aided by both the stocks we owned such as Constellation Brands, as well as the stocks we did not own including soft drinks producers, Coca-Cola and PepsiCo. When we state that not owning particular stocks has aided performance, this means that we did not hold certain stocks that are in our benchmark index, that lost value over the period; not holding these stocks allowed us to add value against the benchmark. Within utilities, a lack of exposure to Exelon, Southern Company and Duke Energy added value. In the technology sector, an overweight position in Apple and a new position in Hewlett Packard assisted performance. Despite some recent softness, Apple has a leading footprint in the growing smartphone/tablet markets and should be able to grow its earnings base over the next few years.

Sector Weightings of the Large Cap Portfolio versus S&P 500 as at 31st December 2012

	Large
	Company		Overweight/
	Portfolio	S&P 500	Underweight
Sector	%*	%	%
Technology	21.4	16.7	4.7
Health Care	16.3	11.9	4.4
Consumer Discretionary	14.7	13.4	1.3
Financial Services	14.2	17.0	-2.8
Energy	12.5	11.0	1.5
Consumer Staples	7.1	9.2	-2.1
Producer Durables	7.8	10.5	-2.7
Utilities	5.0	6.3	-1.3
Materials & Processing	1.0	4.0	-3.0

*Does not include small cap stocks and net current assets.

Source: Wilshire. Based on the Russell Global Sector Classification.

The largest detractor from performance was weak stock selection in the financial services and consumer discretionary sectors. Within financial services, a lack of exposure to JPMorgan Chase¹ and Visa impeded performance the most. We have been increasing the portfolio's exposure in this segment by adding to higher beta names such as Citigroup and Bank of America. Regarding our performance in the consumer discretionary sector, our exposure to retailers Best Buy and Staples proved disappointing. Best Buy's share price slipped as the electronics retailer reported a second-quarter profit plunge of 90% and not only suspended its current forecast but said that it would not provide a new outlook. We continue to believe that the structural issues are overhyped, and that product cycle weakness is the primary culprit of this ongoing concern. The shares of Staples came under pressure after the office-supplies chain announced that fiscal second-quarter earnings fell 32%, prompting the company to trim its full-year outlook. The company has since announced a restructuring plan that includes cutting its North American retail square footage by approximately 15% by the end of fiscal year 2015.

¹We are unable to hold JPMorgan Chase for regulatory reasons as it is our parent company.

The table below shows the largest positive and negative stock contributors to the Company's portfolio performance in 2012:

	Relative	Stock Return
	Weighting at	in 2012	Contribution
Stock	year end	%	%
Positive Contributors
Apple	Overweight	32.8	0.4
Hewlett Packard1	Overweight	-43.1	0.3
Intel2	-	-12.0	0.3
News Corp	Overweight	44.3	0.3
Time Warner Cable	Overweight	57.0	0.2
Negative Contributors
Best Buy	Overweight	-47.3	-0.4
Occidental Petroleum	Overweight	-16.1	-0.3
Sandisk	Overweight	-11.5	-0.3
Staples	Overweight	-15.1	-0.3
Comcast2	-	60.8	-0.3

¹Only held partly through the year and at year end.

²Not held in the portfolio at year end.

Source: Wilshire. Contribution figures are based on stock selection relative to the total contribution return, in US$.

Smaller Companies Portfolio

US smaller companies marginally outperformed their large cap brethren in 2012. However, our holding of the US smaller companies portfolio marginally detracted from performance for the year. Stock selection in technology, our largest sector allocation, was the biggest contributor to performance; and stock selection in health care was the largest detractor.

The year presented a challenging environment for our investment style. Stocks with higher growth expectations generally underperformed while those with lower valuations worked well, particularly during the difficult second quarter when multiples compressed. Additionally, a rally in biotechnology during the second quarter, specifically from take-outs and speculative names which we did not own, further added to the difficult environment.

While performance improved during the third quarter due to the continued strength of the technology sector and better performance from our health care positions, the portfolio ended the year with a weak fourth quarter as the market began to sell off some of our outperforming stocks, particularly within technology.

Our base case remains that companies continue to look fundamentally attractive highlighted by strong earnings and balance sheets within the small cap space. The small cap portfolio remains positioned for modest economic growth as secular growth drivers remain in place along with the added potential of a cyclical recovery, particularly in the still very depressed auto and housing sectors.

In relation to positioning, the small cap portfolio continues to be overweight in technology, as well as modestly overweight in health care and financial services. The portfolio is underweight the materials and processing, producer durables and both of the consumer (discretionary and staples) sectors as we are finding less attractive investment ideas.

Outlook         

Investors were faced with three looming concerns going into 2012; the European debt crisis, an economic slowdown in China and US fiscal policy. During the year, the European debt crisis worries receded while the economic data has turned more positive in China. In the US, the fiscal cliff legislation was passed on New Year's Day 2013 and the market has responded very positively to this news in the short term. However, as tough as the tax debate was, more contentious negotiations lie ahead as Republicans are likely to demand spending cuts and entitlement reform before agreeing to raise the debt ceiling. As the US approaches the absolute limits of the debt ceiling with no agreement imminent, we expect markets to be more volatile.

While investors may continue to concentrate largely on the events occurring in Washington, it is important to focus on what we believe remains a modestly favourable environment for equities. Central banks across the globe remain accommodative. The US economy continues to rebound from the disruptions caused by Hurricane Sandy and the improvement in the housing market remains solid. Despite posting double digit returns for 2012, equity valuations remain reasonably attractive. All but the more defensive utilities and telecom sectors trade at forward P/E multiples of at least 15% below their 15-year averages. Reaching an agreement on the debt ceiling and fostering credible long term deficit reduction could be what we see as the last of the significant macro hurdles. It would be a welcome relief for markets to focus on the robust fundamentals of corporate America and not on the growing fiscal problems of the US government.

Garrett Fish

Investment Manager                                                                                                                18th March 2013

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•     Investment and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported by the Manager. JPMAM 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 all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.

•     Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

•     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'). Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure & Transparency Rules ('DTRs'). A breach of the Companies Act 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 Board relies on the services of its Company Secretary, JPMAM, and its professional advisers to ensure compliance with The Companies Act and the UKLA Listing Rules and DTRs.

•     Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report within the Annual Report.

•     Operational: Disruption to, or failure of, JPMAM's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMAM and its associates and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report within the Annual Report.

•     Financial: The financial risks arising from the Company's financial instruments include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 21 within the Annual Report.

Related Parties Transactions

During the year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

(a) the financial statements have been prepared in accordance with applicable UK accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b) the Annual Report, to be published shortly, 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.

Sarah Bates

Chairman                                                                                                                               18th March 2013

Income Statement

for the year ended 31st December 2012

		2012			2011
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value
through profit or loss		-	32,386	32,386	-	1,260	1,260
Net foreign currency gains*		-	1,025	1,025	-	951	951
Income from investments		9,821	-	9,821	7,682	-	7,682
Other interest receivable and similar income		18	-	18	18	-	18
Gross return		9,839	33,411	43,250	7,700	2,211	9,911
Management fee		(493)	(1,972)	(2,465)	(432)	(1,727)	(2,159)
Other administrative expenses		(577)	-	(577)	(497)	-	(497)
Net return on ordinary activities before
finance costs and taxation		8,769	31,439	40,208	6,771	484	7,255
Finance costs		(693)	(2,775)	(3,468)	(694)	(2,775)	(3,469)
Net return/(loss) on ordinary activities
before  taxation		8,076	28,664	36,740	6,077	(2,291)	3,786
Taxation		(1,423)	-	(1,423)	(1,088)	-	(1,088)
Net return/(loss) on ordinary activities
after taxation		6,653	28,664	35,317	4,989	(2,291)	2,698
Return/(loss) per share (note 3)		13.80p	59.46p	73.26p	11.20p	(5.14)p	6.06p

*Includes gains and losses on forward foreign currency contracts which are used to hedge the currency risk in respect of the geared portion of the portfolio. Details of the Company's hedging strategy are given in note 21(a)(i) on page 56.

The dividends proposed in respect of the year ended 31st December 2012 amount to 12.5p (2011: 11.0p) per share, costing £6,191,000 (2011: £5,082,000). Details of dividends paid and proposed are given in note 8 on page 47 of the annual report.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2010	10,713	19,778	8,151	320,852	14,526	374,020
Issue of ordinary shares to the market	838	27,550	-	-	-	28,388
Net (loss)/return on ordinary activities	-	-	-	(2,291)	4,989	2,698
Dividends appropriated in the year	-	-	-	-	(4,727)	(4,727)
At 31st December 2011	11,551	47,328	8,151	318,561	14,788	400,379
Issue of ordinary shares to the market	1,009	35,668	-	-	-	36,677
Net return on ordinary activities	-	-	-	28,664	6,653	35,317
Dividends appropriated in the year	-	-	-	-	(7,639)	(7,639)
At 31st December 2012	12,560	82,996	8,151	347,225	13,802	464,734

Balance Sheet

at 31st December 2012

		2012	2011
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		461,036	389,086
Investment in liquidity fund held at fair value through profit or loss		40,174	36,156
		501,210	425,242
Current assets
Derivative financial instruments		794	507
Debtors		568	486
Cash and short term deposits		12,339	24,835
		13,701	25,828
Current liabilities
Creditors: amounts falling due within one year		(337)	(294)
Derivative financial instruments		-	(586)
Net current assets		13,364	24,948
Total assets less current liabilities		514,574	450,190
Creditors: amounts falling due after more than one year		(49,840)	(49,811)
Net assets		464,734	400,379
Capital and reserves
Called up share capital		12,560	11,551
Share premium		82,996	47,328
Capital redemption reserve		8,151	8,151
Capital reserves		347,225	318,561
Revenue reserve		13,802	14,788
Total equity shareholders' funds		464,734	400,379
Net asset value per share (note 4)		925.0p	866.5p

The Company's registration number is 15543.

Cash Flow Statement

for the year ended 31st December 2012

		2012	2011
		£'000	£'000
Net cash inflow from operating activities		5,302	3,482
Returns on investments and servicing of finance
Interest		(3,440)	(3,440)
Taxation
Overseas tax recovered		17	1
Capital expenditure and financial investment
Purchases of equity investments		(124,935)	(109,891)
Purchases of liquidity fund		(75,470)	(50,056)
Sales of equity investments		86,985	112,652
Sales of liquidity fund		69,862	44,059
Other capital charges		(8)	(7)
Net cash outflow from capital expenditure and financial investment		(43,566)	(3,243)
Dividends paid		(7,639)	(4,727)
Net cash outflow before financing		(49,326)	(7,927)
Financing
Issue of ordinary shares to the market		36,678	28,388
Net cash inflow from financing		36,678	28,388
(Decrease)/increase in cash in the year		(12,648)	20,461

Notes to the Accounts

for the year ended 31st December 2012

1.    Accounting policies

Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006, 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 'SORP') issued by the Association of Investment Companies in January 2009.

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

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

2.   Dividends

      Dividends paid and proposed

		2012	2011
		£'000	£'000
	Dividends paid
	Unclaimed dividends refunded to the Company1	(4)	-
	2011 Final dividend paid of 11.0p (2010: 11.0p)	5,220	4,714
	2012 Interim dividend of 5.0p (2011: 0.0p)	2,423	-
	Total dividends paid in the year	7,639	4,714

      1Represents dividends which remain unclaimed after a period of 12 years and thereby become the property of the Company.

		2012	2011
		£'000	£'000
	Dividends proposed
	2012 Final dividend proposed of 7.5p (2011: 11.0p)	3,768	5,082

      The final dividend proposed in respect of the year ended 31st December 2011 amounted to £5,082,000. However, the actual payment amounted to £5,220,000 due to shares issued after the Balance Sheet date but prior to the share register Record Date.

      The final dividend has been proposed in respect of the year ended 31st December 2012 and is subject to approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2013.

3.   Return/(loss) per share

      The revenue return per ordinary share of 13.80p (2011: 11.20p) is based on the revenue earnings attributable to the ordinary shares of £6,653,000 (2011: £4,989,000) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344).

      The capital return per ordinary share of 59.46p (2011: 5.14p loss) is based on the capital return attributable to the ordinary shares of £28,664,000 (2011: £2,291,000 loss) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344).

      The total return per ordinary share of 73.26p (2011: 6.06p) is based on the total return attributable to the ordinary shares of £35,317,000 (2011: £2,698,000) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344).

4.   Net asset value per share

      The net asset value per share of 925.0p (2011: 866.5p) is based on the net assets attributable to the ordinary shareholders of £464,734,000 (2011: £400,379,000) and on the 50,241,592 (2011: 46,204,047) shares in issue at the year end.

5.     Status of announcement

2011 Financial Information

The figures and financial information for 2011 are extracted from the published Annual Report and Accounts for the year ended 31st December 2011 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 Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2012 Financial Information

            The figures and financial information for 2012 are extracted from the Annual Report and Accounts for the year ended 31st December 2012 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditor 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 Registrar of Companies in due course.

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

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report will also 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 ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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