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Annual Report2014JPMorgan American Investment Trust plc

Annual Report & Accounts for the year ended 31st December 2014

Features

Contents

Overview

1 Financial Results

Strategic Report

2 Chairman’s Statement11 Investment Manager’s Report16 Summary of Results17 Ten Year Performance18 Ten Year Financial Record19 Ten Largest Equity Investments21 Asset Analysis21 Investment Activity22 List of Investments25 Business Review

Governance

30 Board of Directors32 Directors’ Report34 Corporate Governance Statement40 Directors’ Remuneration Report43 Statement of Directors’

Responsibilities

44 Independent Auditor’s Report

Financial Statements

48 Income Statement49 Reconciliation of Movements in

Shareholders’ Funds50 Balance Sheet51 Cash Flow Statement52 Notes to the Financial Statements

Shareholder Information

73 Notice of Annual General Meeting76 Glossary of Terms and Definitions81 Information about the Company

ObjectiveTo achieve capital growth from North American investments by outperformance of theCompany’s benchmark.

Investment Policies- To invest in North American quoted companies including, when appropriate, exposure tosmaller capitalisation companies.

- To emphasise capital growth rather than income.

Please refer to page 25 for full details of the Company’s investment policies.

Gearing and Hedging Policies- The Company uses short and long term gearing to increase potential returns to shareholders.The Company’s gearing policy is to operate within a range of 5% net cash to 20% geared innormal market conditions. The Manager is accountable for tactically managing the gearing,within a +/–2.0% range around a ‘normal’ gearing level. The normal gearing level, which is setby the Board and kept under review, is currently 10%.

- To hedge the currency risk only in respect of the Company’s sterling debenture.

Further details of the Company’s investment policy and risk management are given in theBusiness Review on page 25.

Benchmark IndexThe S&P 500 Index expressed in sterling total return terms.

Capital StructureAt the Company’s Annual General Meeting held on 7th May 2014, a resolution was passed byshareholders to sub-divide each Ordinary share of 25p into five Ordinary shares of 5p each.Accordingly as at 31st December 2014, the Company’s share capital comprised 281,033,910ordinary shares of 5p each.

The Company has a £50 million debenture in issue, carrying a fixed interest rate of 6.875%, perannum, repayable in June 2018. The Company currently also has a £35 million two year floatingrate debt facility with ING Bank.

Management & Performance FeesThe management fee is charged at a rate of 0.5% per annum, paid quarterly in arrears, on theCompany’s total assets less current liabilities. The performance fee is calculated at the rate of10% of the difference between the net asset value capital return and the capital return of theS&P 500 Index. The fee payable in any one year is capped and any negative fee resulting fromunderperformance is deducted from any unpaid fees brought forward from prior years with anyremaining amount carried forward until paid in full. Please refer to pages 32 and 33 for fulldetails.

Management CompanyThe Company employs JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’) as its AlternativeInvestment Fund Manager. JPMF delegates the management of the Company’s portfolio toJPMorgan Asset Management (‘JPMAM’). Both of these entities are wholly owned affiliates ofJ.P.Morgan Chase & Co.

FCA regulation of ‘non-mainstream pooled investments’The Company currently conducts its affairs so that the shares issued by the Company can berecommended by independent financial advisers to ordinary retail investors in accordance withthe FCA’s rules in relation to non-mainstream investment products and intends to continue to doso for the foreseeable future.

The shares are excluded from the FCA’s restrictions which apply to non-mainstream investmentproducts because they are shares in an investment trust.

AICThe Company is a member of the Association of Investment Companies.

WebsiteThe Company’s website, which can be found at www.jpmamerican.co.uk, includes usefulinformation on the Company, such as daily prices, factsheets and current and historic half yearand annual reports.

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10 Year Performance5 Year Performance3 Year Performance

JPMorgan American Investment Trust plc. Annual Report & Accounts 2014 1

Financial Resultsto 31st December 2014

One year total returns (including dividends reinvested)

Long Term Performance (total returns)for periods ended 31st December 2014

+22.6%Return to shareholders1

(2013: +33.0%)

3.25pDividend(2013: 2.70p4)

+20.8%Return on net assets2

(2013: +30.9%)

+20.4%Benchmark Index1,3

(2013: +29.5%)

A glossary of terms and definitions is provided on page 76.

1Source: Morningstar.2Source: J.P. Morgan.3The Company’s benchmark index is the S&P 500 Index, net of the appropriate withholding tax, expressed in sterlingtotal return terms.4Comparative figures for the year ended 31st December 2013 have been restated due to the sub-division of each existingordinary share of 25p into five ordinary shares of 5p each on 8th May 2014.

JPMorgan American – return to shareholders1

JPMorgan American – return on net assets2

Benchmark1,3

JPMorgan American Investment Trust plc. Annual Report & Accounts 20142

Strategic ReportChairman’s Statement

I am pleased to report on another strong year for shareholders of JPMorganAmerican Investment Trust.

I would like to remind shareholders of the stock split which we put in place at theAnnual General Meeting in 2014, which means that for every one share you held on7th May 2014, you now hold five. This has, we think, increased liquidity and thereforebeen a benefit, but it does make comparatives a little difficult.

Last year, the US market, as measured by the S&P 500 total return Index in sterlingterms, provided a return of 20.4%. Shareholders in JPMorgan American benefited in2014 from the strength of the US dollar against sterling, as the S&P’s dollar return was13.7%. This return was also by some way the strongest for sterling investors amongmajor developed equity markets (as well as compared with those from emergingmarkets). Sterling investors in the equity markets of the UK, Europe, Japan andemerging markets, as measured by the leading market indices in each case, receiveda total return of 1.0%, –2.1%, 1.7% and 4.3% respectively. Of course, most of us weresurprised by bond market returns, with the longer end of the UK bond marketproviding a return of over 25% and holders of 30 year US Treasuries at the start of theyear earning a total dollar return for 2014 in excess of 29%. By the end of 2014 anddespite the ending of quantitative easing in October, the US 10 year bond yieldedapproximately 2.2%, taking the yield back to levels last seen in mid 2013 when the USrecovery was far less secure and the effects of monetary policy provided far greatersupport for the bond market.

Our investment manager, Garrett Fish, reports in more detail on developments in theUS corporate sector and in equity markets in his report. I would just like to noteApple’s fourth quarter profit of US$18 billion, apparently the largest quarterly profitever made by a private sector company. Apple is the Company’s largest holding at5.7% of total assets less current liabilities. The strength and dynamism of the UScorporate sector, on which we commented last year, has some extraordinary effects.Dividend growth has been strong in 2014 and buy backs have also returned cash toshareholders. The US has also seen a persistent pattern of innovation andcommercial development in sectors such as technology and bio technology whichhave led to very rapid corporate growth for some companies. Whilst they aresomewhat backward looking measures, it is interesting to note the sector allocationsof the S&P 500, compared with the FTSE All-Share at the year end. As the chart belowshows, the S&P 500 has larger allocations than its UK counterpart to sectors with arecord of strong growth and innovation such as Information Technology, Health Care,Consumer Discretionary and Industrials whereas the UK Index has higher exposuresto Financials, Consumer Staples, Energy, Telecoms and Utilities where growthprospects perhaps appear more muted. It is worth noting in passing that some of theshare and corporate governance structures in the US are different from those we seein the UK and to UK investors may appear on occasion surprising. Perhaps theapparent abundance of available capital in the US for technology and other


innovative companies is both a source of corporate success and a reason for adifferent approach to shareholder rights. Activism is a significant feature of UScorporate life and within your Company’s portfolio. US investors appear however, lessaverse to dual voting structures, for example.

Relative Performance of the Company

Your Company’s NAV (taking income into account and valuing our debt at itsredemption price rather than at market value) provided a return just slightly ahead ofour benchmark. This was no mean feat in 2014 when most US equity fund managersunderperformed. Apple itself contributed to outperformance as 5.7% of the portfoliowas held in Apple shares compared to a benchmark weighting of approximately4.4%. The large capitalisation portfolio as a whole outperformed and although thesmall capitalisation portfolio underperformed your investment manager reduced theoverall exposure to small companies to 3% at the beginning of the year. The furtherreasons for outperformance are detailed in the investment manager’s report.

Over the longer term, the investment manager has a very strong record: since1st January 2003 when Garrett Fish took over full responsibility for the management

Sector Weightings Compared: JPM American v S&P 500 v FTSE All-Share

Source: JPMorgan Asset Management. Data as at 31st December 2014.

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of the Company, the NAV (on a capital return basis) has risen by 229.9%, comparedwith the relevant benchmark which returned 195.9%; the benchmark representing amarket which is regarded as perhaps the most difficult to outperform. The three andfive year figures cover the most dramatic rise in the market, and now leave out thedifficulties of 2008, when Garrett Fish outperformed significantly in the market crash.The NAV underperformed slightly in the four years following that but hasoutperformed in 2013 and 2014 (we put in place our current gearing approach in2012). Performance before 2008 was also good, and looking at peers it is worthnoting that the performance of the NAV of the trust, over the 10 years to31st December 2014, is in the top 4% of the 256 US large capitalisation ‘blend’ fundsin the relevant Morningstar universe.

Your Company’s share price return is also ahead of the benchmarket index, overthe last one, three, five and 10 years. The Company’s shares traded at a significantdiscount in the past, and the Board showed its commitment to shareholder valueby buying back over 30% of the outstanding equity between January 2002 andDecember 2007. As we have said before, having issued new shares at a smallpremium in recent years, we are aware of our responsibilities not to let thediscount widen significantly.

Gearing

Shareholders may remember that we identified in 2012 that the variation of gearingon a tactical basis by the investment manager was not really adding any value. As aconsequence, we established a normal level of gearing of around 10%, with theinvestment manager authorised to vary this level by plus or minus 2%. Theinvestment manager is further permitted, if he feels that there is a real risk of loss ofcapital, to hold cash up to 5% of net assets although of course, predicting such eventsis not straightforward and may even be impossible. This year, we spent some timeconsidering our liability structure given these guidelines. We have an existing 6.875%sterling debenture, which redeems in 2018. This does provide certainty of funding,but is otherwise inflexible, expensive, and requires the hedging of the equivalentamount of assets to avoid a currency mismatch. Over the last two years, we haveborrowed additional sums on short term revolving credit facilities which haveallowed greater flexibility of drawdown, in both amounts and currency (and atrelatively low total costs). In extremis, the undrawn amounts of these facilities couldbe withdrawn. Our criteria for the liability structure have included transparency, cost,flexibility and diversification of funding source. We have therefore now established a£35 million two year credit facility with ING Bank, which can be drawn down indollars. This means that we have debt repayment points of December 2016 and June2018 and a mix of fixed and floating interest payments. We continue to review ourarrangements in this area. For full details of the terms of these facilities please referto page 60.

Strategic Report continuedChairman’s Statement continued


Dividend

Overall income from the portfolio increased by some 42.5% in dollar terms over theperiod. However, these dividends are translated at the time of receipt, and for much ofthe year sterling was relatively strong, the sterling increase is lower at 35.5%. You mayhave noticed that sterling was weaker at the end of the year than at the beginning, butthere was quite a long period of strength during the year. Several structural factorscontributed to this growth in income. These included the greater use of gearing in theyear and the income earned on the proceeds of shares issued in the year which yourinvestment manager estimates added approximately 7% and 5% respectively to theincome earned in the year. Income was also enhanced by investing a larger proportionof the Company’s assets in the relatively higher yielding large-cap element of theportfolio at the expense of the lower yielding smaller companies portfolio. However,themost significant contributor to the revenue received in the year was a significantincrease in the dividends paid by the companies in which we are invested. Notabledividend increases among our larger positions came from Microsoft, ExxonMobil, WellsFargo and Northrup Grumann, all of which produced dividend increases in excess of10%. We also saw several dividend rises in excess of 50% from a number of smallerholdings in the portfolio such as Suntrust, Morgan Stanley and Hartford Financial.

The Company paid an interim dividend in respect of the 2014 financial year of1.0 pence per share on 8th October 2014. Subject to shareholder approval at theAnnual General Meeting, a final dividend of 2.25 pence per share will be paid on15th May 2015 to shareholders on the register on 17th April 2015, making a total of3.25 pence per share. Given the sub-division of shares mentioned below, thisrepresents an increase of 20.4% on last year’s distribution of 2.7 pence per shareadjusting for the stock split.

Gearing level

Source: JPMAM Potential Gearing level.

Actual Gearing level.

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After the payment of the proposed final dividend, we will have a balance in the revenuereserves of £11.8 million (equivalent to 4.2 pence per share or 1.3 times the currentdividend). It is the intention that such reserves be used to support dividend paymentswhen corporate payouts are less healthy, or if there are other fluctuations in therevenue account which we assess to be temporary.

Share Price and premium/discount

Your Company’s share price return was 22.6% for the year. Compared to net asset valuetaking debt at fair value, the shares have traded at a premium for most of the year.

The Company again issued stock over the year: a total of 12,815,000 shares (adjustedfor the stock split), or 4.8% of the issued share capital at the beginning of the yearraising £31.2 million. We continue to issue shares at a premium to estimated cumincome with debt at fair net asset value, which has added approximately 0.6 pence tothe net asset value calculated on that basis during the year and has not affected NAVmeasured with debt taken at par. Since the year end the Company has issued afurther 600,000 shares, or another 0.21% of the issued share capital in January 2015.

The Board continues to believe that expanding the trust has benefits to its existingshareholders in terms of increased liquidity and lower costs per share, although wedo not intend aggressively to pursue growth for its own sake. We are again asking forshareholder permission to continue to issue shares on the same basis, whereDirectors are confident of sustainable market demand. We are putting the relevantresolutions to shareholders at the forthcoming Annual General Meeting in May,where the Board is seeking permission to issue up to 10% of its issued share capitalat prices in excess of the estimated NAV including income with the value of our debtdeducted at market prices.

As I indicated above, and as we have stated in previous years, the Company hasdemonstrated its willingness to buy shares back when the shares stand at anything


Discount/Premium level

Source: Datastream Discount/Premium level (calculated with debt at fair value and including income).

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more than a small discount. Between 2002 and 2007 over 30% of the outstandingshare capital was repurchased. The Board remains aware of its responsibility not tolet the discount widen significantly and therefore the Company will again be askingshareholders to approve the relevant share buyback resolutions at the AnnualGeneral Meeting. I have confirmed this information in my last two statements, but itsimportance means it is worth reiterating again. You will have also seen us put this intoaction in March 2015 when the Company started to trade on a discount and we havenow bought back 871,032 shares, which are held in Treasury.

Five for One Sub-division of the Company’s Share Capital

Following approval at the Company’s Annual General Meeting held in May 2014, theCompany’s shares were sub-divided into five ordinary shares for every one shareheld. That means for every one share you held previously, you now hold five. Thissub-division took effect on 8th May 2014. The share split did not affect the overallvalue of your holding in the Company as the reduction in the price per share wasoffset by a commensurate increase in the number of shares you hold in the Company.

Investment Manager

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

The Board has once again reviewed carefully and robustly the capabilities of theinvestment manager in order to assess whether JPMorgan Funds Limited (‘JPMF’)should remain the Manager of the Company’s assets. Directors meet with theinvestment managers of both the large and small capitalisation portfolio and theinvestment company team in London, and have conversations over the teleconferencesystem. In 2014, the Board visited the Manager’s offices in New York where we held aboard meeting. We also determined that we wanted to discuss a number of aspectswith the team in New York. This included meetings with the corporate engagementteam, the dealing team, senior management and the behavioural finance team, ofwhich Garrett Fish is a member. In addition to investment management, the Managerprovides other services to the Company, including marketing, accounting and companysecretarial services. We have had a number of discussions with the marketing team, todevelop appropriate Key Performance Indicators and are generally pleased with thedevelopment of their digital marketing approach and have discussed potentialimprovements to the website with them. We were pleased with the approach taken bythe Managers to the demands of new regulation through the AIFM process. We haveconcluded that the ongoing appointment of the Manager is in the continuing interestsof shareholders.

The Manager has this year earned a performance fee of £359,000, which will be paidin three equal amounts over the next three years (the total paid in any one year iscapped). When added to the as yet unpaid element of the performance fee broughtforward from prior years, this gives a balance of £643,000 to be paid in future yearsand details are set out on pages 32 and 33. This performance fee balance will besubject to claw-back in the event of future underperformance relative to thebenchmark up to the point at which it is paid. We have discussed whether the


performance fee makes sense, particularly in the context of the post RetailDistribution Review (‘RDR’) world, where there is increasing competition fromopen-ended funds that charge a single management fee. We have currently areasonably low management fee by industry standards, and we have felt that onbalance, the performance fee works fairly. However, we do keep it under review, aswe do the standard fee, as the size of your Company increases and as we seedevelopments in the investing world.

Alternative Investment Fund Managers Directive (‘AIFMD’) and New ContractualRelationships

I indicated previously that in order to comply with the AIFMD, the Company would beappointing a different JPMorgan entity as its Manager and Company Secretary andwas further required to appoint a depositary in addition to its existing custodian.

Further to legal advice received by the Company from Dickson Minto WS, JPMorganFunds Limited, which has been approved by the Financial Conduct Authority as anAlternative Investment Fund Manager, was appointed as Manager and CompanySecretary to the Company with effect from 1st July 2014. This change of entity doesnot affect the actual management of the portfolio which will continue to be managedfrom the US by Garrett Fish and his support team. The Company Secretarial andadministration support will also continue to be conducted by the same individualsfrom the Company’s registered office in London. No extra fees are being charged byany JPMorgan entity as a result of the Company’s AIFMD obligations.

The Company has also appointed Bank of New York Mellon (‘BNYM’) as Depositary.This appointment, which is a requirement under the AIFMD, brings with it additionalsafeguards over the investments of the Company and third party oversight of many ofthe accounting aspects of the Company’s operations. Following the appointment ofthe Depositary the custodian, JPMorgan Chase Bank NA, which is responsible forsafeguarding the Company’s assets and processing the purchase and sale ofinvestments and collecting income arising from the portfolio, is now appointeddirectly by the Depositary, rather than being a direct appointee of the Company,which was previously the case. BNYM are paid a fee of 0.017% per annum of theCompany’s monthly gross assets per annum (currently around £170,000).

Costs and Directors’ Fees

We have kept our focus on costs through the year, given the increased costs of theAIFMD, and the need to make sure that we continue to offer attractive value forshareholders and potential shareholders. We said last year that we would address thelevel of Directors’ fees given the greater amounts of time required over recent yearsand the rising regulatory responsibilities. The last increase in Directors’ fees wasimplemented four years ago, at the beginning of 2011. The Board has examined thetime and the effort required to be an effective Director of this particular trust andreviewed the fees paid to the directors of other investment trusts and other tradingcompanies.

The Board has resolved that the base Director’s fee will be increased by £3,500 perannum to £28,500. In line with those increases, the Chairman of the Audit Committee’sfee will rise by £4,500 to £34,500 and the Chairman’s fee will increase by £5,500 to£43,000. We have also established a Risk Committee, the fee for the chairing of which



has been set at £2,000, and appointed a Senior Independent Director, the fee forwhich role has also been set at £2,000. All fee increases to take effect from1st January 2015.

The table set out below is in the same format as we used last year. It aims to show thereturns generated on the Company’s investments, the extent to which the capitalbase of the Company has grown or shrunk through share issuance and buy-backs,and the full costs of the Company’s operations. It does so without the distortions thatmay come from the variations in the accounting treatment of certain items of incomeor expenditure which may obscure the full extent of certain categories of return orexpense. Management fees generally vary with the size of the Company andtherefore rose. There was an increase in the “other costs” which was primarily due tothe AIFMD. There was a loss on our currency hedges shown in this part of the tablewhich was balanced by an increase in the underlying assets due to the strength of thedollar and which is included in the net investment performance figure. However, it ispleasing to note that despite these increases on the prior year costs, the Company’sOngoing Charges (including performance fee payable) remain low at 0.64%,a reduction from the 2013 level of 0.66%.

2014 2013Percentage Percentageof opening of opening

£’000s net assets £’000s net assets

Net assets at start of year 642,213 100.00 464,734 100.00Increase/(decrease) in net assets

during the year from investing 139,421 21.71 141,096 30.36Brokerage fees/commissions and

other dealing charges (173) (0.03) (305) (0.07)

Net investment performance 781,461 121.68 605,525 130.29Income received from investing –

net of withholding tax 12,567 1.96 9,636 2.07Dividends paid to shareholders1 (7,467) (1.16) (6,381) (1.37)Interest paid on borrowings (3,826) (0.60) (3,518) (0.76)Gains/(losses) on currency hedging (4,884) (0.76) 3,346 0.72Management and performance fees (4,076) (0.63) (3,483) (0.75)Directors’ fees (152) (0.02) (151) (0.03)Other costs of the Company (495) (0.08) (407) (0.09)Issue of new shares 31,273 4.87 38,001 8.17Cost of issue of new shares (251) (0.04) (355) (0.08)

Net assets at end of year 804,150 125.22 642,213 138.19

1Dividends paid in 2013 include a final full year’s dividend for 2012 and interim dividend for 2013.

The Board

The Board has put in place procedures to ensure that the Company complies fullywith the AIC Code on Corporate Governance.

In accordance with the UK Corporate Governance Code, all continuing Directors willseek reappointment at the Annual General Meeting. Accordingly, I, along with KateBolsover, Simon Bragg (Chairman of the Audit Committee) and Sir Alan Collins (Senior


Independent Director and Chairman of the Risk Committee) all being eligible, offerourselves for reappointment at this year’s Annual General Meeting.

The Board continues to manage succession so that it has an appropriate balance ofskills and diverse approaches to its tasks. Having served as a Director since 2003,James Williams retired from the Board in November 2014. During his tenure Jamescontributed significantly to the success of the Company and we wish him well forthe future. Dr Kevin Carter was appointed to the Board as an independentnon-executive director from 1st July 2014. We identified a clear set of requirementsfor this role, including an understanding of US fund management, an understandingof quantitative fund management approaches as well as fundamental approaches,and an understanding of the investment company sector. Dr Carter is a CFAcharterholder and has a PhD in mathematical statistics and has been involved inthe fund management world for very many years in a wide range of capacities. Hehas wide experience and technical understanding of both fund management andthe management of fund managers. He currently sits on two other investment trustboards. Dr Carter will stand for appointment by shareholders at this year’s AnnualGeneral Meeting.

The Nomination and Remuneration Committee will continue to manage the processof Board succession and refreshment, to make sure the Board has the skills andexperience to add value to shareholders. We would note that we have a Board whichis diversified by gender and also by background and experience.

Annual General Meeting

This year’s Annual General Meeting will be held on Wednesday, 13th May 2015 at2.30 p.m. at 60 Victoria Embankment, London EC4Y 0JP. As in previous years, inaddition to the formal part of the meeting, there will be a presentation from ourinvestment manager, who will answer questions on the portfolio and performance.There will also be an opportunity to meet the Board, Garrett Fish and representativesof JPMF after the meeting. I look forward to welcoming as many shareholders aspossible to this meeting.

Outlook

The US equity market continues to provide a range of opportunities not readilyavailable elsewhere and UK investors have tended to underestimate the strength ofthe US corporate sector. Valuations are clearly not cheap and the impact of theending of quantitative easing and the possible increase in interest rates is verydifficult to assess. Our Manager tends not to make major macro-economic calls, butfocuses on picking companies which appear to offer both reasonable quality andreasonable value. The portfolio is broadly spread and carefully put together so that,compared with the US market as a whole, there are no extreme positions. If marketswere to fall, the assets of your Company would undoubtedly fall as well. On the otherhand, in a very uncertain world, there are considerable attractions in the UScorporate sector and our Manager has demonstrated some ability to steer a sensiblecourse through both exuberant and difficult market conditions.

Sarah BatesChairman 31st March 2015



Market Review

While many correctly anticipated a positive 2014 for the US stock market, few couldhave predicted the way in which it was achieved. Large cap stocks outperformedsmall caps and defensive sectors outperformed cyclical ones. All was not smoothsailing as the US equity market experienced three pullbacks in 2014. However, themarket rebounded strongly each time on the strength of economic and marketfundamentals.

In the end, the S&P 500 Index (S&P 500) made 56 new highs in 2014 and finishedclose to its record high (2090.57) set just before the year end on 29th December 2014.Large cap stocks, as represented by the S&P 500 returned 20.4% in sterling termssignificantly outpacing small cap stocks, measured by the Russell 2000 Index whichrose 11% in sterling terms.

Part of the returns from the market were driven by an increased focus by corporateactivists pressuring underperforming management teams to restructure theirbusinesses and in many cases to increase capital distributions back to shareholdersthrough share repurchases or dividends. We are generally fans of corporationsbuying back their shares if the shares are at a reasonable valuation and their capitallevels are robust. We are also in favour of increasing dividend payments with theexcess cash that the corporations generate through the year. At this point in timethere are many US corporations that are generating healthy cash flows, whichcoupled with robust balance sheets should allow for increased capital returns in theyears ahead.

Investors were quite perplexed when after an April Employment Report thatsignificantly exceeded expectations, bond yields continued to fall. Geopoliticaltensions in the Ukraine, unrest in Iraq, and concerns over US growth were cited,particularly after the poor showing of US GDP in the first quarter of the year, whichexperienced a –2.9% contraction. Clearly, the low yield environment is not a reflectionof poor growth prospects for the US, but a function of supply and demand. Given thelow yields in developed countries such as Japan, Germany and France, yields in theUS look far more attractive. An improving US fiscal deficit has led to lower levels ofTreasury issuance, decreasing the supply.

The year’s deepest sell off began in mid September as the possibility of anotherrecession in Europe rose to the forefront as weakness began to spread to Germany.As expected in October, the Fed ended its quantitative easing programme.

The final bout with volatility came in early December amidst concerns over the fiercedecline in crude oil prices, the collapse of Russian equity markets and its currency,and increasing political uncertainty in and over Greece. Thankfully, marketsrebounded from the sell-off on the strength of US economic data. The currentresilience of the US economy was also confirmed as the final estimate of US GDPfor the third quarter came in at an annualised rate of 5.0%, higher than the secondestimate of 3.9%.

The top performing sector within the S&P 500 over the year was the utilities sector,which was clearly helped by the fall in bond yields and investors’ quest for income.

Investment Manager’s Report


Strategic Report continuedInvestment Manager’s Report continued

Performance attribution for theyear ended 31st December 2014

Year ended31st December

2014%

Contributions to total returns

Net asset value total return (in sterling terms) 20.8

Benchmark total return (in sterling terms) 20.4

Excess return 0.4

Contributions to total returnsLarge cap portfolio 1.1Allocation effect –0.8Selection effect 1.9

Small cap portfolio –0.5Allocation effect –0.5Cash –0.2Gearing 1.5Cost of debt –0.5Currency hedge –0.5Share issuance 0.2Management fee/expenses –0.6Performance fee –0.1

Total 0.4

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

Performance attribution analyses howthe Company achieved its recordedperformance relative to its benchmarkindex.

A glossary of terms and definitions isprovided on page 76.

The worst performing sector was the energy sector which fell dramatically from latesummer, as crude oil prices began to fall. WTI futures, the US benchmark for crude oilpricing, reached a high of US$107.26 per barrel on 20th June and then fell for the restof year finishing 2014 at the low of US$53.27 per barrel, a –50.3% decline.

The Company’s net asset value total return (in sterling terms) rose by 20.8%, whichwas slightly ahead of the benchmark, the S&P 500.

Overall Asset Allocation and Performance

I am responsible for managing the allocation between the large and the small capportfolios, and for implementing the levels of cash and gearing within the gearingguidelines laid down by the Board. The Company ended the year 8.7% geared, havingremained around this level all year. Our gearing was a positive factor as one wouldexpect in a rising equity market and added approximately a net 0.5% to relativeperformance.

The weighting in the small cap portfolio was increased from 2.9% to 3.5% of theCompany’s total assets less current liabilities over the year. We had reduced our smallcap allocation in 2013 based on our valuation tool. This action proved beneficial in2014 due to the strong underperformance of small caps versus large caps. We believethat our ability to move between the two segments enhances returns to shareholdersover the long term and also helps to balance our overall risk.

Attribution data for 2014 shows that our large cap portfolio was a contributor for theperiod and our smaller companies portfolio detracted.

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 exhibitgood growth characteristics with growing earnings, strong cash flows and reasonablevaluations. When constructing our portfolio, we use the core tenets of behaviouralfinance to narrow our investment universe. Behavioural finance theory indicates thaton average, high quality, fast growing, cheap stocks with good news-flow outperformlower quality, slow growing, and expensive stocks with bad news-flow. Taking thisapproach, we rank the stocks in our universe to uncover those companies that arehigh quality, attractively valued and are also exhibiting improving sentiment(momentum). We then undertake fundamental research to validate the rankings. Thisleads us to invest in quality companies that exhibit good growth characteristics withgrowing earnings, strong cash flows and reasonable valuations.

The large companies portfolio marginally contributed to performance for the periodunder review. In terms of sectors where we added value, in a reversal from last year,our positioning in the information technology sector proved very beneficial. We haveadded to our technology exposure during the year, as we continue to find a number ofstocks in the space that meet our investment criteria. Within the sector, our exposureto a handful of names such as Apple, Yahoo, Hewlett Packard and SanDisk helpedperformance. With regards to Apple, the stock’s momentum continues following thecompany’s latest iPhone, iPad and iMac launch and better than expected quarterlyresults. We think revenue and earnings numbers still have upside as we considerpotential unit growth from market share gains and higher average selling prices from


the iPhone 6 and iPhone 6 Plus. From our perspective, Apple remains attractivelyvalued, has a cash rich balance sheet, and the company continues to launch newproducts and services such as the Apple Watch and Apple Pay. We had added to ourposition earlier this year and the name remains our top holding.

Our positioning in the consumer staples and industrials also added value, althoughto a lesser extent. Within consumer staples, overweight positions in pharmacy chainsWalgreen Boots Alliance and CVS Health helped performance. Walgreen postedstrong sales over most of the period, but more importantly completed its acquisitionof European pharmacy concern Alliance Boots which gives it a vast drug distributionempire across 11 countries. During the year, CVS Health hit the headlines as thecompany decided to remove tobacco products from sale in its stores. It is unclearwhether the move has yielded any financial benefit to the pharmacy chain. However,at this time none of the other national pharmacy chains have followed CVS to dropcigarettes.

In contrast our stock selection in the consumer discretionary and financial servicessectors detracted slightly. Within consumer discretionary our exposure to GeneralMotors and Staples for some of the period under review disappointed us as bothstocks sold off on stock specific issues. General Motors suffered from negative investorsentiment over numerous recall-related issues. While General Motors’ valuationremains attractive, we have concerns how long the recalls will act as an overhang aslitigation remains pending. Staples’ earnings came under pressure as the strugglingoffice-supplies retailer was faced with weaker than expected sales due to a reductionin traffic falls in the face of stronger online competition and weaker demand fortraditional office supplies. While the company is closing underperforming stores andtrying to increase its online growth, we have fundamental concerns on how quickly thecompany can reignite sales growth. As a result we exited our position.

In the financials sector, a lack of exposure to Berkshire Hathaway hurt us, as the namerallied strongly. Whilst we do admire Warren Buffet’s proficiency as an investor, wewould prefer to own the name when it was not trading at such an extended valuation.

Sector Weightings of the Large Cap Portfolio versus S&P 500 as at 31st December 2014

Large company Overweight/portfolio S&P 500 (underweight)

Sector %* % %

Information Technology 23.1 19.7 3.4Financials 16.5 16.7 (0.2)Health Care 14.9 14.2 0.7Consumer Discretionary 11.8 12.1 (0.3)Consumer Staples 10.6 9.8 0.8Industrials 9.9 10.4 (0.5)Energy 8.8 8.4 0.4Telecom Services 2.5 2.3 0.2Utilities 1.2 3.2 (2.0)Materials 0.8 3.2 (2.4)

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

Source: Wilshire. Based on theMSCI Global Industry Classification Standards.


Strategic Report continuedInvestment Manager’s Report continued

The table below shows the largest positive and negative stock contributors to theCompany’s portfolio performance in 2014:

Average position Stock returnrelative to (based on

Benchmark average weightover year over the year) Contribution

Stock % % %

Positive ContributorsApple 1.8 49.4 0.9Southwest Airlines 0.5 140.4 0.4Amazon1 –0.7 n/a 0.3Yahoo 0.4 55.7 0.3Hewlett Packard 0.2 55.1 0.3

Negative ContributorsPeabody Energy2 0.3 –51.5 –0.4General Motors2 0.5 –14.7 –0.3Terex2 0.6 –21.4 –0.3Devon Energy 0.9 6.6 –0.3Intel1 –0.9 n/a –0.2

1Not held in the portfolio during the year.2Not held in the portfolio at year end.

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

Smaller Companies Portfolio

US small caps, which performed well in 2013, came under pressure in 2014 and endedthe period lagging their large cap peers. The year presented a challengingenvironment for the investment style of the JPMorgan US small cap growth portfolio,which unfortunately detracted from overall performance against our benchmark.Starting in the middle of March, we witnessed fairly extreme market trends, wherethe higher growth segments, for large and small caps alike, sold off dramatically, asinvestors were concerned with potentially frothy valuations. Given our approachwhich leads us to have a consistent high growth bias, we experienced headwinds toour investment style as valuations in the growth pockets compressed significantly.Stocks such as Gigamon and Financial Engines were the biggest detractors fromperformance.

On the positive side, stock selection was strong in the industrials space withOld Dominion Freight Line and Spirit Airlines delivering strong earnings and revenuegrowth. Both companies are supported by disciplined management teams and havefavourable industry backdrops. Other top performers include positions in twobiotechnology names, Receptos and Puma Biotechnology.

With regards to positioning, the small cap portfolio continues to have significantexposure to healthcare and technology names which represent nearly half theallocation. The portfolio has less exposure to the energy, consumer staples andutilities sectors as we are finding less attractive investment ideas in these areas.


Outlook

We believe that US equity markets can continue to march higher from here despitethat fact that they have had a very strong rally over the last several years. Whileearnings growth in 2015 will most likely be lower than the prior years due to weakerglobal economic growth, with significantly lower oil prices and a strong US dollar theequity market still has some positives. Record high margins continue to increase dueto lower interest costs and muted wages costs and the US economy continues tomaintain its low growth trajectory. US companies continue to have healthy balancesheets with ample cash reserves which should continue to support dividendincreases and share buybacks. We may also see an increase in mergers andacquisitions activity as management teams continue to look at the best ways togrow their businesses.

From a US economic standpoint the slow and steady pace continues to persist whilethe global emerging markets are decelerating and the other developed markets arestruggling to expand. The US employment picture continues to improve as hiringtrends continue to drift higher and consumer confidence levels are at the highestlevels since the financial crisis ended.

The Fed will no doubt play a part in this year’s financial markets. Current expectationsare for the Fed funds rate to be increased from the very low levels at which they standnow. If this does turn out to be true, history says that the market volatility willincrease as market participants will worry that the current economic cycle haspeaked and the higher interest rates will restrict the economy from growing further.This is the inherent tension between the level of short term interest rates and thelevel of economic growth.

There are many interesting developments in the world right now. Our outlookremains positive on the US equity market partly because of recent economic trends inthe US and, whilst the US is not immune to the global economy, we continue to scourthe market for highly attractive securities that are priced at reasonable valuations.

Garrett FishInvestment Manager 31st March 2015


2014 2013

Total returns for the year ended 31st DecemberReturn to shareholders1 +22.6% +33.0%Return on net assets with debt at par value2 +20.8% +30.9%Return on net assets with debt at fair value2 +21.0% +32.3%Benchmark1,3 +20.4% +29.5%

% change

Net asset value, share price, discount and market data at 31st DecemberNet asset value per share with debt at par value 286.1p 239.4p|5 +19.5Net asset value per share with debt at fair value4 283.1p 236.6p|5 +19.7Share price 288.7p 238.2p|5 +21.2Share price premium/(discount) to net asset value per share with debt

at par value 0.9% (0.5)%Share price premium to net asset value per share with debt at fair value 2.0% 0.7%Shareholders’ funds (£’000) 804,150 642,213 +25.2Market capitalisation (£’000) 811,345 638,897 +27.0S&P 500 Index expressed in sterling (capital only)6 1,320.44 1,115.99 +18.3Exchange rate £1=$1.5592 £1=$1.6562 –5.9Shares in issue 281,033,910 268,218,910|5 +4.8

Revenue for the year ended 31st DecemberNet revenue attributable to shareholders (£’000) 10,412 7,763 +34.1Return per share 3.76p 3.00p|5 +25.3Dividend per share 3.25p 2.70p|5 +20.4

Gearing at 31st December7 8.7% 9.1%

Ongoing Charges8 0.62% 0.63%

Ongoing Charges including any performance fee payable9 0.64% 0.66%

Management Fee10 0.50% 0.50%

A glossary of terms and definitions is provided on page 76.1Source: Morningstar.2Source: J.P. Morgan.3The Company’s benchmark is the S&P 500 Index expressed in sterling total return terms. 4The fair value of the £50m debenture issued by the Company has been calculated using discounted cash flow techniques, using the yield from a similarly dated gilt plus a margin basedon the five year average for the AA Barclays Sterling Corporate Bond spread.

5Comparitive figures for the year ended 31st December 2013 have been restated due to the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on8thMay 2014.6Source: Datastream. 7Gearing represents the excess amount above shareholders’ funds of total assets less cash/cash equivalents, expressed as a percentage of the shareholders’ funds. If the amount socalculated is negative, this is shown as a ‘net cash’ position.8Ongoing charges represent the management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during theyear. The ongoing charges are calculated in accordance with guidance issued by the Association of Investment Companies (the ‘AIC’) in May 2012.

9Ongoing charges including any performance fee payable represents the management fee, performance fee and all other operating expenses excluding interest, expressed as apercentage of the average of the daily net assets during the year.

10The level of the management fee, excluding any performance fee payable.

Strategic Report continuedSummary of Results


Performance Relative to BenchmarkFigures have been rebased to 100 at 31st December 2004

Source: Morningstar/Datastream.

JPMorgan American – share price total return.

JPMorgan American – net asset value per share total return.

The benchmark total return is represented by the grey horizontal line.

Total ReturnFigures have been rebased to 100 at 31st December 2004


JPMorgan American – share price total return.

JPMorgan American – net asset value per share total return.

Benchmark total return.

50

100

150

200

250

300

350

20142013201220112010200920082007200620052004

90

100

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20142013201220112010200920082007200620052004

Ten Year Performance


At 31st December 20041 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Shareholders’ funds (£m) 289.7 309.0 312.0 321.5 293.7 321.5 374.0 400.4 464.7 642.2 804.2

Net asset value per share with debt at par value (p)2 123.0 142.1 144.2 150.5 137.5 150.5 174.6 173.3 185.0 239.4 286.1

Net asset value per share with debt at fair value (p)2 120.7 138.1 141.8 147.5 132.4 146.3 170.2 168.6 180.9 236.6 283.1

Share price (p)2 109.6 126.6 130.8 133.1 125.2 139.4 167.4 171.8 181.2 238.2 288.7

Share price premium/(discount) with debt at fair value (%) (9.2) (8.4) (7.7) (9.8) (5.5) (4.7) (1.6) 1.9 0.2 0.7 2.0

Gearing/(net cash) (%)3 12.5 8.8 4.3 (2.9) 12.8 11.3 4.2 (2.8) (0.6) 9.1 8.7

Exchange rate (£1=$) 1.92 1.72 1.96 1.99 1.44 1.61 1.57 1.55 1.63 1.66 1.56

Year ended 31st December

Earnings per share (p)2 1.64 1.56 2.26 2.14 2.27 2.13 2.11 2.24 2.76 3.00 3.76

Dividend per share (p)2 1.50 1.60 2.20 2.20 2.20 2.20 2.20 2.20 2.50 2.70 3.25

Ongoing charges (%)4 0.72 0.72 0.76 0.69 0.71 0.75 0.70 0.69 0.68 0.63 0.62

Ongoing charges (%) including any performance fee payable5 0.72 0.72 0.76 0.69 0.82 0.86 0.81 0.69 0.68 0.66 0.64

Rebased to 100 at 31st December 2004

Share price total return6 100.0 117.1 122.5 126.7 121.3 137.6 167.5 174.0 186.7 248.2 304.2

Net asset value per share – total return6 100.0 117.1 119.6 126.7 117.5 131.1 154.5 155.3 169.3 221.9 266.3

Benchmark – total return6,7 100.0 116.8 118.2 122.2 106.2 119.1 140.9 144.5 159.8 206.9 249.1

A glossary of terms and definitions is provided on page 76.

1The results for the year ended 31st December 2004 have been restated in accordance with Financial Reporting Standards 21, 25 and 26. 2All prior years’ comparative figures have been restated due to the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on 8th May 2014.3Gearing represents the excess amount above shareholders’ funds of total assets less cash/cash equivalents, expressed as a percentage of the shareholders’ funds. If the amount socalculated is negative this is shown as a ‘net cash’ position.4Ongoing charges represents the management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets duringthe year. The ongoing charges are calculated in accordance with guidance issued by the Association of Investment Companies (the ‘AIC’) in May 2012.

5Ongoing charges including any performance fee payable represents the management fee, performance fee and all other operating expenses excluding interest, expressed as apercentage of the average of the daily net assets during the year.6Source: Morningstar.7The Company’s benchmark is the S&P 500 Index expressed in sterling total return terms.

Strategic Report continuedTen Year Financial Record


2014 2013Valuation Valuation

Company Sub Sector £’000 %1 £’000 %1

Apple Information Technology 50,194 5.7 30,559 4.4Apple designs, manufactures and markets personal computers and relatedpersonal computing and mobile communication devices along with a variety ofrelated software, services, peripherals and networking solutions. The companysells its products worldwide through its online and retail stores, its direct salesforce and third-party wholesalers.

Microsoft Information Technology 36,050 4.1 25,617 3.7Microsoft develops, manufactures, licences, sells and supports softwareproducts. The company offers operating system software, server applicationsoftware, business and consumer applications software, software developmenttools and internet and intranet software. Microsoft also develops the MSNnetwork of internet products and software.

Exxon Mobil Energy 23,778 2.7 24,430 3.5Exxon Mobil operates petroleum and petrochemicals businesses on aworldwide basis. The company’s operations include exploration andproduction of oil and gas, electric power generation and coal and mineralsoperations. Exxon Mobil also manufactures and markets fuels, lubricantsand chemicals.

Bank of America Financials 20,574 2.3 15,858 2.3Bank of America accepts deposits and offers banking, investing, assetmanagement, and other financial and risk-management products andservices. The company has a mortgage lending subsidiary, and an investmentbanking and securities brokerage subsidiary.

Wells Fargo Financials 19,048 2.1 14,799 2.1Wells Fargo & Company is a diversified financial services company providingbanking, insurance, investments, mortgage, leasing, credit cards, andconsumer finance. The company operates through physical stores, theInternet and other distribution channels across North America andelsewhere internationally.

Time Warner2 Consumer Discretionary 16,551 1.9 9,492 1.4Time Warner is a media and entertainment company. The company’sbusinesses include cable television networks that provide programming,feature films, television and home video production and distribution, andmagazine publishing.

Gilead Sciences2 Health Care 16,496 1.9 8,959 1.3Gilead Sciences is a research-based biopharmaceutical company thatdiscovers, develops, and commercialises therapeutics to advance the care ofpatients suffering from life-threatening diseases. The company’s primaryareas of focus include HIV/AIDS, liver disease and serious cardiovascular andrespiratory conditions.

Ten Largest Equity Investments


2014 2013Valuation Valuation

Company Sub Sector £’000 %1 £’000 %1

Citigroup Financials 16,422 1.8 14,830 2.2Citigroup is a diversified financial services holding company that provides abroad range of financial services to consumer and corporate customers. Thecompany services include investment banking, retail brokerage, corporatebanking, and cash management products and services. Citigroup servescustomers globally.

Chevron Energy 15,589 1.8 13,468 2.0Chevron is an integrated energy company with operations in countrieslocated around the world. The company produces and transports crude oiland natural gas. Chevron also refines, markets, and distributes fuels as wellas is involved in chemical operations, mining operations, power generationand energy services.

Northrop Grumman2 Industrials 15,090 1.7 9,688 1.4Northrop Grumman is a global security company. The company providessystems, products, and solutions in aerospace, electronics, informationsystems and technical services to government and commercial customersworldwide.

Total 229,792 26.0

1Based on total assets less current liabilities of £884.4m (2013: £692.4m).2Not included in the ten largest equity investments at 31st December 2013.

At 31st December 2013 the value of the ten largest equity investments amounted to £182.4m representing 26.4% of total assetsless current liabilities.

Strategic Report continuedTen Largest Equity Investments continued


2014 2013At 31st December %1 %1

Large Companies 95.4 98.3Small Companies 3.5 2.9Unquoted Companies 0.1 0.2Net current assets/(liabilities)2 1.0 (1.4)

Total 100.0 100.0

1Based on total assets less current liabilities of £884.4m (2013: £692.4m).2Includes investments in liquidity funds.

Investment Activityduring the year ended 31st December 2014

Value at Value at31st December 2013 Changes 31st December 2014

% of Purchases Sales in value % of£’000 portfolio £’000 £’000 £’000 £’000 portfolio

Large Companies 680,622 95.8 228,313 (199,419) 134,054 843,570 95.1Small Companies1 21,445 3.0 20,715 (14,404) 4,375 32,131 3.6Liquidity Fund2 8,494 1.2 91,333 (89,420) 827 11,234 1.3

Total investments 710,561 100.0 340,361 (303,243) 139,256 886,935 100.0

1This includes investments in unquoted companies.2The Company invests its surplus cash in the JPMorgan US Dollar Liquidity Fund. The dollar price per unit of this investment has not changed. Changes in valuation are due to exchangerate movements.Portfolio turnover was 29% (2013: 55%). This is based on the average purchases and sales expressed as a percentage of average opening and closing portfolio values, excluding theliquidity fund transactions and values.

Asset Analysis


Strategic Report continuedList of Investmentsat 31st December 2014

ValuationCompany £’000

Large Companies

These are generally defined as companies which have amarket capitalisation of more than $3 billion.

Apple 50,194Microsoft 36,050Exxon Mobil 23,778Bank of America 20,574Wells Fargo 19,048Time Warner 16,551Gilead Sciences 16,496Citigroup 16,422Chevron 15,589Northrop Grumman 15,090Best Buy 14,653Cisco Systems 14,584Oracle 14,349Hewlett Packard 13,968Pfizer 13,498General Dynamics 13,460Qualcomm 13,312Capital One Financial 13,056CVS 11,478Energizer Holdings 11,379Anthem 11,246Home Depot 11,219CenturyLink 11,218Illinois Tool Works 10,993Yahoo 10,972Hartford Financial Services Group 10,914United Technologies 10,806ConocoPhillips 10,799Broadcom 10,739American International Group 10,352Devon Energy 10,252SanDisk 10,155Medtronic 10,098Ingersoll-Rand 9,845Merck 9,826AT&T 9,734Philip Morris International 9,537


Walgreens Boots Alliance 9,495Discover Financial Services 9,169Morgan Stanley 8,993Delphi Automotive 8,690Bristol-Myers Squibb 8,610Cardinal Health 8,404Parker-Hannifin 8,334Pepsico 8,278Boston Scientific 8,234KLA-Tencor 7,973Coca-Cola Enterprises 7,966Suntrust Banks 7,938Google 7,596AbbVie 7,214Molson Coors Brewing 6,774CareFusion 6,726Time Warner Cable 6,719Southwest Airlines 6,560Viacom ‘B’ 6,322Stryker 6,319Mondelez International 6,315Cigna 6,243Prudential Financial 6,190Kohls 6,181Lorillard 5,832Marathon Petroleum 5,735Expedia 5,529Archer Daniels Midland 5,402CBRE 5,320Garmin 5,159AES 4,990Phillips 4,985UGI 4,875Allison Transmission 4,693Starz 4,590Ingredion 4,538Comcast ‘A’ 4,385McKesson 4,287Becton Dickinson 4,266TripAdvisor 4,078KeyCorp 3,938



United Health 3,851Fifth Third Bancorp 3,680Dow Chemical 3,631Occidental Petroleum 3,552US Bancorp 3,438Caterpillar 3,374Hilton Worldwide Holdings 3,339IBM 3,229United States Steel 2,895Wynn Resorts 2,384Tyson Foods ‘A’ 2,233PTC 1,885

843,570

Small Companies

These are generally defined as companies which, at the date ofinvestment, have a market capitalisation of less than $3 billion.The investments within the Small Companies portfolio are listedseparately as they are managed as a discrete portfolio.

Middleby 705Acuity Brands 661Acadia Healthcare 580Trex Company 537Watsco 492Wolverine World Wide 470Insulet 458Lithia Motors 453Old Dominion Freight Line 450Monolithic Power System 444INPHI 424Guidewire Software 416Financial Engines 413Spirit Airlines 411Novadaq Technologies 410Fluidigm 408Costar 4062U 400Cavium 390Wellcare Health Plans 390Demandware 386


BofI Holding 384Rush Enterprises 376Fortinet 376DealerTrack 374Fortune Brands Home & Security 369HEICO 366Envestnet 362Genmark Diagnostics 352Five Below 350Nimble Storage 344Unilife 343XPO Logistics 339Carlisle Companies 331Vitamin Shoppe 329Veeva Systems 321Tableau Software 318Triquint Semi Conductor 315Proofpoint 311Kate Spade 300Imperva 298Mens Wearhouse 292Eagle Materials 291Signature Bank 288Coupons.Com 282Aruba Networks 276Texas Capital Bancshares 273Receptos 270Cornerstone Ondemand 270Marketo 266Kirby 263Fleetmatics Group 260Surgical Care Affiliates 256Ciena 252K2M Group 249Acadia Pharmaceuticals 246CommVault Systems 245Hexcel 243Penske Automotive 243Freshpet 243Amtrust Financial Services 238Dril Quip 238



Chimerix 233Re/Max Holdings 228Kite Pharma 226Forum Energy Technologies 221Puma Biotechnology 219Vera Bradley 217Masonite International 213Nektar Therapeutics 212Avalanche Biotechnologies 211Exact Sciences 210Syneron Medical 209Pennantpark Investment 209Delek US 202Graco 202Insmed 196FXCM 193Ruckus Wireless 193Acceleron Pharma 186Halozyme Therapeutics 185Ringcentral 184Isis Pharmaceuticals 183Keryx Biopharmaceuticals 182Scientific Games 182Portola Pharmaceuticals 181Tri Pointe Homes 169Sagent Pharmaceuticals 168FEI 167Pool 165Palo Alto Networks 164Highwoods Properties 162Retailmenot 161H&E Equipment Services 159Container Store Group 155Eastgroup Properties 152Intrexon 146Wayfair 145Diamond Foods 141


Laredo Petroleum 132Synageva Biopharma 132Homeaway 132Hubspot 130Coherus Biosciences 129Trulia 127Channeladvisor 127Boyd Gaming 125Infinera 121Nevro 108Versartis 107Arrowhead Research 104Boingo Wireless 91Revance Therapeutics 90Aegerion Pharmaceuticals 82Bellicum Pharmaceuticals 81Ignyta 80Eclipse Resources 58Norcraft 50

30,983

Unquoted Companies

Kane Holdings 1,148

1,148

Liquidity Fund

JPMorgan US Dollar Liquidity Fund 11,234

11,234

Total investments1 886,935

Net current liabilities (2,558)

Total assets less current liabilities 884,377

1Total investments include 0.1% in unquoted companies. Investments are all equitiesexcept for the holding in the JPMorgan US Dollar Liquidity Fund.

Strategic Report continuedList of Investments continued


The aim of the Strategic Report is to provide shareholders withthe ability to assess how the Directors have performed theirduty to promote the success of the Company during the yearunder review. To assist shareholders with this assessment, theStrategic Report sets out the structure and objective of theCompany, its investment policies and risk management,investment limits and restrictions, performance and keyperformance indicators, share capital, principal risks and howthe Company seeks to manage those risks, the Company’senvironmental, social and ethical policy and finally its futuredevelopments.

Structure and Objective of the Company

JPMorganAmerican Investment Trust plc is an investment trustand has a premium listing on the London Stock Exchange. Itsobjective is to provide shareholderswith capital growth fromNorthAmerican investments. In seeking to achieve thisobjective, the Company employs JPMorgan Funds Limited(‘JPMF’ or the ‘Manager’) which, in turn, delegates portfoliomanagement to JPMorganAssetManagement (‘JPMAM’), tomanage the Company’s assets actively. The Board hasdetermined an investment policy and related guidelines andlimits, as described below. It aims to outperform the S&P 500Index, with net dividends reinvested, expressed in sterling terms.

The Company is subject to UK and European legislation andregulations including UK company law, UK Financial ReportingStandards, the UK Listing, Prospectus, Disclosure andTransparency Rules, taxation law and the Company’s ownArticles of Association.

The Company is an investment company within the meaning ofSection 833 of the Companies Act 2006 and has beenapproved by HM Revenue & Customs as an investment trust(for the purposes of Sections 1158 and 1159 of the CorporationTax Act 2010). As a result the Company is not liable for taxationon capital gains. The Directors have no reason to believe thatapproval will not continue to be retained. The Company is not aclose company for taxation purposes.

Investment Policies and Risk Management

In order to achieve its investment objectives and to seek tomanage risk, the Company mainly invests in a diversifiedportfolio of quoted companies including, when appropriate,exposure to smaller capitalisation stocks. The Companycurrently has separate portfolios dedicated to larger

capitalisation and smaller capitalisation companies. Thenumber of investments in the larger capitalisation portfolio willnormally range between 60-100 stocks representing between80-100% of the Company’s equity portfolio. The number ofinvestments in the smaller capitalisation portfolio will normallyrange between 100-120 stocks representing between 0-20%of the Company’s equity portfolio. The Company may investin pooled funds to achieve these aims.

As at the year end, the Company was invested in 90 largercapitalisation stocks and 118 smaller capitalisation stocks,representing 95.4% and 3.5% of the Company’s total assetsrespectively. The balance is represented by cash and oneunquoted stock, Kane Holdings.

Investment Limits and Restrictions (all at time of investment)

• The Company will not normally invest more than 8% of itsgross assets in any one individual stock (31st December2014: 5.7% largest individual stock).

• The Company will normally limit its five largest investmentsto 40% of its gross assets. (31st December 2014: 16.9%).

• The Company will not invest more than 10% of its grossassets in liquidity funds in normal market conditions(31st December 2014: 1.3%).

• The Company will not invest more than 10% of gross assetsin companies that themselves may invest more than 15% ofgross assets in UK listed investment companies(31st December 2014: nil%).

• The Company will not invest more than 15% of its grossassets in other UK listed investment companies(31st December 2014: nil%).

• The Company will use gearing when appropriate toincrease potential returns to shareholders. The Company’sgearing policy is to operate within a range of 5% net cash to20% geared in normal market conditions. The Manager isaccountable for tactically managing the gearing, within a+/–2.0% range around a ‘normal’ gearing level. The normalgearing level, which is set by the Board and kept underreview, is currently 10%.

• The Company only hedges its currency risk in respect of thefull value of the debenture.

Business Review


Strategic Report continuedBusiness Review continued

Compliance with the Board’s investment restrictions andguidelines is monitored by JPMF and is reported to the Boardon a monthly basis.

Performance

In the year ended 31st December 2014, the Companyproduced a total return to shareholders of +22.6% and a totalreturn on net assets of +20.8%. This compares with the returnon the Company’s benchmark in sterling terms, of +20.4%. At31st December 2014, the value of the Company’s investmentportfolio was £887 million. The Investment Manager’s Reporton pages 11 to 15 includes a review of developments duringthe year as well as information on investment activity withinthe Company’s portfolio.

Total Return, Revenue and Dividends

As detailed on page 48, gross total return for the year amountedto £149.6million (2013: £155.4 million) and net total return afterdeducting finance costs, administrative expenses and taxation,amounted to £138.4million (2013: £146.2million). Distributableincome for the year totalled £10.4million (2013: £7.8 million).

As referred to in the Chairman’s Statement on page 7,following approval at the Company’s Annual General Meetingheld on 7th May 2014, the Company’s shares were sub-dividedinto five Ordinary shares for every one share held. Thissub-division took effect on 8th May 2014 and of course hasan impact on the level of dividend per share payable toshareholders.

The Company paid an interim dividend of 1.0p per share on8th October 2014. Given the sub-division of shares detailedabove, this interim dividend was the equivalent distributionto the 5.0p per share paid for the 2013 interim dividend.Directors recommend a final dividend of 2.25p per share,payable on 15th May 2015 to shareholders on the register at theclose of business on 17th April 2015. Given the sub-division, thetotal dividend distribution for 2014 represents an increase of20.4% on last year’s 2.7p distribution. These distributions total£9.1 million (2013: £7.2 million). After payment of the finaldividend the revenue reserve will amount to £11.8 million(2013: £10.6 million).

Key Performance Indicators (‘KPIs’)

The Board uses a number of financial KPIs to monitor andassess the performance of the Company. The principal KPIs are:

• Performance against the benchmark indexThis is an important KPI by which performance is judged.

Please refer to the graphs on page 17 for details of theCompany’s performance relative to its benchmark indexover 10 years.

• Performance against the Company’s peers The principal objective is to achieve capital growth relativeto the benchmark. However, the Board also monitorsperformance relative to a broad range of appropriatecompetitor funds both in the UK and the US.

• Performance attributionThe purpose of performance attribution analysis is toassess how the Company achieved its performance relativeto its benchmark index, i.e. to understand the impact onthe Company’s relative performance of the variouscomponents such as asset allocation, gearing and stockselection. Details of the attribution analysis for the yearended 31st December 2014 are given in the InvestmentManager’s Report on page 12.

• Share price relative to net asset value (‘NAV’) per share withdebt at fair valueThe Board has adopted a share issuance and repurchasepolicy that seeks to address imbalances in supply of anddemand for the Company’s shares in the market andthereby seeks to manage the volatility and absolute level ofthe premium and discount to NAV per share at which theCompany’s shares trade. In the year to 31st December 2014,the shares traded between a premium of 1.9% and adiscount of 1.5% (calculated with debt at fair value andincluding income). Please refer to the Chairman’sStatement on pages 6 and 7 for further information.

• Ongoing chargesThe ongoing charges represent the Company’smanagement fee and all other operating expenses,excluding finance costs and any performance fee payable,expressed as a percentage of the average daily net assetsduring the year. The ongoing charges excluding anyperformance fee for the year ended 31st December 2014is 0.62% (2013: 0.63%). The ongoing charges including anyperformance fee payable is the ratio, expressed inpercentage terms, of the management fee plus all otheroperating expenses plus any performance fee payable, butexcluding finance costs, to the average of the daily net


assets during the year. The ongoing charges includingperformance fee payable for the year ended 31st December2014 is 0.64% (2013: 0.66%).

Share Capital

The Company has authority to both purchase shares forcancellation or holding in Treasury, and issue new shares in themarket for cash at a premium to net asset value.

The Company did not repurchase any shares during the year(2013: nil). Since the year end, the Company has repurchased871,032 shares, into Treasury, representing 0.31% of the sharesoutstanding at the beginning of 2015.

During the year, 1,370,000 new ordinary shares of 25p wereissued to the market at an average price of 1,168.2p per share,for a total net consideration of £16,004,000. After thesub-division of shares, a further 5,965,000 new ordinary sharesof 5p were issued to the market at an average price of 252.2pper share, for a total consideration of £15,044,000.

Since the year end, the Company has issued a further 600,000shares to the market at an average price of 285.0p per share,for a total gross consideration of £1,711,000.

Special Resolutions to renew the authorities to issue andrepurchase shares will be put to shareholders for approval atthe Annual General Meeting.

Principal Risks

With the assistance of JPMF, the Risk Committee has drawn upa risk matrix, which identifies the key risks to the Company.These are reviewed and noted by the Board. These key risks fallbroadly under the following categories:

• Investment and Strategy: An inappropriate investmentstrategy, for example asset allocation or the level ofgearing, may lead to underperformance against theCompany’s benchmark index and peer companies,resulting in the Company’s shares trading on a widerdiscount. The Board manages this risk by insisting ondiversification of investments through its investmentrestrictions and guidelines which are monitored andreported on regularly by the Managers. JPMF providesthe Directors with timely and accurate managementinformation, including performance data and attributionanalyses, revenue estimates, liquidity reports andshareholder analyses. The Board monitors the

implementation and results of the investment process withthe investment manager, who attends the majority of Boardmeetings, and reviews data which shows statisticalmeasures of the Company’s risk profile. The investmentmanager employs the Company’s gearing within a strategicrange set by the Board.

• Market: Market risk arises from uncertainty about thefuture prices of the Company’s investments. This marketrisk comprises three elements – equity market risk,currency risk and interest rate risk. The Board considersasset allocation, stock selection and levels of gearing ona regular basis and has set investment restrictions andguidelines, which are monitored and reported on byJPMF. The Board monitors the implementation and resultsof the investment process with the Manager. However, thefortunes of the portfolio are significantly determined bymarket movements in US equities, the rate of exchangebetween US dollars and sterling and interest ratechanges.

• Operational and Cybercrime: Disruption to, or failure of,the Manager’s accounting, dealing or payments systemsor the custodian’s or depositary’s records could preventaccurate reporting and monitoring of the Company’sfinancial position. On 1st July 2014, the Companyappointed BNY Mellon Trust & Depositary (UK) Limitedto act as its depositary, responsible for overseeing theoperations of the custodian, JPMorgan Chase Bank, N.A.,and the Company’s cash flows. Details of how the Boardmonitors the services provided by the Manager and itsassociates and the key elements designed to provideeffective internal control are included in the InternalControl section of the Corporate Governance report onpages 38 and 39. The threat of cyber attack, in all its guises,is regarded as at least as important as more traditionalphysical threats to business continuity and security. TheCompany benefits directly or indirectly from all elementsof JPMorgan’s Cyber Security programme. The informationtechnology controls around the physical security ofJPMorgan’s data centres, security of its networks andsecurity of its trading applications are tested by Deloitteand reported every six months against the AAF Standard.

• Loss of Investment Team or Investment Manager: Thesudden departure of the investment manager or severalmembers of the wider investment management team could


result in a short term deterioration in investmentperformance. The Manager takes steps to reduce thelikelihood of such an event by ensuring appropriatesuccession planning and the adoption of a team basedapproach. The Board has stressed to JPMF the importanceof retaining the current investment manager.

• Change of Corporate Control of the Manager: The Boardholds regular meetings with senior representatives ofJPMorgan in order to obtain assurance that the Managercontinues to demonstrate a high degree of commitmentto its investment trusts business through the provision ofsignificant resources.

• Share Price Relative to Net Asset Value (‘NAV’) per Share:If the share price of an investment trust is lower than theNAV per share, the shares are said to be trading at adiscount. Throughout the majority of 2014, the Company’sshares traded at a premium. However, the Board monitorsthe Company’s premium/discount level and will seek,where deemed prudent, to address imbalances in thesupply and demand of the Company’s shares through aprogramme of share issuance and buybacks.

• Accounting, Legal and Regulatory: In order to qualify asan investment trust, the Company must comply withSection 1158 of the Corporation Tax Act 2010(‘Section 1158’). Details of the Company’s approval are givenunder ‘Business of the Company’ above. Were the Companyto breach Section 1158, it might lose investment trust statusand, as a consequence, gains within the Company’sportfolio would be subject to Capital Gains Tax. TheSection 1158 qualification criteria are continually monitoredby JPMF and the results reported to the Board each month.The Company must also comply with the provisions of theCompanies Act 2006 and, as its shares are listed on theLondon Stock Exchange, the UKLA Listing Rules andDisclosure & Transparency Rules (‘DTRs’). A breach of theCompanies Act 2006 could result in the Company and/orthe Directors being fined or the subject of criminalproceedings. Breach of the UKLA Listing Rules or DTRscould result in the Company’s shares being suspended fromlisting, which in turn would breach Section 1158. TheDirectors seek to comply with all relevant regulation andlegislation in the UK, Europe and the US and rely on theservices of its Company Secretary, JPMF, and itsprofessional advisers to monitor compliance with allrelevant requirements.

• Financial: The financial risks faced by the Company includemarket price risk, interest rate risk, foreign currency risk,liquidity risk, credit risk, counterparty risk and fraud.Further details are disclosed in note 23 on pages 65 to 71.

• Political and Economic: Changes in financial or taxlegislation, including in the US and the European Union,may adversely effect the Company; current examples arethe AIFM Directive, FATCA and MIFID II. JPMF makesrecommendations to the Board on accounting, dividendand tax policies and the Board seeks external advicewhere appropriate. In addition, the Company is subject topolitical risks, such as the imposition of restrictions on thefree movement of capital.

Please refer to pages 38 and 39 for details of the Company’srisk management and internal controls.

Board Diversity

When recruiting a new Director, the Board’s policy is to appointindividuals on merit. Diversity is important in bringing anappropriate range of skills and experience to the Board. Whencompleting a review of the skills and experience of Directors,the Board feels that they are equipped with the necessaryattributes required for the sound stewardship of the Companyand that their knowledge sets allow for lively and engagingdebates. Full details of the skills and experience of theDirectors can be found on pages 30 and 31. At 31st December2014, there were threemale Directors and two female Directorson the Board. Please refer to page 36 for more information onthe workings of the Nomination and Remuneration Committee.

Employees, Social, Community and Human Rights Issues

The Company has a management contract with JPMF. It hasno employees and all of its Directors are non-executive, theday to day activities being carried out by third parties. Thereare therefore no disclosures to be made in respect ofemployees. The Board notes JPMAM’s policy statements inrespect of Social, Community, Environmental and HumanRights issues, as outlined below, in italics.

Social, Community, Environmental and Human Rights

JPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economicinterests of our clients, we recognise that, increasingly, non-financialissues such as social and environmental factors have the potential toimpact the share price, as well as the reputation of companies.

Strategic Report continuedBusiness Review continued


Specialists within JPMAM’s environmental, social and governance(‘ESG’) team are tasked with assessing how companies deal with andreport on social and environmental risks and issues specific to theirindustry. JPMAM is also a signatory to the United Nations Principles ofResponsible Investment, which commits participants to six principles,with the aim of incorporating ESG criteria into their processes whenmaking stock selection decisions and promoting ESG disclosure. Ourdetailed approach to how we implement the principles is available onrequest.

Greenhouse Gas Emissions

The Company is managed by JPMF. It has no employees and allof its Directors are non-executive, the day to day activitiesbeing carried out by third parties. There are therefore nodisclosures to be made in respect of employees. The Companyitself has no premises, consumes no electricity, gas or dieselfuel and consequently does not have a measurable carbonfootprint. JPMF delegates the management of the portfolio toJPMAM, a signatory to the Carbon Disclosure Project.

Furthermore, JPMorgan Chase is a signatory to the EquatorPrinciples on managing social and environmental risk inproject finance.

Future Developments

The future development of the Company is much dependentupon the success of the Company’s investment strategy in thelight of economic and equity market developments. TheChairman and the Investment Manager discuss the marketoutlook in their reports on pages 10 and 15.

By order of the BoardAlison Vincent for and on behalf ofJPMorgan Funds LimitedSecretary

31st March 2015


GovernanceBoard of Directors

Sarah Bates (Chairman of the Board and Nomination & Remuneration Committee)†

A Director since 2005.

Last reappointed to the Board: 2014.

Remuneration: £37,500.

Chairman of St. James’s Place plc and Witan Pacific Investment Trust plc. A Directorof Development Securities plc, Polar Capital Technology Trust plc andWorldwide Healthcare Trust. She sits on or is advisor to various pension fund andcharitable investment committees including that of the Universities SuperannuationScheme and East Riding Pension Scheme. She was previously a director and chairmanof the Association of Investment Companies.

Shared appointments with other Directors: Universities Superannuation Scheme LimitedInvestment Committee with Dr Kevin Carter.

Shareholding in Company: 25,000.

Kate Bolsover* †




Until June 2005 Director of Corporate Communications at Cazenove & Co. Mrs Bolsoverwas previously Managing Director of Signature Financial Group. She is Chairman ofTomorrow’s People Trust Limited and Fidelity Asian Values plc. She is also a Director ofMontanaro UK Smaller Companies Investment Trust plc.

Shared directorships with other Directors: None.


Simon W Bragg (Chairman of the Audit Committee)* †




Chairman and Chief Executive of Stifel Nicolaus Europe Limited, a UK broker dealer,which acquired Oriel Securities in 2014, a firm Mr Bragg founded. Mr Bragg is also amember of the Financial Conduct Authority’s Listing Authority Advisory Panel togetherwith its Wholesale Markets Practitioner Panel. Having qualified as a CharteredAccountant at KPMG, Mr Bragg previously worked at Hoare Govett, Cargill and HSBC.




Dr Kevin Carter * †


Last reappointed to the Board: n/a.


Currently Chairman and Director of Murray International Trust PLC, a Director of LowlandInvestment Company plc, Chairman of the Investment Committee and a trustee directorof the BBC Pension Scheme. He is also a Director of the Centrica Combined CommonInvestment Fund Limited, a trustee director of Universities Superannuation SchemeLimited and Chairman of its Investment Committee. Dr Carter is a CFA charter holder andhas a doctorate awarded in mathematical statistics with a research subject in financialeconomics.

Shared appointments with other Directors: Universities Superannuation Scheme LimitedInvestment Committee with Mrs Sarah Bates.


Sir Alan S Collins (Chairman of the Risk Committee and Senior Independent Director)* †




Sir Alan has recently retired from a career in the British Diplomatic Service where heheld a number of Ambassador and High Commissioner appointments and was untilAugust 2011 the Consul General New York and the Director General for Trade andInvestment USA. He was also the Managing Director of Olympics Legacy in UnitedKingdom Trade and Investment, having been part of the team that helped London winthe right to host the Olympic and Paralympic Games. He is a non-executive Director ofPrudential Assurance Singapore Ltd, Prudential Hong Kong Ltd, Prudential GeneralInsurance Hong Kong Ltd and ICICI Bank UK plc. He is also an advisor to a number ofother limited companies and a member of the Advisory Council of the LondonPhilharmonic Orchestra.



* Member of the Audit Committee.

† Member of the Risk Committee.

All Directors are considered independent by the Board and are members of the Nomination & Remuneration Committee.

Governance continuedDirectors’ Report


The Directors present their report and the audited financialstatements for the year ended 31st December 2014. A numberof disclosures previously incorporated in the Directors’ Reportare now included in the Strategic Report. These include:Strategy and Objective of the Company; Investment Policiesand Risk Management; Performance; Total Return, Revenueand Dividends; KPIs; Principal Risks; Gender Representation;Employee, Social, Community and Human Rights Issues; andFuture Developments.

Management of the Company

The Manager and Company Secretary is JPMorgan FundsLimited (‘JPMF’), a company authorised and regulated by theFCA. Prior to 1st July 2014, these roles were undertaken byJPMorgan Asset Management (UK) Limited (‘JPMAM’). JPMF isan affiliate of JPMAM and was appointed as the Company’sAlternative Investment Fund Manager (‘AIFM’) from 1st July2014. JPMF is a wholly-owned subsidiary of JPMorgan ChaseBank which, through other subsidiaries, also providesmarketing, banking, dealing and custodian services to theCompany.

The Manager is employed under a contract which can beterminated on six months’ notice, without penalty. If theCompany wishes to terminate the contract on shorter notice,the balance of remuneration is payable by way ofcompensation.

The Board conducts a formal evaluation of the Manager on anannual basis. The evaluation includes consideration of theinvestment strategy and the process of the Manager,performance against the benchmark and a relevant peergroup over the long term and the support the Companyreceives from the Manager. As a result of the evaluationprocess, the Board confirms that it is satisfied that thecontinuing appointment of the Manager is in the interest ofshareholders as a whole.

The Alternative Investment Fund Managers Directive (‘AIFMD’)

JPMF has been appointed as the Company’s alternativeinvestment fund manager (‘AIFM’). JPMF has been approvedas an AIFM by the Financial Conduct Authority (‘FCA’). For thepurposes of the AIFMD the Company is an alternativeinvestment fund (‘AIF’).

The Company entered into a new investment managementagreement with JPMF on 1st July 2014. JPMF has delegated

responsibility for the day to day management of theCompany’s portfolio to JPMAM.

JPMF is required to ensure that a depositary is appointed tothe Company. The Company therefore has appointed BNYMellon Trust and Depositary (UK) Limited (‘BNY’) as itsdepositary. BNY has delegated its safekeeping function to thecustodian, JPMorgan Chase Bank, N.A. BNY remainsresponsible for the oversight of the custody of the Company’sassets and for monitoring its cash flows.

The AIFMD requires certain information to be made availableto investors in AIFs before they invest and requires thatmaterial changes to this information be disclosed in theannual report of each AIF. An Investor Disclosure Document,which sets out information on the Company’s investmentstrategy and policies, leverage, risk, liquidity, administration,management, fees, conflicts of interest and other shareholderinformation is available on the Company’s website atwww.jpmamerican.co.uk There have been no materialchanges (other than those reflected in these financialstatements) to this information requiring disclosure. Anyinformation requiring immediate disclosure pursuant to theAIFMD will be disclosed to the London Stock Exchangethrough a primary information provider.

As an authorised AIFM, JPMF will make the requisitedisclosures on remuneration levels and polices to the FCA atthe appropriate time.

Management and Performance Fees

The basic management fee is calculated and paid quarterly inarrears and is charged at a rate of 0.5% per annum of theCompany’s total assets less current liabilities. Investments infunds on which the Manager or any of its associated companiesearn a management fee are excluded from the calculation andtherefore attract no fee. In addition, a performance fee may bepayable. The Company’s investment in the JPMorgan US DollarLiquidity Fund is not subject to a management fee, andtherefore not excluded from the calculation.

The performance fee is calculated at the rate of 10% of thedifference between the net asset value capital return and thecapital return of the S&P 500 Index, expressed in sterlingterms. The performance fee due in respect of any single year isdivided into equal parts payable over three years.

Any negative fee resulting from underperformance is deductedfrom any unpaid fees brought forward from prior years with


any remaining amount of the negative fee carried forward tobe absorbed in future years.

The performance fee paid in any one year will not exceed0.25% of the fully diluted net asset value at the previous yearend, with any unpaid excess being carried forward until paid infull.

In the year ended 31st December 2014 the Company’s netasset value capital return outperformed the capital returnof the S&P 500 Index, expressed in sterling terms, by1.1 percentage points on the above basis. This results in apositive performance fee calculation of £359,000 which whenadded to the balance brought forward of £284,000 gives apositive balance of £643,000. In the absence of any futureunderperformance which would reduce the amount payableto the Manager, this balance will be paid in the followingperiods:

Performance Performancefee earned fee earned Total

in 2013 in 2014 Payable

Balance at 31st December 2014 £284,000 £359,000 £643,000

Payable in 2015 £142,000 £120,000 £262,000Payable in 2016 £142,000 £120,000 £262,000Payable in 2017 — £119,000 £119,000

Going Concern

The Directors believe, having considered the Company’sinvestment objectives (see page 25), risk management policies(see note 23 on pages 65 to 71), capital management policiesand procedures (see note 24 on page 72), nature of the portfolioand expenditure projections; that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theyconsider there is reasonable evidence to continue to adopt thegoing concern basis in preparing the accounts.

Directors

The Directors of the Company who held office at the end of theyear as detailed on pages 30 and 31. Details of Directors’beneficial shareholdings may be found in the Directors’Remuneration Report on page 41.

In accordance with corporate governance best practice, allDirectors will retire by rotation at the forthcoming AnnualGeneral Meeting and, being eligible, will offer themselves forreappointment. The Nomination and Remuneration Committee,having considered their qualifications, performance andcontribution to the Board and its committees, confirms thateach Director continues to be effective and demonstratescommitment to the role and the Board recommends toshareholders that they be reappointed. For further details onthe experience and skills of each Director please refer topages 30 and 31.

Director Indemnification and Insurance

As permitted by the Articles of Association, the Directors havethe benefit of an indemnity which is a qualifying third partyindemnity, as defined by Section 234 of the Companies Act2006. The indemnities were in place during the year and as atthe date of this report.

During the year an insurance policy has been maintained bythe Company which indemnifies the Directors of the Companyagainst certain liabilities arising in the conduct of their duties.There is no cover against fraudulent or dishonest actions.

Disclosure of information to Auditor

In the case of each of the persons who are Directors of theCompany at the time when this report was approved:

(a) so far as each of the Directors is aware, there is no relevantaudit information (as defined in the Companies Act 2006) ofwhich the Company’s auditor is unaware; and

(b) each of the Directors has taken all the steps that they oughtto have taken as a Director in order to make themselvesaware of any relevant audit information (as defined) and toestablish that the Company’s auditor is aware of thatinformation.

The above confirmation is given and should be interpreted inaccordance with the provision of S418(2) of the Companies Act2006.

Independent Auditors

Deloitte LLP has expressed its willingness to continue in officeas auditor to the Company and a resolution proposing itsreappointment and authorising the Directors to determine itsremuneration for the ensuing year will be put to shareholdersat the Annual General Meeting.


Governance continuedDirectors’ Report continued

Annual General Meeting

NOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOURIMMEDIATE ATTENTION. If you are in any doubt as to the actionyou should take, you should seek your own personal financialadvice from your stockbroker, bank manager, solicitor or otherfinancial adviser authorised under the Financial Services andMarkets Act 2000.

Resolutions relating to the following items of special businesswill be proposed at the forthcoming Annual General Meeting:

(i) Authority to allot new shares and to disapply statutorypre-emption rights (resolutions 11 and 12)

At the Annual General Meeting the Directors will seek authorityto issue up to 28,076,287 new ordinary shares or shares held inTreasury for cash up to an aggregate nominal amount of£1,403,814 (such amount being equivalent to 10% of the issuedshare capital) and disapply pre-emption rights upon suchissues. The full text of the resolutions is set out in the Notice ofMeeting on pages 73 and 74. This authority will expire at theconclusion of the Annual General Meeting of the Company in2016 unless renewed at a prior general meeting.

It is advantageous for the Company to be able to issue newshares to new and existing shareholders when the Directorsconsider that it is in the best interests of shareholders to do so.As such issues are only made at prices greater than the netasset value (the ‘NAV’), they increase the NAV per share andspread the Company’s administrative expenses, other than themanagement fee which is charged on the value of theCompany’s assets, over a greater number of shares. The issueproceeds are available for investment in line with theCompany’s investment policies.

(ii) Authority to repurchase the Company’s shares (Resolution 13)At the Annual General Meeting held on 7th May 2014,shareholders gave authority to the Company to purchase upto 14.99% of its then issued share capital. At that time,shareholders were informed that this authority would expire on31st October 2015 but could be renewed by shareholders at anytime at a general meeting of the Company. The Directorsconsider that the renewal of the authority is in the interests ofshareholders as a whole, as the repurchase of shares at adiscount to the underlying net asset value (‘NAV’) enhances theNAV of the remaining shares and helps to control the discountand its volatility. Resolution 13 gives the Company authority tobuy back its own issued shares in the market as permitted by

the Companies Act 2006 (the ‘Act’). The authority limits thenumber of shares that could be purchased to a maximum of42,086,355 shares representing approximately 14.99% of theCompany’s issued shares as at 30th March 2015 (being thelatest practicable date prior to the publication of thisdocument). The authority also sets minimum and maximumprices.

If resolution 13 is passed at the Annual General Meeting, sharesrepurchased might not be cancelled but rather held as Treasuryshares. The Company does not have authority to re-issue sharesfrom Treasury at a discount to NAV, therefore any reissue ofshares from Treasury would be at a premium to the prevailingNAV.

The full text of the resolution is set out in the Notice of Meetingon pages 73 and 74. Repurchases will be made at the discretionof the Board and will only be made in the market at prices belowthe prevailing NAV per share, thereby enhancing the NAV of theremaining shares as and when market conditions are appropriate.

Recommendation

The Board considers that resolutions 11 to 13 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole. TheDirectors unanimously recommend that you vote in favour ofthe resolutions as they intend to do in respect of their ownbeneficial holdings which amount in aggregate to 74,784shares representing approximately 0.1% of the existing issuedshare capital of the Company.

Corporate Governance StatementCompliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 43, indicates how theCompany has applied the principles of good governance of theUK Corporate Governance Code and the AIC’s Code ofCorporate Governance (the ‘AIC Code’), which complements theUK Corporate Governance Code and provides a framework ofbest practice for investment trusts.1

The Board is responsible for ensuring the appropriate level ofcorporate governance and considers that the Company hascomplied with the best practice provisions of the UK Corporate

1Copies of the UK Corporate Governance Code and the AIC Code may be found on the respective organisations’ websites: www.frc.org.uk and www.theaic.co.uk


Governance Code, insofar as they are relevant to the Company’sbusiness, and the AIC Code throughout the year under review.

Role of the Board

A management agreement between the Company and JPMFsets out the matters over which the Manager has delegatedauthority. This includes management of the Company’s assetswithin the guidelines established by the Board from time totime and the provision of accounting, company secretarial,administration and some marketing services. All other mattersare reserved for the approval of the Board. A formal scheduleof matters reserved to the Board for decision has beenapproved. This includes determination and monitoring of theCompany’s investment objectives and policy and its futurestrategic direction, gearing policy, management of the capitalstructure, appointment and removal of third party serviceproviders, review of key investment and financial data and theCompany’s corporate governance and risk controlarrangements.

The Board meets at least five times during the year andadditional meetings are arranged as necessary. Full and timelyinformation is provided to the Board to enable it to functioneffectively and to allow Directors to discharge theirresponsibilities. Further information on meetings andcommittees can be found on page 36.

The Board has procedures in place to deal with potentialconflicts of interest and, following the introduction of theBribery Act 2010, has adopted appropriate proceduresdesigned to prevent bribery. It confirms that the procedureshave operated effectively during the year under review.

There is an agreed procedure for Directors to take independentprofessional advice in the furtherance of their duties and at theCompany’s expense. This is in addition to the access that everyDirector has to the advice and services of the CompanySecretary, JPMF, which is responsible to the Board for ensuringadherence to Board procedures and compliance withapplicable rules and regulations.

Board Composition

The Board consists of five non-executive Directors, chaired bySarah Bates, all of whom are considered to be independentof the Company’s Manager. The Directors have a breadth ofinvestment knowledge, business and financial skills and

experience relevant to the Company’s business and briefbiographical details of each Director are set out on pages 30and 31.

A review of Board composition and balance is included as partof the annual performance evaluation of the Board, details ofwhich may be found below. Sir Alan Collins, the SeniorIndependent Director, leads the evaluation of the performanceof the Chairman and is available to shareholders if they haveconcerns that cannot be resolved through discussion with theChairman.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be reappointed byshareholders. Subject to the performance evaluation carriedout each year, the Board will agree whether it is appropriate forDirectors to seek annual reappointment in accordance withcorporate governance best practice. The Board does notbelieve that length of service in itself necessarily disqualifiesa Director from seeking reappointment but, when making arecommendation, the Board will take into account the ongoingrequirements of the UK Corporate Governance Code, includingthe need to refresh the Board and its Committees.

A list of potential conflicts of interest for each Director ismaintained by the Company. These are considered carefully,taking into account the circumstances surrounding them, and,if considered appropriate, are approved.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment, copies of which areavailable for inspection on request at the Company’s registeredoffice and at the Annual General Meeting.

Induction and Training

On appointment, the Manager and Company Secretary provideall Directors with induction training. Thereafter, regularbriefings are provided on changes in law and regulatoryrequirements that affect the Company and Directors. Directorsare encouraged to attend industry and other seminars coveringissues and developments relevant to investment trusts. Regularreviews of the Directors’ training needs are carried out by theBoard by means of the evaluation process described below.



Meetings and Committees

The Board delegates certain responsibilities and functions tocommittees. Details of membership of committees are shownwith the Directors’ profiles on pages 30 and 31.

The table below details the number of formal Board andCommittee meetings attended by each Director. During theyear there were five Board meetings, including a privatemeeting of the Directors to evaluate the Manager. In addition,two Audit Committee meetings, a Risk Committee meeting andthree Nomination & Remuneration Committee meetings wereheld.

Nomination &Audit Risk Remuneration

Board Committee Committee CommitteeMeetings Meetings Meetings Meetings

Director Attended Attended Attended Attended

Sarah Bates 5 21 1 3Kate Bolsover 5 2 1 3Simon Bragg 5 2 1 3Dr Kevin Carter2 1 — 1 —Sir Alan Collins 5 2 1 3James Williams3 5 2 1 3

1Attended by invitation of the Committee.2Appointed 1st July 2014.3Retired on 18th November 2014.

As well as the formal meetings detailed above, the Boardcommunicates frequently by email or telephone to deal withday to day matters as they arise. Directors also meet face toface outside scheduled formal meetings. In 2014 Directors meton a number of occasions in relation to share issuanceprocedure, broker arrangements, AIFMD compliance andgearing and borrowing arrangements. Importantly, Directorsalso visited the fund management team in New York and spenttime with a number of longer term strategists as well as withsenior management and the dealing desk in JPMAM’s offices.

Board Committees

Nomination & Remuneration Committee The Nomination & Remuneration Committee, chaired by SarahBates, consists of all of the Directors and meets at leastannually to ensure that the Board has an appropriate balanceof skills and experience to carry out its fiduciary duties and toselect and propose suitable candidates for appointment when

necessary. A variety of sources, including external searchconsultants, may be used to ensure that a wide range ofcandidates is considered. In relation to the appointment ofDr Kevin Carter, the Board engaged a recruitment consultant.Open advertising was not used as part of the process as the useof a recruitment consultant was deemed sufficient.

The Board’s policy on diversity, including gender, is to takeaccount of the benefits of these during the appointmentprocess. However, the Board remains committed to appointingthe most appropriate candidate, regardless of gender or otherforms of diversity. Therefore, no targets have been set againstwhich to report.

This year, the Directors commissioned Lintstock, a firm ofindependent consultants, to externally facilitate the evaluationof the Board. The process has involved the completion ofquestionnaires by the Board followed by interviews conductedby Lintstock with each Director. The resulting written report isdiscussed by Directors under the remit of the Nomination &Remuneration Committee. The evaluation of individualDirectors is led by the Chairman and the Chairman is evaluatedby the Senior Independent Director.

The Committee also reviews Directors’ fees and makesrecommendations to the Board as and when required.

Audit Committee The Audit Committee, chaired by Simon Bragg, consists of allthe Directors, except the Chairman of the Board, and meets atleast twice each year. The Chairman of the Board attends byinvitation of the Committee. The members of the AuditCommittee consider that they have recent and relevantfinancial expertise and the requisite skills and experience tofulfil the responsibilities of the Committee.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the UK Corporate GovernanceCode. At the request of the Board, the Audit Committeeprovides confirmation to the Board as to how it has dischargedits responsibilities so that the Board may ensure thatinformation presented to it is fair, balanced andunderstandable, together with details of how it has done so.

During its review of the Company’s financial statements for theyear ended 31st December 2014, the Audit Committeeconsidered the following significant issues, in particular thosecommunicated by the Auditors during their reporting:


Significant issue How the issue was addressed

Valuation, existence The valuation of investments is undertaken inand ownership of accordance with the accounting policies, disclosed in investments note 1 to the accounts on page 52.

Valuation of The Company uses derivative instruments to hedge Derivative instruments the currency risk arising from the USD investment

portfolio and the GBP debenture. The Company entersinto short-term currency contracts with a range ofcounterparties. The Company’s policy is to fair value the derivatives is recorded in the balance sheet and the audit includes a independent valuation of thederivatives contracts from a third party pricing source.

Calculation of The management and performance fees are calculated management and in accordance with the Investment Management performance fees Agreement.

Recognition of The recognition of investment income is undertaken in investment income accordance with accounting policy note 1(d) to the

accounts on page 52.

Compliance with Approval for the Company as an investment trust Sections 1158 and 1159 under Sections 1158 and 1159 for financial years

commencing on or after 1st October 2012 has beenobtained and ongoing compliance with the eligibilitycriteria is monitored on a regular basis.

The Board is required to be made fully aware of any significantfinancial reporting issues and judgements made in connectionwith the preparation of the financial statements.

As a result of the work performed, the Committee hasconcluded that the Annual Report for the year ended31st December 2014, taken as a whole, is fair, balanced andunderstandable and provides the information necessary forshareholders to assess the Company’s performance, businessmodel and strategy, and has reported on these findings to theBoard. The Board’s conclusions in this respect are set out inthe Statement of Directors’ Responsibilities on page 43.

The Audit Committee also examines the effectiveness of theCompany’s internal control systems, receives information fromthe Manager’s compliance department and also reviews thescope and results of the external audit, its cost effectivenessand the independence and objectivity of the external auditors.In the Directors’ opinion the Auditors are independent.

The Audit Committee also has a primary responsibility formaking recommendations to the Board on the reappointmentand removal of external auditors. Representatives of the

Company’s Auditors attended the Audit Committee meeting atwhich the draft Annual Report & Accounts were consideredand also engage with Directors as and when required. Havingreviewed the performance of the external auditors, includingassessing the quality of work, timing of communications and workwith the Manager, the Committee considered it appropriate torecommend their reappointment. The Board supported thisrecommendation which will be put to shareholders at theforthcoming Annual General Meeting. The current tenure of theexternal auditor dates from 10th August 2006. The Company’syear ended 31st December 2014 is the current audit partnersfifth of a five year maximum term and accordingly a new auditpartner will oversee the Company’s 2015 year end audit. Anydecision to open the external audit to tender is taken on therecommendation of the Audit Committee.

Risk CommitteeIn the course of 2014, the Board established a Risk Committee.The Risk Committee, chaired by Sir Alan Collins, consists of allthe Directors and meets at least twice each year. Only onemeeting was held in 2014 given the timing of the Committee’sestablishment.

The Committee discusses the Company’s overall risk appetite,tolerance and strategy, taking into account the current andprospective macroeconomic and financial environment. Itfurther reviews the Company’s key risks and identifies andmanages any new risks that arise during the year. Finally, theCommittee reviews compliance with the Company’s investmentrestrictions and guidelines.

Terms of Reference

The Nomination & Remuneration Committee, Audit Committeeand Risk Committee have written terms of reference whichdefine clearly their respective responsibilities, copies of whichare available on the Company’s website and for inspection onrequest at the Company’s registered office and at the AnnualGeneral Meeting.

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performanceand reports formally to shareholders twice a year by way of theAnnual Report and Accounts and the Half Year Report. This issupplemented by the daily publication, through the LondonStock Exchange, of the net asset value of the Company’s shares.



All shareholders have the opportunity, and are encouraged, toattend the Company’s Annual General Meeting at which theDirectors and representatives of the Manager are available inperson to meet with shareholders and answer questions. Inaddition, a presentation is given by the investment managerwho reviews the Company’s performance. During the year theinvestment management team, JPMF and the Company’sbrokers hold regular discussions with larger shareholders. TheDirectors are made aware of their views. The Chairman andDirectors make themselves available as and when required toaddress shareholder queries. The Directors may be contactedthrough the Company Secretary whose details are shown onpage 81.

The Company’s Annual Report and Accounts is published intime to give shareholders at least 20 working days’ notice ofthe Annual General Meeting. Shareholders wishing to raisequestions in advance of the meeting are encouraged to submitquestions via the Company’s website or write to the CompanySecretary at the address shown on page 81.

Details of the proxy voting position on each resolution will bepublished on the Company website shortly after the AnnualGeneral Meeting.

Section 992 Companies Act 2006

The following disclosures are made in accordance withSection 992 Companies Act 2006:

Capital StructureThe Company’s capital structure is summarised on the insidecover of this report.

Voting Rights in the Company’s sharesDetails of the voting rights in the Company’s shares as at thedate of this report are given in note 16 to the Notice of AnnualGeneral Meeting on page 75.

Environmental Matters, Social and Community IssuesInformation on environmental matters, social and communityissues is set out on page 28. The Company has no employees.

Notifiable Interests in the Company’s Voting RightsAt the date of this report, the following had declared anotifiable interest in the Company’s voting rights:

Number of Shareholders voting rights %

Brewin Dolphin Limited 44,991,672 16.0Investec Wealth & Investment Limited 27,828,981 9.9Quilter Cheviot Limited 14,003,486 5.0

The Company is also aware that approximately 4.0% of theCompany’s total voting rights are held by individuals throughsavings products managed by JPMAM, registered in the nameof Chase Nominees Limited. If those voting rights are notexercised by the beneficial holders, in accordance with theterms and conditions of the savings products, under certaincircumstances the Manager has the right to exercise thosevoting rights. That right is subject to certain limits andrestrictions and falls away at the conclusion of the relevantgeneral meeting.

Risk Management and Internal Control

The UK Corporate Governance Code requires the Directors, atleast annually, to review the effectiveness of the Company’ssystem of risk management and internal control and to reportto shareholders that they have done so. This encompasses areview of all controls, which the Board has identified to includebusiness, financial, operational, compliance and riskmanagement.

The Directors are responsible for the Company’s system of riskmanagement and internal control which is designed tosafeguard the Company’s assets, maintain proper accountingrecords and ensure that financial information used within thebusiness, or published, is reliable. However, such a system canonly be designed to manage rather than eliminate the risk offailure to achieve business objectives and therefore can onlyprovide reasonable, but not absolute, assurance against fraud,material misstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company byJPMorgan and its associates, the Company’s system of riskmanagement and internal control mainly comprisesmonitoring the services provided by JPMorgan and itsassociates, including the operating controls established bythem, to ensure they meet the Company’s business objectives.There is an ongoing process for identifying, evaluating andmanaging the significant risks faced by the Company (seePrincipal Risks on pages 27 and 28). The Company does nothave an internal audit function of its own, but relies on theinternal audit department of JPMF which reports any materialfailings or weaknesses. This arrangement is kept under annualreview. The key elements designed to provide effective internalcontrol are as follows:

Financial Reporting – Regular and comprehensive review bythe Board of key investment and financial data, includingmanagement accounts, revenue projections, analysis oftransactions and performance comparisons.


Management Agreement – Evaluation and appointment of amanager and custodian regulated by the Financial ConductAuthority (‘FCA’), whose responsibilities are clearly defined ina written agreement.

Management Systems – The Manager’s system of riskmanagement and internal control includes organisationalagreements which clearly define the lines of responsibility,delegated authority, control procedures and systems. Theseare monitored by JPMorgan’s Compliance department whichregularly monitors compliance with FCA rules and reports tothe Board.

Investment Strategy – Authorisation and monitoring of theCompany’s investment strategy and exposure limits by theBoard.

The Board keeps under review the effectiveness of theCompany’s system of risk management and internal control bymonitoring the operation of the key operating controls of theManager and its associates as follows:

• the Board, through the Audit Committee, reviews the termsof the management agreement and receives regularreports from JPMorgan’s Compliance department;

• the Board reviews a report, which is also independentlyreviewed, on the internal controls and the operations ofits custodian, JPMorgan Chase Bank; and

• the Directors review every six months an independentreport on the internal controls and the operations of JPMF’sinvestment trust department.

By means of the procedures set out above, the Board confirmsthat it has reviewed the effectiveness of the Company’s systemof risk management and internal control for the year ended31st December 2014, and to the date of approval of this AnnualReport and Accounts.

During the course of its review of the system of risk managementand internal control, the Board has not identified nor beenadvised of any failings or weaknesses which it has determined tobe significant. Therefore a confirmation in respect of necessaryactions has not been considered appropriate.

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to JPMAM.The following information in italics is a summary of JPMAM’s

policy statements on corporate governance, voting policy andsocial and environmental issues, which has been reviewed andnoted by the Board. Details on social and environmental issuesare included in the Strategic Report on pages 28 and 29.

Corporate Governance JPMAM believes that corporate governance is integral to its investmentprocess. As part of its commitment to delivering superior investmentperformance to clients, it expects and encourages the companies inwhich it invests to demonstrate the highest standards of corporategovernance and best business practice. JPMAM examines the sharestructure and voting structure of the companies in which it invests, aswell as the board balance, oversight functions and remuneration policy.These analyses then form the basis of JPMAM’s proxy voting andengagement activity.

Proxy Voting JPMAM manages the voting rights of the shares entrusted to it as it wouldmanage any other asset. It is the policy of JPMAM to vote in a prudent anddiligent manner, based exclusively on reasonable judgement of what willbest serve the financial interests of clients. So far as is practicable, JPMAMwill vote at all of the meetings called by companies in which it is invested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clients asamajor asset owner.

JPMAM is a signatory to the Principles for Responsible Investment, aninitiative of the UN Secretary-General and supports the principles of bestpractice elsewhere. We believe that regular contact with the companies inwhich we invest is central to our investment process and we alsorecognise the importance of being an ‘active’ owner on behalf of ourclients.

JPMAM’s Voting Policy and Corporate GovernanceGuidelines are available on request from the CompanySecretary or can be downloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/governance.

By order of the Board Alison Vincent, for and on behalf of JPMorgan Funds Limited, Secretary

31st March 2015


Governance continuedDirectors’ Remuneration Report

Introduction

The Board presents the Directors’ Remuneration Report forthe year ended 31st December 2014 which has been preparedin accordance with the requirements of Section 421 of theCompanies Act 2006.

The law requires the Company’s Auditor to audit certain of thedisclosures provided. Where disclosures have been auditedthey are indicated as such. The Auditor’s opinion is included intheir report on pages 44 to 47.

Directors’ Remuneration Policy

The Directors’ Remuneration Policy is subject to a triennialbinding vote. However, the Board has resolved that for goodgovernance purposes, the policy vote will be put toshareholders every year. Accordingly a resolution to approvethe policy will be put to shareholders at the 2015 AnnualGeneral Meeting. The policy, subject to the vote, is set out infull below and is currently in force.

The Board’s policy for this and subsequent years is thatDirectors’ fees should properly reflect the time spent by theDirectors on the Company’s business and should be at a levelto ensure that candidates of a high calibre are recruited to theBoard. The Chairman of the Board and the Chairman of theAudit Committee are paid higher fees than other Directors,reflecting the greater time commitment involved in fulfillingthose roles.

The Nomination and Remuneration Committee, comprising allDirectors, reviews fees on a regular basis and makesrecommendations to the Board as and when appropriate.Reviews are based on information provided by the Manager,and includes research carried out by third parties on the levelof fees paid to the directors of the Company’s peers and withinthe investment trust industry generally. The involvement ofremuneration consultants has not been deemed necessary aspart of this review.

All of the Directors are non-executive. There are noperformance-related elements to their fees and the Companydoes not operate any type of incentive, share scheme, award orpension scheme and therefore no Directors receive bonuspayments or pension contributions from the Company or holdoptions to acquire shares in the Company. Directors are notgranted exit payments and are not provided withcompensation for loss of office. No other payments are madeto Directors, other than the reimbursement of reasonableout-of-pocket expenses.

In the year under review, Directors’ fees were paid at thefollowing rates: Chairman £37,500; Chairman of the AuditCommittee £30,000; and other Directors £25,000.

With effect from 1st January 2015, fees have been increased to£43,000 for the Chairman, £34, 000 for the Audit CommitteeChairman and £28,500 for other Directors. In 2014, a new RiskCommittee was established and it was agreed that the fee forthe Chairman of this Committee would be set at £2,000. Therole of a Senior Independent Director was further establishedin March 2015, the fee for this role is also set at £2,000. Sir AlanCollins holds both these new appointments and accordinglyfrom March 2015 he will be paid a fee of £32,500 per annum.

The Company’s Articles of Association stipulate that aggregatefees must not exceed £225,000 per annum. Any increase in thisthe maximum aggregate amount requires both Board andshareholder approval.

The Company has no Chief Executive Officer and no employeesand therefore there was no consultation of employees, andthere is no employee comparative data to provide, in relationto the setting of the remuneration policy for Directors.

The Company has not sought shareholder views on itsremuneration policy. The Nomination Committee considers anycomments received from shareholders on remuneration policyon an ongoing basis and will take account of these views ifappropriate.

The Directors do not have service contracts with the Company.The terms and conditions of Directors’ appointments are setout in formal letters of appointment which are available forreview at the Company’s Annual General Meeting and theCompany’s registered office. Details of the Board’s policy ontenure are set out on page 35.

Remuneration Report

The Directors’ Remuneration Report is subject to an annualadvisory vote and therefore an ordinary resolution to approvethis report will be put to shareholders at the forthcomingAnnual General Meeting. There have been no changes to thepolicy compared with the year ended 31st December 2013 andno changes are proposed for the year ending 31st December2014.

At the Annual General Meeting held on 7th May 2014, of votescast, 99.7% of votes cast were in favour of (or granteddiscretion to the Chairman who voted in favour of) theremuneration report and 0.3% voted against.

Details of the implementation of the Company’s remunerationpolicy are given below. No advice from remunerationconsultants was received during the year under review.


Single total figure of remuneration

The single total figure of remuneration for the Board as a wholefor the year ended 31st December 2014 was £151,987. The singletotal figure of remuneration for each Director is detailed belowtogether with the prior year comparative.

There are no performance targets in place for the Directors ofthe Company and there are no benefits for any of the Directorswhich will vest in the future. There are no benefits, pension,bonus, long term incentive plans, exit payments orarrangements in place on which to report.

Single total figure table1

Total amount of salary and fees

2014 2013

Sarah Bates £37,500 £37,500Kate Bolsover £25,000 £25,000Simon Bragg £30,000 £28,333Dr Kevin Carter2 £12,500 —Sir Alan Collins £25,000 £25,000James Fox3 — £10,000James Williams4 £21,987 £25,000

Total £151,987 £150,833

1Audited information. 2Appointed to the Board on 1st July 2014.3Retired from the Board on 4th May 2013.4Retired from the Board on 18th November 2014.

Expenditure by the Company on remuneration and distributions toshareholders1

Year ended 31st December

2014 2013

Remuneration paid to all Directors £151,987 £150,833Distributions to shareholders— by way of dividend £8,412,000 £7,157,000

Percentage of remuneration paid to Directors of Shareholders’ funds 0.02% 0.02%

1Management and performance fees paid to JPMF in 2014 were £4,076,000 (2013:£3,483,000), or 0.51% (2013: 0.54%) of Shareholders’ funds. Please refer to pages 32and 33 for more details.

A table showing the total remuneration for the Chairman overthe five years ended 31st December 2014 is below:

Remuneration for the Chairman over the five years ended31st December 20141

Year ended31st December Fees

2014 £37,5002013 £37,5002012 £37,5002011 £37,5002010 £30,000

1Rate applicable to the role – Hamish Buchan retired on 4th May 2012 and was replacedby Sarah Bates.

Directors’ Shareholdings1

There are no requirements pursuant to the Company’s Articlesof Association for the Directors to own shares in the Company.The Directors’ beneficial shareholdings are detailed below. TheDirectors have no other share interests or share options in theCompany and no share schemes are available.

31st December 1st January20142 2014

Sarah Bates 25,000 5,000Kate Bolsover 11,397 2,183Simon Bragg 19,866 2,763Dr Kevin Carter 12,000 —Sir Alan Collins 5,493 1,077

1Audited information.2Directors’ shareholdings have been adjusted following the five for one sub-division ofthe Company’s share capital on 8th May 2014.

All of the holdings of the Directors are beneficial. Since the yearend, Simon Bragg’s beneficial holding has increased by 1,028ordinary shares.

The Directors have no other share interest or share options inthe Company and no share schemes are available.


Governance continuedDirectors’ Remuneration Report continued

A graph showing the Company’s share price total returncompared with its benchmark index, the S&P 500 Indexexpressed in sterling total returns terms, over the last six yearsis shown below:

Six Year Ordinary Share Price andBenchmark Total Returns to 31st December2014


Share price total return.

Benchmark total return.

By order of the Board Sarah BatesChairman

31st March 2015

100

125

150

175

200

225

250

275

2014201320122011201020092008


The Directors are responsible for preparing the annual reportand financial statements, and the Directors’ RemunerationReport in accordance with applicable law and regulations.

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, the Directorshave prepared the financial statements in accordance withUnited Kingdom Generally Accepted Accounting Practice(United Kingdom Accounting Standards and applicable law).Under company law the Directors must not approve thefinancial statements unless they are satisfied that, taken as awhole, the annual report and accounts provide the informationnecessary for shareholders to assess the Company’sperformance, business model and strategy and that they give atrue and fair view of the state of affairs of the Company and ofthe total return or loss of the Company for that period. In orderto provide these confirmations, and in preparing these financialstatements, the Directors must be satisfied that, taken as awhole, the annual report and accounts are fair, balanced andunderstandable and provide the information necessary forshareholders to assess the performance, business model andstrategy of the Company; and the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and accounting estimates that arereasonable and prudent;

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

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business

and the Directors confirm they have done so. The Boardconfirms it is satisfied that the annual report and accountstaken as a whole are fair, balanced and understandable andprovide the information necessary for shareholders to assessthe performance, business model and strategy of theCompany.

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain the Company’s

transactions and disclose with reasonable accuracy at any timethe financial position of the Company and enable them toensure that the financial statements comply with theCompanies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for takingreasonable steps for the prevention and detection of fraud andother irregularities.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Strategic Report, a Directors’Report, Directors’ Remuneration Report and Statement ofCorporate Governance that comply with that law and thoseregulations.

The accounts are published on the www.jpmamerican.co.ukwebsite, which is maintained by the Company’s Manager. Themaintenance and integrity of the website maintained by JPMFis, so far as it relates to the Company, the responsibility ofJPMF. The work carried out by the Auditors does not involveconsideration of the maintenance and integrity of thiswebsite and, accordingly, the Auditors accept noresponsibility for any changes that have occurred to thefinancial statements since they were initially presented onthe website. The financial statements are prepared inaccordance with UK legislation, which may differ fromlegislation in other jurisdictions.

The Directors, whose names and functions are listed in theDirectors’ Report, each confirm that, to the best of theirknowledge the financial statements, which have been preparedin accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards)and applicable law, give a fair, balanced and understandableview of the assets, liabilities, financial position and return orloss of the Company.

For and on behalf of the Board Sarah BatesChairman

31st March 2015

Statement of Directors’ Responsibilities


Independent Auditor’s Report

Opinion on financial statements of JPMorgan American Investment Trust plc

In our opinion:

• the financial statements give a true and fair view of the state of the Company’s affairs as at 31st December 2014 and of theCompany’s profit for the year then ended;

• the Company’s financial statements have been properly prepared in accordance with United Kingdom Generally AcceptedAccounting Practice; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

The financial statements comprise the Income Statement, Reconciliation of Movements in Shareholders’ Funds, the BalanceSheet, the Cash Flow Statement and the related notes 1 to 24. The financial reporting framework that has been applied in theirpreparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted AccountingPractice).

Going concern

As required by the Listing Rules we have reviewed the Directors’ statement contained within the Directors’ report on page 33 thatthe Company is a going concern. We confirm that:

• we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financialstatements is appropriate; and

• we have not identified any material uncertainties that may cast significant doubt on the Company’s ability to continue as agoing concern.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company’sability to continue as a going concern.

Our assessment of risks of material misstatement

The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, theallocation of resources in the audit and directing the efforts of the engagement team.

How the scope of our audit Risk responded to the risk

We reviewed and assessed the Global Custody SOC1 controls report of theCustodian, JPMorgan Chase Bank over the valuation of investments and testedthe design and implementation of the controls in place.

We agreed 100% of the bid prices of quoted investments on the investmentledger at year end to closing bid prices published by an independent pricingsource.

To test the liquidity of investments as at 31st December 2014, we obtained thetrading activity and volume of shares traded around the period end, bysampling across the portfolio held at the period end, focussing on the smallcap holdings, and to identify any investments which were not frequentlytraded and considered indicators of impairment by monitoring the price of anypost period-end sales.

We challenged the Manager and Directors regarding their assessment of theportfolio pricing and liquidity.

We reviewed the completeness and appropriateness of disclosures in relationto fair value measurements and liquidity risk.

Valuation of investmentsThe investments of the Company (£875.7m) make up110% of total net assets (£803.6m).

There is a risk that investments within the portfoliomay not be actively traded and the prices quoted maynot be reflective of fair value.


How the scope of our audit Risk responded to the risk

We reviewed and assessed the Global Custody SOC1 controls report of theCustodian, JPMorgan Chase Bank to understand the controls in place over theownership of investments and tested the design and implementation of thecontrols in place.

We agreed 100% of the Company’s investment portfolio at the year end to theconfirmation received directly from the independent custodian.

We engaged our financial instruments specialists to review the accountingtreatments and approach to derivatives in the Company and review thevaluation work performed.

We obtained independent valuation of derivative contracts held by theCompany at 31st December 2014 from an independent third party pricingsource.

We obtained independent confirmations of open forward currency contractsat 31st December 2014 from the derivative counterparty.

We compared the treatment adopted in the financial statements with therequirements of the SORP.

We tested the design and implementation of controls in place to calculate theperformance fee.

We reperformed the calculation of performance fee using inputs provided bymanagement and the basis per the terms of the signed investmentmanagement agreement.

We reviewed the payment schedule and traced the payments through thebank to determine whether the allocation of the fee was in line with thedisclosed policy.

We tested the design and implementation of the controls over revenuerecognition, completeness and allocation. We also reviewed and assessed theJPMorgan Asset Management AAF 01/06 report on internal controls.

For a sample of corporate actions and special dividends received, wechallenged management’s rationale for the allocation between revenue andcapital against the requirements of the SORP and agreed details of thedividend to a third party source to evidence the nature of the dividend.

We developed an expectation of the dividends received for the year usingmarket yield to assess the reasonableness of the dividends recorded.

To test the completeness of revenue, for a sample of investments held in theyear, we agreed the ex-dividend dates and rates for dividends declared,obtained from an independent pricing source to the dividend entitlementreport.

Last year our report included one other risk which is not included in our report this year: Failure to comply with the provisions ofSections 1158/1159 of the Corporation Tax Act 2010. This risk is not considered to have had the greatest effect on our auditstrategy, the allocation of resources in the audit and directing the efforts of the engagement team.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committeediscussed on page 37.

Ownership of investments The investments of the Company (£875.7m) make up110% of total net assets (£803.6m).

There is a risk that investments within the portfoliomay not represent the property of the Company.

Valuation of Derivative instruments Derivative instruments used to hedge the currency riskarising from the USD investment portfolio and the GBPdebenture may not be recorded at values equivalent tofair value as this is a complex accounting area.

The Company enters into short-term currencycontracts with a range of counterparties. TheCompany’s policy is to fair value derivatives in thebalance sheet. Changes in the contracts arerecognised in profit or loss as they arise.

Calculation of performance fees Performance fees or the performance provision arecalculated based on the difference in the returnbetween the Company and its benchmark, the S&P500 index over 10%. As this is a complex calculation,there is a risk the performance fee may be calculatedincorrectly

Recognition of investment income Dividends from equity shares (£15.2m) are accountedfor on an ex-dividend basis.

Dividends are accounted for as revenue, except where;in the opinion of management and the board, thedividend is capital in nature, in which case it is treatedas a return of capital.

There is a risk that revenue is incomplete or that it isincorrectly allocated between revenue and capitalaccounts.


Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole,and not to express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified withrespect to any of the risks described above, and we do not express an opinion on these individual matters.

Our application of materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economicdecisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scopeof our audit work and in evaluating the results of our work.

We determined materiality for the Company as being approximately 1% of Net Assets, which is £8,057,500.

This is a change of approach from 2013, where materiality of £19,300,000 was based on 3% of Net Assets. We have changed thepercentage applied to align more closely with comparable companies.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £50,000 (2013:£50,000), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also reportto the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financialstatements.

An overview of the scope of our audit

There were no changes to the scope of our audit since the prior year. Our audit was scoped by obtaining an understanding of theentity and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond tothe risks of material misstatement was performed directly by the audit engagement team.

As part of our audit we assessed the controls in place at the administrator who prepares the financial statement of the Companyby reviewing a controls report over their activities.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the CompaniesAct 2006; and

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statementsare prepared is consistent with the financial statements.

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been receivedfrom branches not visited by us; or

• the Company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remunerationhave not been made or the part of the Directors’ Remuneration Report to be audited is not in agreement with the accountingrecords and returns. We have nothing to report arising from these matters.

Independent Auditor’s Reportcontinued


Corporate Governance Statement

Under the Listing Rules we are also required to review the part of the Corporate Governance Statement relating to the Company’scompliance with ten provisions of the UK Corporate Governance Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report

Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in theannual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in thecourse of performing our audit; or

• otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired duringthe audit and the Directors’ statement that they consider the annual report is fair, balanced and understandable and whether theannual report appropriately discloses those matters that we communicated to the audit committee which we consider shouldhave been disclosed. We confirm that we have not identified any such inconsistencies or misleading statements.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of thefinancial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinionon the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Thosestandards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. We also comply withInternational Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our qualitycontrol procedures are effective, understood and applied. Our quality controls and systems include our dedicated professionalstandards review team and independent partner reviews.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required tostate to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or forthe opinions we have formed.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonableassurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes anassessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistentlyapplied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overallpresentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report toidentify material inconsistencies with the audited financial statements and to identify any information that is apparently materiallyincorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If webecome aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Stuart McLaren (Senior Statutory Auditor)for and on behalf of Deloitte LLPChartered Accountants and Statutory Auditor,London, United Kingdom

31st March 2015


2014 2013Revenue Capital Total Revenue Capital Total

Notes £’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss 2 — 139,248 139,248 — 140,791 140,791

Net foreign currency (losses)/gains1 — (4,884) (4,884) — 3,346 3,346Income from investments 3 15,228 — 15,228 11,241 — 11,241Interest receivable and similar income 3 — — — 27 — 27

Gross return 15,228 134,364 149,592 11,268 144,137 155,405Management fee 4 (743) (2,974) (3,717) (611) (2,446) (3,057)Performance fee 4 — (359) (359) — (426) (426)Other administrative expenses 5 (647) — (647) (558) — (558)

Net return on ordinary activities before finance costs and taxation 13,838 131,031 144,869 10,099 141,265 151,364

Finance costs 6 (765) (3,061) (3,826) (704) (2,814) (3,518)

Net return on ordinary activities beforetaxation 13,073 127,970 141,043 9,395 138,451 147,846

Taxation 7 (2,661) — (2,661) (1,632) — (1,632)

Net return on ordinary activities aftertaxation 10,412 127,970 138,382 7,763 138,451 146,214

Return per share2 9 3.76p 46.24p 50.00p 3.00p 53.58p 56.58p

1Includes 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’shedging strategy are given in note 23(a)(i) on page 66.2Comparative figures for the year ended 31st December 2013 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on8th May 2014.

The dividends payable in respect of the year ended 31st December 2014 amount to 3.25p (2013: 2.70p) per share, costing£9,114,000 (2013: £7,157,000). Details of dividends paid and proposed are given in note 8 on page 57.

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

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columnsrepresent supplementary information prepared under guidance issued by the Association of Investment Companies. The Totalcolumn 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.

The notes on pages 52 to 72 form an integral part of these accounts.

Financial StatementsIncome Statementfor the year ended 31st December 2014


Called up Capitalshare Share redemption Capital Revenuecapital premium reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000

At 31st December 2012 12,560 82,996 8,151 347,225 13,802 464,734Issue of ordinary shares net of costs to the market 851 36,795 — — — 37,646Net return on ordinary activities — — — 138,451 7,763 146,214Dividends appropriated in the year — — — — (6,381) (6,381)

At 31st December 2013 13,411 119,791 8,151 485,676 15,184 642,213Issue of ordinary shares net of costs to the market 641 30,381 — — — 31,022Net return on ordinary activities — — — 127,970 10,412 138,382Dividends appropriated in the year — — — — (7,467) (7,467)

At 31st December 2014 14,052 150,172 8,151 613,646 18,129 804,150


Reconciliation of Movements in Shareholders’ Funds


2014 2013Notes £’000 £’000

Fixed assets 10Investments held at fair value through profit or loss 875,701 702,067Investment in liquidity fund held at fair value through profit or loss 11,234 8,494

886,935 710,561

Current assets 11Derivative financial assets — 1,920Debtors 776 782Cash and short term deposits 3 10

779 2,712

Current liabilitiesCreditors: amounts falling due within one year 12 (1,808) (20,907)Derivative financial liabilities 13 (1,529) —

Net current liabilities (2,558) (18,195)

Total assets less current liabilities 884,377 692,366

Creditors: amounts falling due after more than one year 14 (79,720) (49,869)Performance fees 15 (507) (284)

Net assets 804,150 642,213

Capital and reserves Called up share capital 16 14,052 13,411Share premium 17 150,172 119,791Capital redemption reserve 17 8,151 8,151Capital reserves 17 613,646 485,676Revenue reserve 17 18,129 15,184

Total equity shareholders’ funds 804,150 642,213

Net asset value per share1 18 286.1p 239.4p

1Comparative figures for the year ended 31st December 2013 have been restated due to the sub-division of each existing Ordinary share of 25p into five Ordinary shares of 5p each on8th May 2014.

The accounts on pages 48 to 72 were approved and authorised for issue by the Directors on 31st March 2015 and were signed ontheir behalf by:

Sarah BatesDirector


The Company’s registration number is 15543.

Financial Statements continuedBalance Sheetat 31st December 2014


2014 2013Notes £’000 £’000

Net cash inflow from operating activities 19 8,085 5,794

Returns on investments and servicing of finance Interest (3,709) (3,440)

Taxation Overseas tax recovered 11 2

Capital expenditure and financial investment Purchases of equity investments (252,234) (365,193)Purchases of liquidity fund (91,333) (216,686)Sales of equity investments 213,841 268,522Sales of liquidity fund 89,420 248,273Other capital charges (8) (10)

Net cash outflow from capital expenditure and financial investment (40,314) (65,094)

Net cash outflow before management of liquid resources and financing (35,927) (62,738)

Management of liquid resourcesNet (purchases)/sales of Time Deposits (5) 2,085

Net cash (outflow)/inflow from management of liquid resources (5) 2,085

Dividends paid (7,467) (6,381)

Net cash outflowbefore financing (43,399) (67,034)

Financing Increase in bank loans 11,173 17,045Issue of ordinary shares to the market 30,998 37,664

Net cash inflow from financing 42,171 54,709

Decrease in cash in the year 20 (1,228) (12,325)


Cash Flow Statementfor the year ended 31st December 2014


1. Accounting policies

(a) Basis of accountingThe accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companiesand Venture Capital Trusts’ (the ‘SORP’) issued by the Association of Investment Companies in January 2009. All of theCompany’s operations are of a continuing nature.

The disclosures on going concern on page 33 of the Directors’ Report form part of these accounts.

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

(b) Valuation of investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of incomeand capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, inaccordance with a documented investment strategy and information is provided internally on that basis to the Company’sBoard of Directors. Accordingly, upon initial recognition the investments are designated by the Company as ‘held at fair valuethrough profit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental topurchase which are written off in the capital column of the income statement at the time of acquisition. Subsequently theinvestments are valued at fair value, which are quoted bid prices for investments traded in active markets. For investmentswhich are not traded in active markets, unlisted and restricted investments, the Board takes into account the latest tradedprices, other observable market data and asset values based on the latest management accounts.

All purchases and sales are accounted for on a trade date basis.

(c) Accounting for reservesGains and losses on sales of investments including the related foreign exchange gains and losses, realised exchange gains andlosses on cash and short term deposits, realised gains and losses on foreign currency contracts, any performance fee realised,management fee and finance costs allocated to capital and any other capital charges, are included in the Income Statementand dealt with in capital reserves within ‘Gains and losses on sales of investments’.

Increases and decreases in the valuation of investments held at the year end including the related foreign exchange gains andlosses, unrealised gains and losses on forward foreign currency contracts and any performance fee provision, are included inthe Income Statement and dealt with in capital reserves within ‘Holding gains and losses on investments’.

(d) IncomeDividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of theBoard, the dividend is capital in nature, in which case it is included in capital.

Overseas dividends are included gross of any withholding tax.

Where the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount ofthe cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of thecash dividend is recognised in capital.

Interest receivable from debt securities together with any premiums or discounts on purchase are allocated to revenue on atime apportionment basis so as to reflect the effective interest rate of those securities.

Deposit interest receivable is taken to revenue on an accruals basis.

Financial Statements continuedNotes to the Financial Statementsfor the year ended 31st December 2014


(e) ExpensesAll expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue with the following exceptions:

• any performance fee is allocated 100% to capital.

• the management fee is allocated 20% to revenue and 80% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company’s investment portfolio.

• expenses incidental to the purchase of an investment are included within the cost of the investment and those incidentalto the sale are deducted from the sale proceeds. These expenses are commonly referred to as transaction costs andcomprise mainly brokerage commission. Details of transaction costs are given in note 10 on pages 58 and 59.

(f) Finance costsFinance costs are accounted for on an accruals basis using the effective interest rate method in accordance with the provisionsof FRS 25 ‘Financial Instruments: Presentation’ and FRS 26 ‘Financial Instruments: Measurement’.

Finance costs are allocated 20% to revenue and 80% to capital in line with the Board’s expected long term split of revenueand capital return from the Company’s investment portfolio.

(g) Financial instrumentsCash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount ofcash and are subject to an insignificant risk of changes in value.

Other debtors and creditors do not carry any interest, are short term in nature and are accordingly stated at nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

The debenture in issue, bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Financecosts, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrualsbasis in the Income statement using the effective interest rate method.

Forward foreign currency contracts are included in the balance sheet as derivative financial instruments and are carried at fairvalue, which is the cost of closing out those contracts. Changes in the fair value of derivative instruments that do not qualify forhedge accounting are recognised in profit or loss as they arise.

(h) Foreign currencyIn accordance with FRS 23: ‘The effects of changes in Foreign Currency Exchange Rates’ the Company is required to nominatea functional currency, being the currency in which the Company predominantly operates. The Board, having regard to thecurrency of the Company’s share capital and the predominant currency in which its shareholders operate, has determined thatsterling is the functional currency. Sterling is also the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates at the date of the transaction. Assetsand liabilities denominated in foreign currencies at the year end are translated at the rates of exchange prevailing at the yearend.

Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in the incomestatement as an exchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capitalnature.

Financial Statements continuedNotes to the Financial Statements continued


1. Accounting policies continued

(i) TaxationCurrent tax is provided at the amounts expected to be paid or received.

Deferred tax is accounted for in accordance with FRS 19: ‘Deferred Tax’.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred taxliabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it ismore likely than not that taxable profits will be available against which those timing differences can be utilised.

Tax relief is allocated to expenses charged to capital on the ‘marginal basis’. On this basis, if taxable income is capable of beingentirely offset by revenue expenses, then no tax relief is allocated to capital.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expectedto reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured onan undiscounted basis.

(j) Dividends payableIn accordance with FRS 21: ‘Events after the Balance Sheet Date’, the final dividend is included in the accounts in the year inwhich it is approved by shareholders.

(k) Value Added Tax (‘VAT’)Irrecoverable VAT is included in the expense on which it has been suffered. Recoverable VAT is calculated using the partialexemption method based on the proportion of zero rated supplies to total supplies.

2014 2013£’000 £’000

2. Gains on investments held at fair value through profit or loss Gains on sales of investments held at fair value through profit or loss based on historical cost 39,643 76,069

Amounts recognised in investment holding gains and losses in the previous year inrespect of investments sold during the year (42,925) (28,169)

(Losses)/gains on sales of investments based on the carrying value at the previous balance sheet date (3,282) 47,900

Net movement in investment holding gains and losses 142,538 92,901Other capital charges (8) (10)

Total capital gains on investments held at fair value through profit or loss 139,248 140,791


2014 2013£’000 £’000

3. Income Income from investmentsDividends from overseas investments 15,204 11,184Dividends from liquidity funds 20 57Scrip dividends 4 —

15,228 11,241

Interest receivable and similar incomeDeposit interest — 27

— 27

Total income 15,228 11,268

The Company does not currently lend stock.

2014 2013Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

4. Management and performance feeManagement fee1 743 2,974 3,717 611 2,446 3,057Performance fee1 — 359 359 — 426 426

743 3,333 4,076 611 2,872 3,483

1Details of the management fee and performance fee are given in the Directors’ Report on pages 32 and 33.

2014 2013£’000 £’000

5. Other administrative expensesAdministration expenses 329 286Directors’ fees1 152 151Savings scheme costs2 134 93Auditor’s remuneration – for audit services 24 20Auditor’s remuneration – for all other services3 8 8

647 558

1Full disclosure is given in the Directors’ Remuneration Report on pages 40 to 42.2These fees were paid to JPMAM for the marketing and administration of our savings scheme products.3Comprises the Company’s contribution to the audit of JPMAM’s control procedures amounting to £5,000 (2013: £5,000), plus fees payable for the audit of the debenturecompliance certificate amounting to £3,000 (2013: £3,000).




6. Finance costsInterest on debenture 708 2,834 3,542 701 2,803 3,504Bank loans and overdraft interest 57 227 284 3 11 14

765 3,061 3,826 704 2,814 3,518

7. Taxation (a) Analysis of tax charge in the year


Overseas withholding tax 2,661 — 2,661 1,632 — 1,632

Current tax charge for the year 2,661 — 2,661 1,632 — 1,632

(b) Factors affecting current tax charge for the yearThe tax assessed for the year is lower (2013: lower) than the Company’s applicable rate of corporation tax for the year of21.49% (2013: 23.25%). The factors affecting the current tax charge for the year are as follows:


Net return on ordinary activities before taxation 13,073 127,970 141,043 9,395 138,451 147,846

Net return on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of 21.49% (2013: 23.25%) 2,809 27,501 30,310 2,184 32,190 34,374

Effects of:Non taxable overseas dividends (3,267) — (3,267) (2,594) — (2,594)Non taxable capital returns — (28,875) (28,875) — (33,512) (33,512)Non taxable scrip dividends (1) — (1) — — —Overseas withholding tax 2,661 — 2,661 1,632 — 1,632Income tax timing difference 1 — 1 — — —Unrelieved expenses and charges 458 1,374 1,832 410 1,322 1,732

Current tax charge for the year 2,661 — 2,661 1,632 — 1,632

(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £11,930,000 (2013: £10,742,000) based on a prospective corporationtax rate of 20% (2013: 21%). The deferred tax asset has arisen due to the cumulative excess of deductible expenses overtaxable income. Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in theforeseeable future and therefore no asset has been recognised in the accounts.

Given the Company’s status as an Investment Trust Company and the intention to continue meeting the conditions required toobtain such approval, the Company has not provided for deferred tax on any capital gains or losses arising on the revaluationor disposal of investments.


8. Dividends(a) Dividends paid and proposed

2014 2013£’000 £’000

Dividends paidUnclaimed dividends refunded to the Company1 — (3)2013 Final dividend paid of 1.7p (2012: 1.5p)2 4,676 3,7872014 Interim dividend of 1.0p (2013: 1.0p)2 2,791 2,597

Total dividends paid in the year 7,467 6,381

1Represents dividends which remain unclaimed after a period of 12 years and thereby become the property of the Company.2Dividend rates have been restated due to the sub-division of each existing ordinary share of 25p into 5p each on 8th May 2014.

The final dividend proposed in respect of the year ended 31st December 2013, amounted to £4,560,000. However, theactual payment amounted to £4,676,000 due to shares issued after the balance sheet date but prior to the final dividendrecord date.

2014 2013£’000 £’000

Dividends proposed2014 Final dividend proposed of 2.25p (2013: 1.7p)1 6,323 4,560

1Dividend rates have been restated due to the sub-division of each existing ordinary share of 25p into 5p each on 8th May 2014.

The final dividend has been proposed in respect of the year ended 31st December 2014 and is subject to approval at theforthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflectedin the accounts for the year ending 31st December 2015.

(b) Dividends 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 proposed in respect of the financial year, as follows:

2014 2013£’000 £’000

Interim dividend of 1.0p (2013: 1.0p)1 2,791 2,5972014 Final dividend proposed of 2.25p (2013: 1.7p)1 6,323 4,560

Total 9,114 7,157

1Dividend rates have been restated due to the sub-division of each existing ordinary share of 25p into 5p each on 8th May 2014.

The revenue available for distribution by way of dividend for the year is £10,412,000 (2013: £7,763,000).



9. Return per share

The revenue return per ordinary share of 3.76p (2013: 3.00p) is based on the revenue earnings attributable to the ordinaryshares of £10,412,000 (2013: £7,763,000) and on the weighted average number of shares in issue during the year of276,739,581 (2013: 258,411,335).

The capital return per ordinary share of 46.24p (2013: 53.58p) is based on the capital return attributable to the ordinaryshares of £127,970,000 (2013: £138,451,000) and on the weighted average number of shares in issue during the year of276,739,581 (2013: 258,411,335).

The total return per ordinary share of 50.00p (2013: 56.58p) is based on the total return attributable to the ordinary shares of£138,382,000 (2013: £146,214,000) and on the weighted average number of shares in issue during the year of 276,739,581(2013: 258,411,335).

Comparative figures for the year ended 31st December 2013 have been restated due to the sub-division of each existingordinary share of 25p into five ordinary shares of 5p each as 8th May 2014.

10. Investments

2014 2013£’000 £’000

Investments listed or quoted on a recognised stock exchange 874,553 700,987Investment in liquidity fund 11,234 8,494Unquoted investments 1,148 1,080

886,935 710,561

Listedoverseas Unquoted Total

£’000 £’000 £’000

Opening book cost 555,001 116 555,117Opening investment holding gains 154,480 964 155,444

Opening valuation 709,481 1,080 710,561

Movements in the year:Purchases at cost 340,361 — 340,361Sales – proceeds (303,243) — (303,243)Losses on sales of investments based on the carrying value at the previousbalance sheet date (3,282) — (3,282)

Net movement in investment holding gains and losses 142,470 68 142,538

Closing valuation 885,787 1,148 886,935

Closing book cost 631,762 116 631,878Closing investment holding gains 254,025 1,032 255,057

Total investments held at fair value through profit or loss 885,787 1,148 886,935

During the year, prior year investment holding gains amounting to £42,925,000 were transferred to gains on sales ofinvestments as disclosed in notes 2 and 17.


Transaction costs on purchases during the year amounted to £85,000 (2013: £192,000) and on sales during the year amountedto £88,000 (2013: £113,000). These costs comprise mainly brokerage commission.

At the current and comparative year end, the Company held 10% or more of a class of the issued share capital of the followingcompany, which is valued in the accounts at the Company’s share of net assets:

2014 2013% %

Kane Holdings 15.8 15.8

The Company does not exercise significant influence over the operating and financial policies of the above company, which istherefore not considered to be an associated company.

11. Current assets2014 2013£’000 £’000

Derivative financial assetsForward foreign currency contracts held at fair value — 1,920

The forward currency contracts settle on 13th January 2015 and are for the purpose of hedging the risk of fluctuation in the£/$ exchange rate. Details of the Company’s hedging strategy are given in note 23(a)(i) on page 66.

2014 2013£’000 £’000

Debtors Securities sold for future settlement 4 22Overseas tax recoverable 12 166Dividends and interest receivable 709 551Other debtors 51 43

776 782

The Directors consider that the carrying amount of debtors approximates to their fair value.

Cash and short term depositsCash and short term deposits comprises bank balances and cash held by the Company, including short term deposits. Thecarrying amount of these represents their fair value. Cash balances in excess of a predetermined amount are placed on shortterm deposit at market rates of interest.



2014 2013£’000 £’000

12. Creditors: amounts falling due within one year Securities purchased for future settlement 278 3,488Bank loan — 16,906Bank overdraft1 908 —Other creditors and accruals 486 371Performance fee 136 142

1,808 20,907

1Repaid in full on 6th January 2015.

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.

2014 2013£’000 £’000

13. Derivative financial liabilitiesForward foreign currency contracts held at fair value 1,529 —

The forward currency contracts settle on 13th January 2015 and are for the purpose of hedging the risk of fluctuation in the£/$ exchange rate. Details of the Company’s hedging strategy are given in note 23(a)(i) on page 66.

2014 2013£’000 £’000

14. Creditors: amounts falling due after more than one year Bank loan 29,822 —£50,000,000 6.875% debenture June 2018 49,898 49,869

79,720 49,869

The £50 million debenture, which the Company has in issue, carries a fixed interest rate of 6.875% until the repayment date inJune 2018. The debenture is secured by a floating charge over the assets of the Company.

The £35 million two year floating rate debt facility with ING Bank, has an interest rate of LIBOR as quoted in the market for theloan period, plus a margin of 0.80%, plus mandatory costs. Any undrawn amounts under the facility attract an interest rate of0.25%.


2014 2013£’000 £’000

15. Provisions for liabilities and chargesOpening balance 284 —Performance fee for the year 359 426Amount realised during the year (136) (142)

Closing balance 507 284

Further details of the performance fee can be found in the Directors’ report on pages 32 and 33.

The balance of £507,000 will be carried forward until paid in full or absorbed by any under performance in subsequent years.The payment in any one year will not exceed 0.25% of the fully diluted net asset value at the previous 31st December andaccordingly payment of this outstanding balance will be determined by the under/over performance of the Company infuture periods but it is unlikely to take more than three years. The provision is not discounted.

2014 2013£’000 £’000

16. Called up share capital Allotted and fully paidOpening balance of 53,643,782 (2013: 50,241,592) ordinary shares of 25p each 13,411 12,560Issue of 1,370,000 (2013: 3,402,190) ordinary shares of 25p each to the market 343 851Sub-division of 55,013,782 shares of 25p each into 275,068,910 shares of 5p each — —Issue of 5,965,000 (2013: nil) ordinary shares of 5p each to the market 298 —

Closing balance of 281,033,910 (2013: 268,218,9101) ordinary shares of 5p each 14,052 13,411

1The 2013 Closing Balance of 53,643,782 shares of 25p each has been restated as a result of the five for one sub-division of shares.

During the year, 1,370,000 new ordinary shares of 25p were issued to the market at an average price of 1,166.3p per share, fora total net consideration of £15,978,000. After the sub-division of shares, a further 5,965,000 new ordinary shares of 5p wereissued to the market at an average price of 252.2p per share, for a total net consideration of £15,044,000.



Capital reservesGains and Holding

Called up Capital losses on gains andshare Share redemption sales of losses on Revenuecapital premium reserve investments investments reserve£’000 £’000 £’000 £’000 £’000 £’000

17. Reserves Opening balance 13,411 119,791 8,151 328,457 157,219 15,184Losses on sales of investments based on the carrying value at the previous balance sheet date — — — (3,282) — —

Realised losses on time deposits — — — (5) — —Net movement in investment holding gains and losses — — — — 142,538 —Net currency losses on cash and short term deposits held during the year — — — (1,607) — —

Unrealised losses on forward foreign currency contracts — — — — (1,529) —

Unrealised gains on forward foreign currency contracts now realised — — — 1,920 (1,920) —

Transfer on disposal of investments — — — 42,925 (42,925) —Performance fee for the year — — — — (359) —Performance fee now realised — — — (136) 136 —Issue of ordinary shares net of costs to the market 641 30,381 — — — —Unrealised currency losses on loans — — — — (1,743) —Management fee and finance costs charged to capital — — — (6,035) — —Other capital charges — — — (8) — —Dividends appropriated in the year — — — — — (7,467)Retained revenue for the year — — — — — 10,412

Closing balance 14,052 150,172 8,151 362,229 251,417 18,129

18. Net asset value per shareThe net asset value per share of 286.1p (2013: 239.4p) is based on the net assets attributable to the ordinary shareholders of£804,150,000 (2013: £642,213,000) and on the 281,033,910 (2013: 268,218,910) shares in issue at the year end.

2014 2013£’000 £’000

19. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

Net return on ordinary activities before finance costs and taxation 144,869 151,364Less capital return before finance costs and taxation (131,031) (141,265)Scrip dividends received as income (4) —Increase in accrued income (158) (191)Increase in other debtors (8) (1)Increase in accrued expenses 45 102Increase in performance fee provision 223 284Management and performance fee charged to capital (3,333) (2,872)Overseas withholding tax (2,518) (1,627)

Net cash inflow from operating activities 8,085 5,794


At At31st December Exchange Other 31st December

2013 Cash flow movements movements 2014£’000 £’000 £’000 £’000 £’000

20. Analysis of changes in net debtCash and short term deposits 10 (320) 313 — (3)Bank overdraft — (908) — — (908)Bank loan falling due within one year (16,906) 16,906 — — —Bank loan falling due in more than one year but not more than five years — (28,079) (1,743) — (29,822)

Debenture falling due in more than one year but not more than five years (49,869) — — (29) (49,898)

Net debt (66,765) (12,401) (1,430) (29) (80,625)

21. Transactions with the Manager

Details of the management contract are set out in the Directors’ Report on page 32. The management fee payable toJ.P. Morgan Asset Management (UK) Limited (‘JPMAM’) for the year was £3,717,000 (2013: £3,057,000), of which £nil (2013: £nil)was outstanding at the year end.

The performance fee payable for the year is £359,000 (2013: £426,000) and £136,000 (2013: £142,000) was outstanding at theyear end. An amount of £507,000 (2013: £284,000) is carried forward and will either be paid or absorbed by anyunderperformance in following years.

During the year £134,000 (2013: £93,000) was payable to JPMAM for the marketing and administration of savings schemeproducts, of which £nil (2013: £nil) was outstanding at the year end.

Included in other administration expenses in note 5 on page 55 are safe custody fees amounting to £7,000 (2013: £5,000)payable to JPMorgan Chase of which £1,000 (2013: £1,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £8,000 (2013: £10,000) were payable to JPMorgan Chase during theyear of which £2,000 (2013: £2,000) was outstanding at the year end.

The Company holds an investment in the JPMorgan US Dollar Liquidity Fund which is managed by JPMAM. The administratorof the JPMorgan US Dollar Liquidity Fund does not charge a management fee on the share class held by the Company. At31st December 2014 this investment was valued at £11.2 million (2013: £8.5 million) and represented 1.3% (2013: 1.2%) of theCompany’s total investments of £886.9 million (2013: £710.6 million). During the year the Company made purchases of thisinvestment with a total value of £91.3 million (2013: £216.7 million) and sales with a total value of £89.4 million (2013:£248.3 million). Income receivable from this investment for the year amounted to £20,000 (2013: £57,000) of which £nil (2013:£nil) was outstanding at the year end. The JPMorgan US Dollar Liquidity Fund invests primarily in certificates of deposit andcommercial paper.

At the year end, a net cash overdraft of £905,000 (2013: £10,000 cash deposit) was held by JPMorgan Chase. The overdraftamount was repaid in full on 6th January 2015. There was no cash on deposit with external counterparties at the year end(2013: £nil). Information on the Company’s exposure to counterparty risk is given in note 23(c) on pages 70 and 71. A netamount of interest of £nil (2013: £28,000) was receivable by the Company during the year from JPMorgan Chase of which £nil(2013: £nil) was outstanding at the year end.



22. Disclosures regarding financial instruments measured at fair value

The disclosures required by the amendment to FRS 29: ‘Improving Disclosures about Financial Instruments’ are given below.The Company’s financial instruments within the scope of FRS 29 that are held at fair value comprise its investment portfolioand derivative financial instruments.

The investments are categorised into a hierarchy consisting of the following three levels:

Level 1 – valued using quoted prices in active markets.

Level 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices includedwithin Level 1.

Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset.

Details of the valuation techniques used by the Company are given in note 1(b) on page 52.

The following table sets out the fair value measurements using the FRS 29 hierarchy at 31st December.

2014Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or loss at 31st December 2014

Equity investments 874,553 — 1,148 875,701Liquidity fund 11,234 — — 11,234Derivatives – forward foreign currency contracts — (1,529) — (1,529)

Total 885,787 (1,529) 1,148 885,406

2013Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or loss at 31st December 2013

Equity investments 700,987 — 1,080 702,067Liquidity fund 8,494 — — 8,494Derivatives – forward foreign currency contracts — 1,920 — 1,920

Total 709,481 1,920 1,080 712,481


There have been no transfers between Levels 1, 2 or 3 during the year. A reconciliation of the fair value measurements inLevel 3 is set out below.

2014 2013Equity Equity

investments Total investments Total£’000 £’000 £’000 £’000

Level 3 financial instruments held at fair value through profit or lossOpening balance 1,080 1,080 604 604Total gains included in gains on investments held at fair value through profit or loss in the Income Statement– on assets held at the year end 68 68 476 476

Closing balance 1,148 1,148 1,080 1,080

23. Financial instruments’ exposure to risk and risk management policies

As an investment trust, the Company invests in equities and other securities for the long term so as to secure its investmentobjective stated on the ‘Features’ page on the inside of the front cover. In pursuing this objective, the Company is exposed to avariety of risks that could result in a reduction in the Company’s net assets or a reduction in the profits available for dividends.

These risks include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.The Directors’ policy for managing these risks is set out below.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set outbelow, have not changed from those applying in the comparative year. The Company’s financial instruments may comprise:

• investments in US equity shares and a $ liquidity fund, which are held in accordance with the Company’s investmentobjective;

• short term debtors, creditors and cash arising directly from its operations;

• a debenture issued by the Company and bank loans, the purpose of which is to finance the Company’s operations; and

• forward foreign currency contracts, the purpose of which is to manage the currency risk arising from the Company’sinvestment activities.

(a) Market risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in marketprices. This market risk comprises three elements – currency risk, interest rate risk and other price risk. Information to enablean evaluation of the nature and extent of these three elements of market price risk is given in parts (i) to (iii) to this note,together with sensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks andthese policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure tomarket risk when making each investment decision and monitors the overall level of market risk on the whole of theinvestment portfolio on an ongoing basis.

(i) Currency risk The majority of the Company’s assets and income are denominated in currencies other than sterling which is theCompany’s functional currency and the currency in which it reports. As a result, movements in exchange rates will affectthe sterling value of those items.



23. Financial instruments’ exposure to risk and risk management policies continued

(a) Market risk continued(i) Currency risk continued

Management of currency risk The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, whichmeets on at least four occasions each year. The Manager measures the risk to the Company of the foreign currencyexposure by considering the effect on the Company’s net asset value and income of a movement in the rates of exchangeto which the Company’s assets, liabilities, income and expenses are exposed.

The Company has a £50 million debenture in issue which is repayable in June 2018. It is the Company's policy to hedge thecurrency risk in respect of this geared portion of the portfolio using three month forward contracts. At 31st December 2014the Company held a number of open contracts with BNP Paribas, Barclays, Morgan Stanley and Goldman Sachs. The neteffect of these contracts is to purchase £50 million for settlement in $ and the latest settlement date of these contracts was13th January 2015. Upon maturity, these contracts were rolled over with the same counterparties and the settlementdate of these new contracts is 12th April 2015.

Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financialinstruments to mitigate the currency exposure in the period between the time that income is included in the financialstatements and its receipt.

Foreign currency exposure The fair value of the Company’s monetary items that have foreign currency exposure at 31st December are shown below.Where the Company’s equity investments, which are not monetary items, are priced in a foreign currency, they have beenincluded separately in the analysis so as to show the overall level of exposure.

2014 2013USD Euro Total USD Euro Total

£’000 £’000 £’000 £’000 £’000 £’000

Investments held at fair value through profit or loss that are monetary items 11,234 — 11,234 8,494 — 8,494

Cash and short term deposits (14) 3 (11) 6 16 22Debtors – securities sold awaiting settlement, overseas tax recoverable, dividends and interest receivable 726 — 726 739 — 739

Creditors – securities purchased awaiting settlementand interest payable (278) — (278) (3,500) — (3,500)

Forward foreign currency contracts (1,529) — (1,529) 1,920 — 1,920Loan facility (29,822) — (29,822) (16,906) — (16,906)

Foreign currency exposure on net monetary items (19,683) 3 (19,680) (9,247) 16 (9,231)Investments held at fair value through profit or lossthat are equities 875,701 — 875,701 702,067 — 702,067

Total net foreign currency exposure 856,018 3 856,021 692,820 16 692,836

The above year end amounts are broadly representative of the exposure to currency risk during the current andcomparative year.


Foreign currency sensitivityThe following tables illustrate the sensitivity of the return after taxation for the year and net assets with regard to theCompany’s monetary financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on theCompany’s monetary currency financial instruments held at each balance sheet date and the income receivable in foreigncurrency and assumes a 10% (2013: 10%) appreciation or depreciation of sterling against the $ which is deemed to be areasonable illustration based on the volatility of exchange rates during the year.

If sterling had weakened by 10% (2013: 10%) against the $ this would have had the following effect:

2014 2013£’000 £’000

Income statement return after taxationRevenue return 1,522 1,118Capital return (1,968) (923)

Total return after taxation for the year (446) 195

Net assets (446) 195

If sterling had strengthened by 10% (2013: 10%) against the $ this would have had the following effect:

2014 2013£’000 £’000

Income statement return after taxationRevenue return (1,522) (1,118)Capital return 1,968 923

Total return after taxation for the year 446 (195)

Net assets 446 (195)

In the opinion of the Directors, the above sensitivity analyses with respect to monetary financial assets and liabilities arebroadly representative of the whole of the current and comparative year. The sensitivity with regard to the Company’sinvestments and foreign currency is subsumed into other price risk sensitivity on page 69.

(ii) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the liquidity fund. The Company’sexposure to floating interest rates, giving cash flow interest rate risk when rates are reset, is as follows:

2014 2013£’000 £’000

Exposure to floating interest ratesCash (overdrafts)/deposits and short term deposits (905) 10JPMorgan US Dollar Liquidity Fund 11,234 8,494Foreign currency bank loan (29,822) (16,906)

Total exposure (19,493) (8,402)




(a) Market risk continued(ii) Interest rate risk continued

Interest receivable on cash balances is at a margin below LIBOR and interest payable on overdrafts is at a margin overLIBOR or its foreign currency equivalent (2013: same).

The target interest earned on the JPMorgan US Dollar Liquidity Fund is the 7 day $ London Interbank Bid Rate (2013: same).

Details of the facility are given in note 14 on page 60.

The above year end exposures are not necessarily representative of the exposure to interest rates during the year as thecash balances and investments in the liquidity fund have fluctuated. The maximum and minimum exposures during theyear, arising from cash balances and the liquidity fund were as follows:

2014 2013£’000 £’000

Maximum interest rate exposure to floating rates (19,494) 69,758Minimum interest rate exposure to floating rates (7,039) (8,423)

Interest rate sensitivityThe following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.5% (2013: 0.5%)increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. Thislevel of change is considered to be a reasonable illustration based on observation of current market conditions. Thesensitivity analysis is based on the Company’s monetary financial instruments held at the balance sheet date, with all othervariables held constant.

2014 20130.5% Increase 0.5% Decrease 0.5% Increase 0.5% Decrease

in rate in rate in rate in rate£’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return 26 (26) 26 (26)Capital return (123) 123 (68) 68

Total return after taxation for the year and net assets (97) 97 (42) 42

In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposureto interest rate changes, due to fluctuations in the level of cash balances and investment in the liquidity fund.

(iii) Other price risk Other price risk includes changes in market prices, other than those arising from interest rate risk or currency risk, whichmay affect the value of equity investments.

Management of other price risk The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the riskassociated with particular industry sectors. The investment management team has responsibility for monitoring theportfolio, which is selected in accordance with the Company’s investment objectives and seeks to ensure that individualstocks meet an acceptable risk/reward profile.


Other price risk exposure The Company’s total exposure to other changes in market prices at 31st December comprises its holdings in equityinvestments as follows:

2014 2013£’000 £’000

Equity investments held at fair value through profit or loss 875,701 702,067

The above data is broadly representative of the exposure to other price risk during the current and comparative year.

Concentration of exposure to other price risk A list of the Company’s investments is given on pages 22 to 24. This shows that all of the investments’ value is in the US$.Accordingly, there is a concentration of exposure to that country. However, it should be noted that an investment may notbe entirely exposed to the economic conditions in its country of domicile or of listing.

Other price risk sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to an increase ordecrease of 10% (2013: 10%) in the market value of equity investments. This level of change is considered to be areasonable illustration based on observation of current market conditions. The sensitivity analysis is based on theCompany’s equities and includes the impact on the management fee but assumes all other variables are held constant.

2014 201310% Increase 10% Decrease 10% Increase 10% Decreasein fair value in fair value in fair value in fair value

£’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (88) 88 (70) 70Capital return 87,220 (87,220) 69,926 (69,926)

Total return after taxation for the year 87,132 (87,132) 69,856 (69,856)

Net assets 87,132 (87,132) 69,856 (69,856)

(b) Liquidity risk This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that aresettled by delivering cash or another financial asset.

Management of the risk Liquidity risk is not significant as the Company’s assets comprise mainly readily realisable securities, which can be sold tomeet funding requirements if necessary.




(b) Liquidity risk continuedLiquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be requiredare as follows:

2014More than

Three three months months but not more More thanor less than one year one year Total£’000 £’000 £’000 £’000

Debenture stock including interest — 3,438 58,594 62,032Foreign currency bank loan including interest 77 234 30,287 30,598Securities purchased for future settlement 278 — — 278Bank overdraft 908 — — 908Other creditors and accruals 486 — — 486Performance fee payable 136 — — 136Performance fee provision — — 507 507Derivative – forward foreign currency contracts 1,529 — — 1,529

3,414 3,672 89,388 96,474

2013More than

Three three months months but not more More thanor less than one year one year Total£’000 £’000 £’000 £’000

Debenture stock including interest — 3,438 62,033 65,471Foreign currency bank loan including interest 48 17,037 — 17,085Securities purchased for future settlement 3,488 — — 3,488Other creditors and accruals 371 — — 371Performance fee payable 142 — — 142Performance fee provision — — 284 284

4,049 20,475 62,317 86,841

The liabilities shown above against debenture stock are the undiscounted contractual amounts that are to be paid and, assuch differ from the amounts shown in the balance sheet.

(c) Credit risk Credit risk is the risk that a counterparty to a transaction fails to discharge its obligations under that transaction which couldresult in loss to the Company.

Management of credit riskPortfolio dealingThe Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates the riskof losing the principal of a trade during the settlement process. The Manager regularly monitors dealing activity to ensure bestexecution. Counterparty lists are maintained and adjusted accordingly.


CashCounterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties that have aminimum rating of A1/P1 (2013: A1/P1) from Standard & Poor’s and Moody’s respectively.

Exposure to JPMorgan ChaseJPMorgan Chase is the custodian of the Company’s assets. The Company’s assets are segregated from JPMorgan Chase’s owntrading assets. Therefore these assets are designed to be protected from creditors in the event that JPMorgan Chase were tocease trading. However, no absolute guarantee can be given on the protection of all the assets of the Company.

The following amounts shown in the Balance Sheet, represent the maximum exposure to credit risk at the current andcomparative year end.

2014 2013Balance Maximum Balance Maximumsheet exposure sheet exposure£’000 £’0001 £’000 £’000

Fixed assets – investments held at fair value through profit or loss 886,935 11,234 710,561 8,494Current assetsCash and short term deposits 3 3 10 10Debtors 776 776 782 782Derivative financial instruments — — 1,920 1,920

887,714 12,013 713,273 11,206

1The fixed asset exposure to credit risk comprises the Company’s investment in the JPMorgan US Dollar Liquidity Fund. This Fund has been given a AAA credit rating byStandard & Poor’s. The Fund’s investments comprise mainly certificates of deposit, commercial paper, and floating rate notes with a weighted average maturity of 45 days.

There has been no stock lending during the year. Cash and short term deposits comprise balances held at banks that have aminimum rating of A1/P1 (2013: A1/P1) from Standard & Poor’s and Moody’s respectively.

(d) Fair values of financial assets and financial liabilitiesAll financial assets and liabilities are either included in the balance sheet at fair value or the carrying value in the balance sheetis a reasonable approximation of fair value except for the debenture which the Company has in issue. The fair value of the£50 million debenture issued by the Company has been calculated using discounted cash flow techniques, using the yieldfrom a similarly dated gilt plus a margin based on the five year average for the AA Barclays Sterling Corporate Bond spread.

2014 2013Accounts Fair Accounts Fair

value value value value£m £m £m £m

£50 million 6.875% debenture June 2018 49.9 58.0 49.9 57.4


24. Capital management policies and procedures

The Company’s debt and capital structure comprises the following:2014 2013£’000 £’000

Debt:Foreign currency bank loan 29,822 16,906£50,000,000 6.875% debenture June 2018 50,000 50,000

79,822 66,906

Equity:Equity share capital 14,052 13,411Reserves 790,098 628,802

804,150 642,213

Total debt and equity 883,972 709,119

The Company’s capital management objectives are to ensure that it will continue as a going concern and seek to maximiseincome and capital return to its equity shareholders through an appropriate level of gearing.

The Board’s policy is to limit gearing within the range (5)% to 20%. Gearing for this purpose is defined as Total Assets(including net current assets/liabilities) less cash/cash equivalents, expressed as a percentage of total net assets.

2014 2013£’000 £’000

Investments held at fair value excluding liquidity fund holdings 875,701 702,067Current assets excluding cash 776 2,702Current liabilities excluding bank loan and overdraft (2,429) (4,001)

Total assets 874,048 700,768Net assets 804,150 642,213

Gearing 8.7% 9.1%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on anongoing basis. This includes a review of:

• the planned level of gearing, which takes into account the Manager’s views on the market;

• the need to buy back equity shares, either for cancellation or to hold in Treasury, which takes into account the share pricediscount or premium;

• the need for issues of new shares, including issues from Treasury; and

• the extent to which revenue in excess of that which is required to be distributed should be retained.


Notice is hereby given that the ninety-ninth Annual GeneralMeeting of JPMorgan American Investment Trust plc will beheld at 60 Victoria Embankment, London EC4Y 0JP onWednesday, 13th May 2015 at 2.30 p.m. for the followingpurposes:

1. To receive the Directors’ Report, the Annual Accounts andthe Auditors’ Report for the year ended 31st December2014.

2. To approve the Directors’ Remuneration Policy.

3. To approve the Directors’ Remuneration Report for theyear ended 31st December 2014.

4. To declare a final dividend on the ordinary shares of2.25 pence per share.

5. To reappoint Sarah Bates as a Chairman of the Company.

6. To reappoint Kate Bolsover as a Director of the Company.

7. To reappoint Simon Bragg as a Director of the Company.

8. To reappoint Sir Alan Collins as a Director of the Company.

9. To reappoint Dr Kevin Carter as a Director of the Company.

10. To reappoint Deloitte LLP as auditors to the Company andto authorise the Directors to determine their remuneration.

Special Business

To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution11. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors),pursuant to Section 551 of the Companies Act 2006 (the‘Act’) to exercise all the powers for the Company to allotrelevant securities (within the meaning of Section 551 of theAct) up to an aggregate nominal amount of £1,403,814,representing approximately 10% of the Company’s issuedordinary share capital as at the date of the passing of thisresolution, provided that this authority shall expire at theconclusion of the Annual General Meeting of the Companyto be held in 2016 unless renewed at a general meetingprior to such time, save that the Company may before suchexpiry make offers, agreements or arrangements whichwould or might require relevant securities to be allotted

after such expiry and so that the Directors of the Companymay allot relevant securities in pursuance of such offers,agreements or arrangements as if the authority conferredhereby had not expired.

Authority to disapply pre-emption rights on allotment of relevantsecurities – Special Resolution12. THAT subject to the passing of Resolution 11 set out above,

the Directors of the Company be and they are herebyempowered pursuant to Section 570 and 573 of the Act toallot equity securities (within the meaning of Section 560of the Act) for cash pursuant to the authority conferred byResolution 11 or by way of a sale of Treasury shares as ifSection 561(1) of the Act did not apply to any such allotment,provided that this power shall be limited to the allotment ofequity securities for cash up to an aggregate nominalamount of £1,403,814, representing approximately 10% ofthe issued ordinary share capital as at the date of thepassing of this resolution at a price of not less than the netasset value per share and shall expire upon the expiry ofthe general authority conferred by Resolution 11 above,save that the Company may before such expiry make offers,or agreements which would or might require equitysecurities to be allotted after such expiry and so that theDirectors of the Company may allot equity securities inpursuant of such offers, or agreements as if the powerconferred hereby had not expired.

Authority to repurchase the Company’s shares – Special Resolution13. THAT the Company be generally and subject as hereinafter

appears unconditionally authorised in accordance withSection 701 of the Companies Act 2006 (the ‘Act’) to makemarket purchases (within the meaning of Section 693 of theAct) of its issued shares in the capital of the Company(‘ordinary shares’).

PROVIDED ALWAYS THAT

(i) the maximum number of shares hereby authorised tobe purchased shall be that number of shares which isequal to 14.99% of the Company’s issued share capitalas at the date of the passing of this resolution;

(ii) the minimum price which may be paid for a share shallbe the nominal value of the share;

(iii) the maximum price which may be paid for a share shallbe an amount equal to the highest of: (a) 105% of the

73JPMorgan American Investment Trust plc. Annual Report & Accounts 2014

Shareholder InformationNotice of Annual General Meeting


average of the middle market quotations for a sharetaken from and calculated by reference to the LondonStock Exchange Daily Official List for the five businessdays immediately preceding the day on which the shareis contracted to be purchased; or (b) the price of the lastindependent trade; or (c) the highest currentindependent bid;

(iv) any purchase of shares will be made in the market forcash or prices below the prevailing net asset value pershare (as determined by the Directors);

(v) the authority hereby conferred shall expire on12th October 2016 unless the authority is renewed atthe Company’s Annual General Meeting in 2016 or atany other general meeting prior to such time; and

(vi) the Company may make or contract to purchase sharesunder the authority hereby conferred prior to the expiryof such authority and may make a purchase of sharespursuant to any such contract notwithstanding suchexpiry.

By order of the BoardAlison Vincent, for and on behalf of JPMorgan Funds Limited, Secretary

7th April 2015

Notes

These notes should be read in conjunction with the notes on thereverse of the proxy form.

1. A member entitled to attend and vote at the meeting may appointanother person(s) (who need not be a member of the Company)to exercise all or any of his rights to attend, speak and vote at themeeting. A member can appoint more than one proxy in relation tothe meeting, provided that each proxy is appointed to exercise therights attaching to different shares held by him.

2. A proxy does not need to be a member of the Company but mustattend the Meeting to represent you. Your proxy could be theChairman, another director of the Company or another person whohas agreed to attend to represent you. Details of how to appointthe Chairman or another person(s) as your proxy or proxies usingthe proxy form are set out in the notes to the proxy form. If thevoting box on the proxy form is left blank, the proxy or proxies willexercise his/ their discretion both as to how to vote and whetherhe/they abstain(s) from voting. Your proxy must attend themeeting for your vote to count. Appointing a proxy or proxies doesnot preclude you from attending the Meeting and voting in person.

3. Any instrument appointing a proxy, to be valid, must be lodged inaccordance with the instructions given on the proxy form.

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments (seeabove) also applies in relation to amended instructions. Anyattempt to terminate or amend a proxy appointment received afterthe relevant deadline will be disregarded. Where two or more validseparate appointments of proxy are received in respect of thesame share in respect of the same meeting, the one which is lastreceived (regardless of its date or the date of its signature) shall betreated as replacing and revoking the other or others as regardsthat share if the Company is unable to determine which was lastreceived, none of them shall be treated as valid in respect of thatshare.

5. To be entitled to attend and vote at the Meeting (and for thepurpose of the determination by the Company of the number ofvotes they may cast), members must be entered on the Company’sregister of members as at 6.00 p.m. two business days prior to themeeting (the ‘specified time’). If the meeting is adjourned to a timenot more than 48 hours after the specified time applicable to theoriginal meeting, that time will also apply for the purpose ofdetermining the entitlement of members to attend and vote (andfor the purpose of determining the number of votes they may cast)at the adjourned meeting. If however the meeting is adjourned fora longer period then, to be so entitled, members must be enteredon the Company’s register of members as at 6.00 p.m. twobusiness days prior to the adjourned meeting or, if the Companygives notice of the adjourned meeting, at the time specified in thatnotice changes to entries on the register after this time shall bedisregarded in determining the rights of persons to attend or voteat the meeting or adjourned meeting.

Shareholder Information continuedNotice of Annual General Meeting continued


6. Entry to the above Meeting will be restricted to shareholders andtheir proxy or proxies, with guests admitted only by priorarrangement.

7. A corporation, which is a shareholder, may appoint individuals toact as its representatives and to vote in person at the meeting (seeinstructions given on the proxy form). In accordance with theprovisions of the Companies Act 2006, each such representativemay exercise (on behalf of the corporation) the same powers as thecorporation could exercise if it were an individual member of thecompany, provided that they do not do so in relation to the sameshares. It is therefore no longer necessary to nominate adesignated corporate representative.

Representatives should bring to the meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of theCompanies Act 2006 can require the Company to publish astatement on its website setting out any matter relating to: (a) theaudit of the Company’s accounts (including the Auditors’ reportand the conduct of the audit) that are to be laid before the AGM; or(b) any circumstances connected with Auditors of the Companyceasing to hold office since the previous AGM, which the memberspropose to raise at the Meeting. The Company cannot require themembers requesting the publication to pay its expenses. Anystatement placed on the website must also be sent to theCompany’s Auditors no later than the time it makes its statementavailable on the website. The business which may be dealt with atthe AGM includes any statement that the Company has beenrequired to publish on its website pursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Companymust cause to be answered at the AGM any question relating to thebusiness being dealt with at the AGM which is put by a memberattending the Meeting except in certain circumstances, including ifit is undesirable in the interests of the Company or the good orderof the Meeting or if it would involve the disclosure of confidentialinformation.

10. Under Sections 338 and 338A of the 2006 Act, members meetingthe threshold requirements in those sections have the right torequire the Company: (i) to give, to members of the Companyentitled to receive notice of the Meeting, notice of a resolutionwhich those members intend to move (and which may properly bemoved) at the Meeting; and/or (ii) to include in the business to bedealt with at the Meeting any matter (other than a proposedresolution) which may properly be included in the business at theMeeting. A resolution may properly be moved, or a matter properlyincluded in the business unless: (a) (in the case of a resolution only)it would, if passed, be ineffective (whether by reason of anyinconsistency with any enactment or the Company’s constitution orotherwise); (b) it is defamatory of any person; or (c) it is frivolous orvexatious. A request made pursuant to this right may be in hardcopy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business,must be accompanied by a statement setting out the grounds forthe request, must be authenticated by the person(s) making it andmust be received by the Company not later than the date that is

six clear weeks before the Meeting, and (in the case of a matterto be included in the business only) must be accompanied by astatement setting out the grounds for the request.

11. A copy of this notice has been sent for information only to personswho have been nominated by a member to enjoy informationrights under Section 146 of the Companies Act 2006 (a ‘NominatedPerson’). The rights to appoint a proxy can not be exercised by aNominated Person: they can only be exercised by the member.However, a Nominated Person may have a right under anagreement between him and the member by whom he wasnominated to be appointed as a proxy for the Meeting or to havesomeone else so appointed. If a Nominated Person does not havesuch a right or does not wish to exercise it, he may have a rightunder such an agreement to give instructions to the member as tothe exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this notice of meeting, details of the total number ofshares in respect of which members are entitled to exercise votingrights at the AGM, the total voting rights members are entitled toexercise at the AGM and, if applicable, any members’ statements,members’ resolutions or members’ matters of business receivedby the Company after the date of this notice will be available on theCompany’s website www.jpmamerican.co.uk.

13. The register of interests of the Directors and connected persons inthe share capital of the Company and the Directors’ letters ofappointment are available for inspection at the Company’sregistered office during usual business hours on any weekday(Saturdays and public holidays excepted). It will also be availablefor inspection at the Annual General Meeting. No Director has anycontract of service with the Company.

14. You may not use any electronic address provided in this Notice ofMeeting to communicate with the Company for any purposes otherthan those expressly stated.

15. As an alternative to completing a hard copy Form of Proxy/VotingInstruction Form, you can appoint a proxy or proxies electronicallyby visiting www.sharevote.co.uk. You will need your Voting ID,Task ID and Shareholder Reference Number (this is the series ofnumbers printed under your name on the Form of Proxy/VotingDirection Form). Alternatively, if you have already registered withEquiniti Limited’s online portfolio service, Shareview, you cansubmit your Form of Proxy at www.shareview.co.uk. Fullinstructions are given on both websites.

16. As at 30th March 2015 (being the latest business day prior to thepublication of this Notice), the Company’s issued share capitalconsists of 280,762,878 shares, (carrying one vote each). Thereforethe total voting rights in the Company are 280,762,878.

Electronic appointment – CREST membersCREST members who wish to appoint a proxy or proxies by utilising theCREST electronic proxy appointment service may do so for the Meetingand any adjournment(s) thereof by using the procedures described inthe CREST Manual. See further instructions on the proxy form.

Return to ShareholdersTotal return to the investor, on a mid-market price tomid-market price basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe Company at the time the shares were quoted ex-dividend.

Return on Net AssetsTotal return on net asset value (‘NAV’) per share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested, into the shares of the Company at theNAV per share at the time the shares were quoted ex-dividend.

BenchmarkReturnTotal return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe underlying companies at the time the shares were quotedex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the Company’sinvestment universe. The Company’s investment strategy doesnot ‘track’ this index and consequently there may be somedivergence between the Company’s performance and that ofthe benchmark.

Actual Gearing FactorInvestments excluding holdings in liquidity funds, expressed asa percentage of net assets. This shows the effect of gearing onthe net asset value if the market value of the portfolio were toincrease by 100%.

Leverage

For the purposes of the Alternative Investment Fund ManagersDirective (‘AIFMD’), leverage is any method which increases theCompany’s exposure, including the borrowing of cash and theuse of derivatives. It is expressed as a ratio between theCompany’s exposure and its net asset value and can becalculated on a gross and a commitment method. Under thegross method, exposure represents the sum of the Company’spositions after the deduction of sterling cash balances, withouttaking into account any hedging and netting arrangements.Under the commitment method, exposure is calculated withoutthe deduction of sterling cash balances and after certainhedging and netting positions are offset against each other.

The Company’s maximum and actual leverage levels at31st December 2014 are shown below:

Gross CommitmentLeverage exposure method method

Maximum limit 200.00% 200.00%Actual 126.81% 120.40%

Ongoing ChargesThe ongoing charges represent the Company’s managementfee and all other operating expenses excluding finance costspayable, expressed as a percentage of the average of the dailynet assets during the year and is calculated in accordance withguidance issued by the Association of Investment Companies.

Share Price Discount/Premium to Net Asset Value (‘NAV’) per ShareIf the share price of an investment trust is lower than the NAVper share, the shares are said to be trading at a discount. Thediscount is shown as a percentage of the NAV per share. Theopposite of a discount is a premium. It is more common for aninvestment trust’s shares to trade at a discount than at apremium.

Portfolio TurnoverPortfolio turnover is based on the average equity purchasesand sales expressed as a percentage of average opening andclosing portfolio values.

Performance AttributionAnalysis of how the Company achieved its recordedperformance relative to its benchmark.

Performance Attribution Definitions:

Allocation EffectMeasures the effect of allocating assets to sectors or assettypes differently to the weighting in the benchmark.

Selection EffectMeasures the effect of investing in securities to a greater orlesser extent than their weighting in the benchmark, or ofinvesting in securities which are excluded from the benchmark.

Gearing/(Net Cash)Measures the impact of borrowings or cash balances on theCompany’s performance relative to its benchmark.

Currency HedgeMeasures the effect on the Company’s performance of a gain orloss arising from the Company’s hedging activities.

Management Fee/ExpensesThe payment of fees and expenses reduces the level of totalassets and therefore has a negative effect on the Company’srelative performance.

Shares IssuedThe issue of shares at a price in excess of the net asset valueper share, has a positive effect on the Company’s relativeperformance.

76 JPMorgan American Investment Trust plc. Annual Report & Accounts 2014

Shareholder Information continuedGlossary of Terms and Definitions


Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority

HistoryThe Company has its origins in the Alabama, New Orleans, Texas andPacific Junction Railways Company Limited which was formed in 1881to acquire interests in, and to undertake the completion of, threeAmerican railroads – the Vicksburg and Meridian, the Vicksburg,Shreveport and Pacific and the New Orleans and North Eastern. In 1917the Company was reorganised, a proportion of the railroad interestswere sold, and the investment powers were widened enabling its assetsto be invested in several countries including the United Kingdom. Toreflect the new objectives the name was changed to The Sterling Trust.The Company’s investment policy reverted to North Americansecurities in 1982 when the name was changed to The FlemingAmerican Investment Trust plc. The name was changed to JPMorganFleming American Investment Trust plc in April 2002 and to its presentform in 2006. JPMorgan, and its predecessor company, has been theCompany’s manager and secretary since 1966.

Company NumbersCompany registration number: 15543London Stock Exchange number: 08456505 ISIN: GB00BKZGVH64SEDOL Code: BKZGVH6Bloomberg code: JAM LN

Market InformationThe Company’s net asset value (‘NAV’) is published daily via the LondonStock Exchange. The Company’s shares are listed on the London StockExchange and the price is noted daily in the Financial Times, The Times,The Daily Telegraph, The Scotsman and on the J.P. Morgan website atwww.jpmamerican.co.uk, where the share price is updated every fifteenminutes during trading hours.

Websitewww.jpmamerican.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbrokeror professional adviser acting on an investor’s behalf. They may also bepurchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all available on theonline wealth manager service, J.P. Morgan WealthManager+ available atwww.jpmorganwealthmanagerplus.co.uk

Manager and Company SecretaryJPMorgan Funds Limited

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone number: 020 7742 4000

For company secretarial and administrative matters or to contact theBoard, please contact Alison Vincent.

DepositaryBNY Mellon Trust & Depositary (UK) LimitedBNY Mellon Centre160 Queen Victoria StreetLondon EC4V 4LA

The Depositary employs JPMorgan Chase Bank, N.A. as the Company’scustodian.

RegistrarsEquiniti LimitedReference 1077Aspect HouseSpencer RoadWest Sussex BN99 6DATelephone number: 0871 384 2316

Calls to this number cost 8p perminute froma BT landline. Otherproviders’ costsmay vary. Lines open8.30 a.m. to 5.30 p.m.,Monday toFriday. The overseas helpline number is +44 (0)121 415 7047

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrar quoting reference 1077.

Registered shareholders can obtain further details on their holdings onthe internet by visiting www.shareview.co.uk

Independent AuditorDeloitte LLPChartered Accountants and Statutory Auditor2 New Street SquareLondon EC4A 3ZB

BrokersWinterflood Securities LimitedThe Atrium BuildingCannon Bridge25 Dowgate HillLondon EC4R 2GA

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP, see contact details on the back cover of this report.

Information about the Company

Financial CalendarFinancial year end 31st DecemberFinal results announced MarchHalf year end 30th JuneHalf year results announced AugustDividend on ordinary shares paid May/OctoberInterest payments on 6.875% debenture stock 2018 June/DecemberAnnual General Meeting May

A member of the AIC


J.P. Morgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmamerican.co.uk

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