JPMorgan American

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN AMERICAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2020

Legal Entity Identifier: 549300QNAI4XRPEB4G65

Information disclosed in accordance with the DTR 4.1.3

CHAIR'S STATEMENT

The last year has been dominated by the Covid-19 pandemic, which has tragically seen over 100 million people infected across the globe and over 2 million deaths. Despite its many advantages, the United States has been one of the worst affected countries with over 28 million cases and more than half a million fatalities. Alongside this, the United States saw a period of extreme political uncertainty both ahead of the November election, and perhaps more unusually, after the election, as the world waited to see if the resulting transfer of power would be peaceful or a catalyst for social and political unrest.

It was perhaps surprising therefore that investors in US equities enjoyed strong returns in the year to 31st December 2020 with the S&P 500 Index on a total return basis rising by 18.4% in dollar terms. This is a remarkable reversal of fortunes from earlier in the year when the sell-off triggered by the pandemic saw the index fall, at one point, by over 30% to a low point in March. Taking account of the effect of withholding taxes and a strengthening of sterling over the period, this translated into a benchmark return of +14.4% for UK investors.

Over the year, your Company's NAV rose by +22.0%, outperforming its benchmark by +7.6%. The discount of the share price to NAV widened slightly over the period from 4.3% to 5.0%, producing a total return to shareholders for the year of +21.2%. More information is provided in the attribution report detailed in the Investment Manager's Report below.

Since the Company changed the investment approach on 1st June 2019, it has outperformed its benchmark index by +6.7% through to the end of the financial year, providing a total return to shareholders of +35.7%, compared with a benchmark return of +29.0%. The S&P 500 Index is a notoriously difficult benchmark to beat, and an encouraging start has been made in the 19 months since the change in investment policy.

The Large Cap Portfolio

Over 90% of your Company's assets are invested into US large-cap stocks in a high conviction portfolio of some 40 stocks representing a curated selection of the Managers' best growth and value investment ideas. This portfolio has co-lead portfolio managers; Jonathan Simon who leads the selection of the value stocks in the portfolio and Tim Parton who is responsible for its growth stock element. The growth and value components of the portfolio are approximately equal, with a maximum tilt in either direction of 60:40. At the year-end, 52% of the portfolio was invested in growth stocks and 48% in value stocks. Performance, in both absolute and relative terms, was dominated by the growth component of the portfolio, with value as an investment style out of favour during the year. More details can be found in the Investment Manager's report below.

The Small Cap Portfolio

The Company also benefits from an exposure to small cap stocks, which is achieved through investment in 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.

During the year the Board reviewed the allocation to the small cap portfolio and as a result increased the allocation to approximately 5% of the Company's assets from approximately 1% at the end of 2019. This proved beneficial to shareholders, as the small cap portfolio outperformed the large cap element, adding 1.0% to the Company's outperformance of its benchmark over the year. The Board will continue to keep the small cap allocation under review.

Gearing

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

As announced on 9th June 2020, given the Covid-19 pandemic, the Board decided that the tactical level of gearing would be 5% with a permitted range around this level of plus or minus 5%, meaning that currently gearing can vary between 0% and 10%. The Company ended the year with gearing of 5%.

The Board believes it is prudent for its gearing capacity to be funded from a mix of sources; including short and longer term tenors and fixed and floating rate borrowings. The Company's gearing strategy is implemented through the use of an £80 million multi-currency revolving credit facility with ING Bank. This is drawn in US Dollars to match the currency of the Company's asset base.

Alongside this bank facility, the Company announced in February 2020 that it had issued $65 million of unsecured loan notes repayable in February 2031 via a private placement with a UK life assurance company. This long term, fixed rate debt bearing a fixed interest rate of 2.55% per annum complements the short term floating rate bank loan the Company already has in place.

The gearing level of the Company was 4.5% calculated in line with the Association of Investment Companies ('AIC') methodology as at the latest practical date. The Board continues to review the appropriate gearing level on a regular basis.

Board Review of the Manager and Company Broker

The Board was unable to visit the Manager's offices in New York as planned during the year due to travel restrictions caused by the pandemic, but has been able to hold virtual meetings with the portfolio managers, Jonathan Simon and Tim Parton, and also with the portfolio manager of the smaller companies' portfolio, Eytan Shapiro. The Board further met with JPMorgan's senior management team to discuss the performance of the portfolio, the Company's strategy and to review broader aspects of the Manager's service.

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. I am pleased to report that, since the on-set of the pandemic, the Manager and the Company's other service providers have been able to adjust their business operations to accommodate the working from home environment with limited disruption. The Board has received assurances that the Company's operations, including the management of the portfolio, and the maintenance of a strong controls environment, have continued as normal. During the year, the Board conducted a review of the appointment of Company Broker. The result of this review was to appoint Stifel Nicolaus Europe Limited in place of Winterflood Investment Trusts (a division of Winterflood Securities Limited) who had been Company Broker since February 2014.

Ongoing Charges

The Board continues to monitor closely 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 benefited from a negotiated fee waiver from 1st June 2019 through to 29th February 2020. This resulted in a saving to the Company of £0.56 million over the two months of the current year in which the waiver was in place. Over its life, the fee waiver has resulted in savings of £2.52 million to the Company and its shareholders.

The Company's Ongoing Charges Ratio ('OCR') for the year under review was 0.34%. Had the Company not benefitted from the remaining two months of the fee waiver, the OCR would have been 0.39%. While this may appear to be a material increase on the 0.18% figure for the previous year, it is important to note that in the absence of the fee waiver, this figure would have been 0.39%. On a like-for-like basis, therefore, your Board's rigorous cost controls are proving to be of benefit to shareholders.

These costs again mean the Company remains one of the most competitively priced US actively managed funds available to UK investors, in either closed-ended or open-ended form. However, the Board is aware that major competitors 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 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 NAV for remaining shareholders, the Board is prepared to buy-back shares when they stand at anything more than a small discount. This undertaking has operated for several years and applies in normal market conditions. During the year 10,754,203 shares were purchased into Treasury, at a cost of £53.1 million, representing 5.1% of the Company's issued share capital at the beginning of 2020.

This is an increase on the amount repurchased during the previous year when £42.2 million was spent repurchasing 4.25% of the issued share capital. The increase in the number of shares acquired is perhaps not surprising given the considerably higher volatility seen in markets during the year. The average discount over the year of 5.0% to NAV is nearly identical to the average discount over the preceding few financial years. Since the year end and at the time of writing the Company has repurchased a further 1,769,406 shares into Treasury, at a cost of £10.4 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 the Board is confident of sustainable market demand. The authority, if approved, will allow the Company to issue up to 10% of its issued share capital from Treasury. The Company will only issue shares at a price in excess of the estimated NAV, including income with the value of the debt deducted at fair value.

Dividends

The Company paid an interim dividend in respect of the 2020 financial year of 2.5p on 2nd October 2020. Subject to shareholder approval at the AGM, a final dividend of 4.25p will be paid on 28th May 2021 to shareholders on the register on 23rd April 2021, making a total of 6.75p per share, an increase to last year's total of 6.5p per share. After the payment of the proposed final dividend, the balance in the revenue reserves will be £23.0 million, equivalent to 11.6p per share (2019: 9.6p) or 1.7 times (2019: 1.5 times) the current dividend. This prudent approach in building up revenue reserves in prior years provides the Board with a means of supporting dividend levels in the future should earnings per share drop materially in any financial year.

Whilst capital growth is the primary aim of the Company, the Board is aware that dividend receipts can be an important element of shareholder returns. The Board continues to monitor the net income position of the Company and based on current estimated dividend receipts for the year ahead, the Board aims at least to maintain the aggregate 2020 dividend in the forthcoming year.

Corporate Governance

The Board is committed to maintaining and demonstrating high standards of corporate governance and 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 2020, 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 past year the Company complied with the recommendations of the AIC Code in all aspects as explained in the Directors' Report.

Amendment to the Articles of Association of the Company

In light of the circumstances created by the Covid-19 pandemic, the Board is proposing to make amendments to the Articles to enable the Company to hold general meetings (wholly or partially) by electronic means and to provide for additional powers in respect of postponing meetings in appropriate circumstances. The amendments are being proposed in response to restrictions on social interactions which made it impossible for shareholders to attend physical general meetings last year and possibly for a large part of this year. The Board's objective is to make it easier for shareholders to participate in general meetings by introducing electronic access for those not able to travel, and also to ensure appropriate security measures are in place for the protection and wellbeing of shareholders.

I would like to stress that wholly virtual meetings will only be proposed if the specific circumstances or applicable law and regulation mean it is the only way to hold a meeting of shareholders. The Board's intention is always to hold a physical AGM provided it is both safe and practical to do so. The safety of all of the Company's stakeholders must of course remain paramount. The principal changes proposed to be introduced in the Articles, and their effect, are set out in more detail in the Directors' report and in the Appendix to the Notice of the AGM, both included in the Annual Report.

Environmental, Social and Governance ('ESG')

As I reported last year the Board has continued to engage with the Manager on the integration of ESG factors into its investment process, and to encourage further progress. I am pleased to report that material progress has been achieved and the Board is satisfied that ESG considerations are being assessed and evaluated by the Manager's research analysts and portfolio managers at individual stock level, and are taken into account in portfolio company decisions.

While neither the Manager nor the Company operates an exclusion policy, the Board believes that sustainable and durable businesses are generally those that will deliver long term outperformance. We expect that the evolving ESG reporting by the Manager on the Company's portfolio will demonstrate progressive exposure to such businesses. Further information on the Manager's ESG process and engagement is set out in the ESG section in the Annual Report.

The Board

As announced on 7th April 2020 and also reported in the half year report, Ms. Claire Binyon joined the Board on 1st June 2020. She is currently also a non-executive director of NHBS Ltd and of Murray International Trust PLC, is a chartered accountant, and brings to the Board a wealth of corporate and strategic experience gained at a number of large quoted multinationals. There has been no other change to the composition of the Board during the year.

The results of this year's Board evaluation process confirmed that all Directors possess the experience and attributes to support a recommendation to shareholders that they seek re-appointment at the Company's forthcoming Annual General Meeting. In line with the AIC Code of Corporate Governance, additional statements to support the re-appointment of each Director are included in the Directors' Report. The Board continues to manage succession so that it has an appropriate balance of skills and diverse approaches to its tasks. Mr. Simon Bragg, current Audit Committee Chair, has indicated his intention to retire from the Board later this year, after which Ms. Claire Binyon will become the new Audit Committee Chair. Shareholders will be kept informed about the timing of Mr. Bragg's retirement and any plans to recruit a new director. On behalf of the Board and all shareholders I would like to record our sincere thanks to Simon for his expert leading of the Audit Committee and his significant contribution to the Company's affairs.

Following a detailed review, the Remuneration Committee has recommended an increase in fees paid to the Directors and an increase to the aggregate fee cap to reflect the appointment of a new director, increasing workload of the Directors and the responsibilities involved. Board fees have been static since 2015 apart from a small increase three years ago. Further details can be found in the Directors' Remuneration Report.

Annual General Meeting

This year's Annual General Meeting is the Company's 105th and it will be held on Friday, 14th May 2021 at 2.30 p.m. at 60 Victoria Embankment, London EC4Y 0JP. Our preference had been to welcome shareholders in person to our 2021 Annual General Meeting, particularly given the constraints we faced in 2020 due to the Covid-19 pandemic. However, due to the prevailing government restrictions in place at the time of writing this report and ongoing public health concerns, the Board has reluctantly decided to limit in person attendance at the Annual General Meeting to Directors, their proxies and representatives from JPMorgan. This will ensure a quorum is in place and that the formal business of the Company will be able to proceed. Shareholders will not be permitted to attend the Annual General Meeting in person but can be represented by the Chair of the meeting acting as their proxy.

The Board is aware that many shareholders look forward to hearing the views of the Portfolio Managers and may have questions for them and the Board. Accordingly, the Company will be holding a webinar on Wednesday, 28th April 2021 at 3.00 p.m. This will include a presentation from our two Portfolio Managers, Timothy Parton and Jonathan Simon, followed by a live question and answer session. Shareholders are invited to join the webinar and raise any questions they have, either by submitting questions during the webinar, or in advance by writing to the Company Secretary via email to [email protected]. Details on how to register for this event can be found on the Company's website, or by writing to the Company Secretary.

The Board strongly encourages all shareholders to exercise their votes by completing and returning their proxy forms in accordance with the notes to the AGM Notice as included in the Annual Report. If there are any changes to the arrangements for the Annual General Meeting, the Company will update shareholders through the Company's website and, if appropriate, through an announcement to the London Stock Exchange. The Board would like to thank shareholders for their understanding and co-operation at this difficult time. I sincerely hope that you and your families remain safe and well and along with the rest of the Board look forward to meeting you at a future Annual General Meeting.

Outlook

The year has begun with a continuation of the stock market rises we saw in 2020. At the time of writing the Company's benchmark has already returned 5.0% this year as investors are evaluating the latest news on the virus, vaccine deployment, policy decisions in the US Congress and every utterance of Federal Reserve Chairman Powell. The behaviour of the US 10 Year Treasury Bond, where yields have sharply risen by around 50 basis points, would seem to confirm the growing consensus that the reopening of the economy is going to lead to surprisingly strong economic growth. Indeed, at its recently concluded meeting the Federal Reserve forecast growth of 6.5% in 2021, the fastest since 1984, and indicated no rise in short term interest rates until 2024 at the earliest. This is positive news for the stock market, especially in combination with the outsized $1.9 trillion fiscal package just passed by Congress.

Market participants are having to reassess the outlook for company profits in this unexpectedly buoyant environment and this is surely a significant factor in continuing market strength. Within the overall market an important rotation from growth stocks to value stocks has been underway for several months, beginning in Q4 last year. 2020 was an outstanding year for growth stocks with value stocks lagging significantly. This is now reversing as confidence in the economic reopening thesis gains increasing strength.

The construction of the large cap portfolio, comprising the vast majority of the Company's assets, has approximately equal exposure to growth and value stocks, meaning that in aggregate the portfolio is largely protected against rotations between these styles. Added to this the portfolio managers are investing in their best ideas in the 40 stocks comprising the large cap portfolio.

Stock markets discount future earnings and growth prospects. The surprising strength in 2020 anticipated much of what we now expect 2021 to deliver in growth terms. At some point the market will have discounted, at least temporarily, the best outlook it can see ahead. This suggests that the year ahead could be punctuated by periods of market volatility. The managers will be aware of these risks as they continue to manage the portfolio through a bottom up stock picking approach to identifying attractive investments.

Dr Kevin Carter

Chair                                                                                                                                               

INVESTMENT MANAGER'S REPORT

Market Review

With incredibly resilient performance, the S&P 500 Index ended a tumultuous 2020 up 18% in US dollar terms and over 14% higher in sterling terms.

After a strong end to 2019, solid US economic indicators continued to buoy the S&P 500 at the beginning of the year. However, as the Covid-19 outbreak spread globally, governments responded with economy-wide shutdowns, ultimately leading to a dramatic downturn for markets in the first quarter. Amid the pandemic, GDP contracted world-wide and the US officially entered a recession in March, ending the more than a decade-long expansion. The impact of the virus was also evident in the unemployment data, as the US moved from a 50-year low in the unemployment rate to a level not seen since the Great Depression, and all in the space of a few months.

The market seemed to cast aside virus concerns as the US government very quickly provided an unprecedented level of fiscal stimulus. While the extraordinary fiscal and monetary policy responses invigorated the market, it was not all smooth sailing as disappointing economic data along with increased tensions between the US and China generated frequent bouts of market volatility. Corporate earnings also started to recover in the second half of the year, after taking a hit in the first and second quarters. Meanwhile, investor optimism surrounding a potential vaccine continued to lift the markets throughout the summer.

After lacklustre market performance in September and October, the equity markets rallied strongly in November, driven by major developments on the political and pandemic fronts. Joe Biden won the race to be the 46th President of the United States and the Democrats retained control of the House of Representatives. However, the balance of power in the Senate was not finalised until January 2021, when Georgia held run-off elections for both of its seats. Investors largely cheered the election results as they anticipated a return to a more predictable political climate. In addition, investors cheered the Federal Reserve's stance that it would be more accommodative for longer.

While political news was supportive, it was news of a promising vaccine with a much higher-than-expected efficacy rate that really spurred the market higher in November. There was also a sharp market rotation into the value names that had lagged for most of 2020 as investors sought out vaccine beneficiaries. Economic data pointed to a steady recovery and oil prices moved higher, aided by improved sentiment regarding a stronger economy in the months ahead. However, as the year closed out, infection rates continued to rise in the US and the weekly jobless claims data was higher than expected as the labour market took a hit from rising Covid-19 cases.

Although enormous stimulus support and the progress on the vaccine front have lifted consumer and business confidence, news of the emergence of new, potentially more contagious mutations of Covid-19 remains an important development to watch in the near term.

Throughout the year, much has been written about the narrowness of the market as well as concentration risk. At year end, the top five holdings in the S&P 500 represented over 20% of the index and contributed nearly half of its return for the year. We would expect the market to be more broad based as the economy starts to recover and businesses continue to reopen.

Not surprisingly, the technology sector led the S&P 500 higher in 2020 and finished the year with a return that was more than double that of the index. This is the second year that technology has been the best performing sector in the S&P 500 and it's also the second year that energy was the worst performing sector. However, in 2020 the magnitude of the spread between the best and worst performing sectors was over 75 percentage points.

Given the types of businesses that benefited and those that really suffered during the pandemic lockdown, it is no surprise that value lagged growth for the year. However, the dominance of growth was significant, with the Russell 1000 Growth index outperforming the Russell 1000 Value index by over 35 percentage points, far wider than during the 1999 tech boom.

In terms of market capitalisation, large-cap stocks marginally underperformed small caps as the S&P 500 Index returned 18% compared to a return of 20% for the small cap Russell 2000 Index. The small cap index's performance was entirely driven by its growth component.

Performance and Overall Asset Allocation

The Company's net asset value rose by 22.0% in total return terms for the year ending 31st December 2020. The return was above that of the S&P 500, which rose 14.4% in sterling terms. The main driver of the Company's outperformance was strong stock selection particularly from Tesla which contributed significantly to this performance (further details of which are set out in the 'large cap portfolio' section below).

Gearing, which had detracted from performance in the first six months of the year, ended the 2020 with a positive contribution to the Trust's overall performance. As a result of the sharp market rally, as well as valuation concerns, the decision was taken to move to a tactical gearing level of 5% +/-5% and the portfolio ended the first half of the year with gearing at 7%. As the market rallied, we decreased our gearing in the second half of the year and the Company was 5% geared at year end.

The large cap portion of the portfolio posted a positive return and outperformed the S&P 500 in the period. The small cap allocation also added value as it significantly outperformed the S&P 500 with most of that outperformance coming in the second half of the year. We started 2020 with an allocation of 1% to our small cap portfolio, which is at the lower end of our historical range. The small cap exposure was increased to 5% in September, which we believe is a more meaningful long-term allocation, and ended the year at 5.6%.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 31ST DECEMBER 2020

¹     The impact of fair valuation includes the effect of valuing the $65 million private placement at fair value. It is the sum of the impact on the closing NAV of the fair value adjustment and its impact on the calculation of total returns arising from the reinvestment of dividends paid in the year into the Company's NAV.

Large Cap Portfolio

The Company's large-cap portfolio posted a positive return and outperformed the S&P 500 for the calendar year 2020. The portfolio benefited from strong stock selection across a number of sectors; however, the largest contribution came from our stock picking in the consumer discretionary, information technology and healthcare sectors, all of which outperformed their benchmark peer group.

Within consumer discretionary our names produced a return that was more than double that of the benchmark peer group. A significant part of that performance was due to our overweight position in Tesla, a name we have owned in this portfolio since 2019 and in our US growth portfolios since its initial public offering in 2010. The stock rallied throughout the year, as the market finally came to believe that electric vehicles will be ubiquitous and that Tesla has massive technological, infrastructure, and brand leadership. We took some profits from the name during the year as the stock rallied over 700% and at year end the stock was approximately a 2% position. We continue to have conviction in the company driven by the ongoing secular shift to electric vehicles, positive free cash flow generation and improved operational efficiencies, as well as the company's significant competitive advantage in autonomous driving software.

In the information technology sector, our overweight position in semiconductor concern Advanced Micro Devices proved beneficial. Advanced Micro Devices has emerged as a strong competitor in the central processing unit and graphic processing unit areas just as its long dominant rival Intel has confronted significant architectural challenges with its latest generation chips. We expect the company can continue to increase market share and drive higher profit margins.

At the individual stock level, our overweight in the healthcare name DexCom was among the largest contributors. DexCom is a medical device company that produces continuous glucose monitoring (CGM) systems for diabetes sufferers, a huge and growing global population. The stock has rallied throughout the year on the back of strong quarterly results with rising volumes across most channels and strong new patient additions. Moreover, its diabetes management devices continue to drive disruption in the traditional diabetes care model. We have trimmed the name on its outperformance and remain comfortable with our current position.

In contrast, our stock selection in the industrials and real estate sectors detracted during the period. Within industrials, owning Delta Air Lines for some of the period was the largest detractor and accounted for most of our underperformance in the sector. Airlines came under significant pressure after travel restrictions due to Covid-19 came into place globally. Delta was forced to cut its system-wide capacity, grounding the majority of its over 800 strong aircraft fleet. While we initially held onto our position in Delta after the government announced a bailout for airlines in the US, we decided to exit our position in April as travel remained low, which continued to hurt the company.

In the real estate space, our exposure to Federal Realty Investment Trust weighed on performance. The REIT (real estate investment trust), which owns and operates shopping malls, has been negatively impacted by the shutdown. We believe shopping centre fundamentals will gradually improve and we view Federal Realty as a high quality REIT.

Our overweight position in Loews proved lacklustre. Loews is a diversified company, with businesses in the insurance, energy, hospitality and packaging industries. The company's earnings were negatively impacted by its majority stake in insurance company CNA Financial. Loews reported a decline in net investment income as well as net investment losses from CNA. In addition, the company was also negatively impacted, although to a lesser extent, from its exposure to Diamond Offshore Drilling and Loews Hotels & Co. Despite these issues, we believe Loews is well positioned as the economy recovers and we remain comfortable with our position as the company trades at a discount to its valuation on a sum of the parts basis, including its stake in CNA, which is also undervalued.

In terms of portfolio positioning, our sector weights remain a by-product of our bottom-up investment analysis and our disciplined approach to portfolio construction. We remain focused on owning stakes in high quality businesses with durable competitive advantages, which we believe will provide stability should uncertainty persist and economic fundamentals deteriorate. Financials and information technology remain the largest allocations and represent nearly half of the overall portfolio. However, their representation relative to the S&P 500 diverge. Financials remains the largest overweight in the portfolio, although the complexion of our exposure has shifted. Specifically, we have reduced those financials most at risk to deteriorating credit conditions, while adding to higher quality names. In technology, mindful of valuations and risk management, we have been trimming our positions selectively, particularly those names seen by the market as strong Covid-19 beneficiaries.

On the other hand, our largest underweights include the communication services, consumer staples and industrials sectors. For consumer staples, we continue to find names with better risk/reward profiles in other sectors.

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 48% of the large-cap portfolio and growth stocks comprised the remaining 52%. Below is an overview of the split between value and growth in the strategy over the long term, prior to adoption of the Company's new investment policy in mid 2019.

When we put our collection of names together in the large-cap portfolio we always find it interesting to look at some key characteristics at the portfolio level. As you can see from the below table, the large-cap portfolio is trading at about a 22% discount to the market on a free cash flow basis as we are clearly not paying a premium for good cash flow. Additionally, we continue to be confident that our names will deliver earnings growth that is higher than the market at almost a similar price-to-earnings (P/E) multiple.

Source: Factset, J.P. Morgan Asset Management. Data as of 31st December 2020.1 Includes negatives.

Small Cap Portfolio

Our small cap portfolio outperformed our large-cap portfolio in 2020, and was a positive contributor to the Company's overall results.

The primary driver of the strong performance was our stock selection, with the majority of sectors proving beneficial. Stock specific contributors included healthcare concern Teladoc and renewable energy holding Enphase Energy. Shares of Teladoc rallied as the company benefitted from increased demand for telehealth services amid the Covid-19 pandemic. Management also reported earnings and revenue that beat expectations, as well as upgraded guidance. We exited our position during the period as the market cap exceeded our parameters. Our exposure to Enphase Energy added value as the company reported strong earnings results and guidance, which supported bullish views on battery momentum over the next few years. The shares jumped further as the political outcome of Democrat control in the Senate allowed for belief in a stronger stance on climate change from the new administration. The company has emerged as a key components and software provider for the fast growing solar and battery storage industries.

Among the individual names, our exposure to Intercept Pharmaceuticals and Hudson were among the largest detractors. Intercept Pharmaceuticals is a biopharmaceutical company focused on developing therapeutics for the treatment of chronic liver diseases. Its stock price came under pressure as the Food and Drug Administration failed to approve its drug Ocaliva as a treatment for non-alcoholic steatohepatitis. At the security level, owning Hudson, an operator of airport convenience stores, detracted as Covid-19 dramatically impacted passenger traffic. We exited the name during the period under review.

Market Outlook

During this period of considerable uncertainty and volatility we have continued to focus on high quality, high conviction names and to take advantage of market dislocations for compelling long-term stock selection opportunities.

We continue to focus on the economic fundamentals and on company earnings. Starting with profits, our current research suggests that profit growth could be around -16% for 2020; however, this figure has been trending upwards in recent months. Moreover, we do expect to have a strong recovery in 2021, and our current estimates are for earnings growth of +23%. While the economic recovery is underway, the path of the virus and the effectiveness of the new vaccines remains uncertain. Meanwhile, the market has rallied quite strongly in anticipation of progress on the vaccine front, which somewhat tempers our appetite for too much risk in the shorter term.

Timothy Parton

Jonathan Simon

Portfolio Managers                                                                                                                             

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:

Principal Risks

•        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 portfolio managers, who attend the majority of Board meetings, and reviews data which details the portfolio's risk profile. The managers deploy the Company's gearing within a 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 40 and 41 of the 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 2020, 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 26 of the Annual Report. Section 1158 requires, among other matters, that the Company does not retain more than 15% of its investment income, can demonstrate an appropriate diversification of risk and is not a close company. 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 affect 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 continues to monitor and review the impact of Britain's exit from the EU, including the impact of the trade deal reached in December 2020.

•        Global Pandemics: During the year, Covid-19 was identified initially as an emerging risk, but quickly moved to become a current significant risk. The global reach and disruption caused by the virus to markets worldwide was unprecedented. Even though there are no direct comparatives from history to learn from, time after time, extreme market falls are followed by recovery, albeit over varying and sometimes extended time periods. To date the portfolio's holdings have not exhibited a material long-term impact and have recovered as the containment measures eased, although the pandemic has yet to run its course. The Board monitors effectiveness and efficiency of service providers' processes through ongoing compliance and operational reporting and there were no disruptions to the services provided to the Company in the year under review due to the pandemic. The Company's service providers implemented business continuity plans which include working almost entirely remotely. The Board continues to receive regular reporting on operations from the Company's major service providers and does not anticipate a fall in the level of service.

•        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 Company's investment process integrates considerations of environmental, social and governance factors into decisions on which stocks to buy, hold or sell. This includes the approach investee companies take to recognising and mitigating climate change risks. 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.

Emerging Risks

•        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 with 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 35 of the Annual Report. The management fee payable to the Manager for the year was £2,795,000 (2019: £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) of which £nil (2019: £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 for 2020 reflects the ten months paid for the period 1st March 2020 to 31st December 2020.

Included in administration expenses in note 6 on page 67 of the Annual Report are safe custody fees amounting to £10,000 (2019: £9,000) payable to JPMorgan Chase Bank N.A. of which £2,000 (2019: £2,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £13,000 (2019: £16,000) were payable to JPMorgan Chase Bank N.A. during the year of which £2,000 (2019: £2,000) 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 (2019: £nil) of which £nil (2019: £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 £43.4 million (2019: £8.6 million). Income amounting to £268,000 (2019: £317,000) was receivable during the year of which £nil (2019: £nil) was outstanding at the year end.

At the year end, total cash of £76,000 (2019: £24,000) was held with JPMorgan Chase Bank N.A. A net amount of interest of £nil (2019: £nil) was receivable by the Company during the year from JPMorgan Chase of which £nil (2019: £nil) was outstanding at the year end.

Full details of Directors' remuneration can be found on page 47 and in note 6 on page 67 of the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report & Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare the Annual Report & Financial Statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that, taken as a whole, the Annual Report & Financial Statements are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•        select suitable accounting policies and then apply them consistently;

•        make judgements and accounting estimates that are reasonable and prudent;

•        state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•        prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmamerican.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed on page 34 of the Annual Report, confirms that, to the best of their knowledge:

•        the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return or loss of the Company; and

•        the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the Annual Report & Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

The Board also confirms that it is satisfied that the Strategic Report and Directors' Report include a fair review of the development and performance of the business, and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

For and on behalf of the Board

Dr Kevin Carter

Chair

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST DECEMBER 2020

¹     Management fee for the year ended 31st December 2019 includes a reduction of £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 2020

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 2020

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST DECEMBER 2020

¹     The unrealised exchange loss on the JPMorgan US Dollar Liquidity Fund in the comparative column has been moved from the initial 'Net cash outflow from operations' total to be disclosed separately as the 'unrealised gain/(loss) on foreign currency cash and cash equivalents'.

NOTES TO THE FINANCIAL STATEMENTS

1.       Accounting policies

          General information and basis of accounting

The Company is a closed-ended investment company incorporated in the UK. The address of its registered office is at 60 Victoria Embankment, London, EC4Y 0JP.

The financial statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in 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 43 of the 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 per share

3.       Dividends

(a)     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 2019 amounted to £8,373,000. However the amount paid amounted to £8,294,000 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 2020, will be reflected in the financial statements for the year ending 31st December 2021.

(b)    Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £12,893,000 (2019: £16,106,000).

The revenue reserve after payment of the final dividend will amount to £22,993,000 (2019: £23,514,000).

4.       Net asset value per share

5.     Status of results announcement

2019 Financial Information

The figures and financial information for 2019 are extracted from the published Annual Report and Financial Statements for the year ended 31st December 2019 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements for the year ended 31st December 2019 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.

2020 Financial Information

The figures and financial information for 2020 are extracted from the published Annual Report and Financial Statements for the year ended 31st December 2020 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements include the Report of the Independent Auditor which is unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements for the year ended 31st December 2020 will be delivered to the Register 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.

1st April 2021

For further information:

Priyanka Vijay Anand

JPMorgan Funds Limited             020 7742 4000

ENDS

A copy of the 2020 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 also 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