Annual Report2012 JPMorgan American Investment Trust plc Annual Report & Accounts for the year ended 31st December 2012 Features

Contents Objective About the Company To achieve capital growth from North American investments by outperformance of the Company’s benchmark. 1 Financial Results 2 Chairman’s Statement Investment Policies

Investment Review - To invest in quoted companies including, when appropriate, exposure to smaller capitalisation companies. 8 Investment Manager’s Report - To emphasise capital growth rather than income. 12 Summary of Results - To use gearing when appropriate to increase potential returns to shareholders. 13 Ten Year Performance - To hedge the currency risk only in respect of the geared portion of the portfolio. 14 Ten Year Financial Record - To invest no more than 15% of gross assets in other UK listed investment companies. 15 Ten Largest Equity Investments 17 Portfolio Analyses Further details of the Company’s investment policy and risk management are given in 18 Investment Activity the Directors’ Report on page 24. 19 List of Investments 22 Board of Directors Benchmark Index The S&P 500 Index expressed in sterling total return terms. Directors’ Report 24 Directors’ Report Capital Structure & Gearing 24 Business Review At 31st December 2012, the Company’s share capital comprised 50,241,592 ordinary 30 Corporate Governance shares of 25p each. Statement 35 Directors’ Remuneration Report The Company has a £50 million debenture in issue, carrying a fixed interest rate of 6.875%, per annum, repayable in June 2018. The Company’s policy is to use gearing Accounts in a range of 5% net cash to 20% geared in normal market conditions. Gearing for this purpose is defined as investments, excluding liquidity fund holdings, expressed as a 36 Statement of Directors’ percentage of total net assets. Responsibilities 37 Independent Auditor’s Report Management & Performance Fees 38 Income Statement 39 Reconciliation of Movements in The management fee is charged at a rate of 0.5% per annum, paid quarterly in Shareholders’ Funds arrears, on the Company’s total assets less current liabilities. The Company also has a 40 Balance Sheet performance fee calculated at the rate of 10% of the difference between the net asset 41 Cash Flow Statement value capital return and the capital return of the S&P 500 Index, expressed in sterling 42 Notes to the Accounts terms.

Shareholder Information Management Company 62 Notice of Annual General Meeting The Company employs JPMorgan Asset Management (‘JPMAM’ or the ‘Manager’) to 66 Glossary of Terms and Definitions manage its assets. 69 Information about the Company The US equity management team consists of 89 investment professionals and manages around $135 billion for its clients worldwide.

AIC The Company is a member of the Association of Investment Companies.

Website The Company’s website, which can be found at www.jpmamerican.co.uk, includes useful information on the Company, such as daily prices, factsheets and current and historic half year and annual reports. Financial Results

Total returns (including dividends reinvested) +7.3% +8.6% +10.5% Return to shareholders1 Return on net assets2 Benchmark Index1,3 (2011: +3.9%) (2011: +0.5%) (2011: +2.6%)

12.5p Long Term Performance (total returns) for periods ended 31st December 2012

Dividend % (2011: 11.0p) 140 125.3 120 109.1

100 96.7

80

60 47.4

40 35.6 35.4 33.5 33.0 29.0

20

0 3 Year Performance 5 Year Performance 10 Year Performance

JPMorgan American – return to shareholders1 JPMorgan American – return on net assets2 Benchmark1,3

A glossary of terms and definitions is provided on page 66.

1Source: Morningstar. 2Source: J.P. Morgan. 3The Company’s benchmark index is the S&P 500 Index expressed in sterling total return terms.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 1 Chairman’s Statement

Having become Chairman in May 2012, I wrote to you for the first time in the Company’s half-year report which was sent to shareholders in July 2012. I am now pleased to be reporting on the Company’s results for the full year to December 2012. Of course, by the time you read this statement, some months have passed and markets have moved on since the end of our financial year. As the Company’s net asset value (‘NAV’) is published daily and fact sheets are published monthly, you may well be aware of how things have changed since that point. Therefore I think it is worth trying to use my statement to give some longer term historic context and to discuss what your Board has been thinking about and doing over the year. For the 12 months to the end of December 2012, the US equity market, as measured by the S&P 500 Index, provided a return, including dividends reinvested, of 10.5% (in sterling terms). This is despite the euroturmoil in the middle of the year, the US presidential election, the fiscal cliff challenge, worries about the strength of the US recovery and concerns over US corporate growth. The old phrase ‘markets climb a wall of worry’ seems particularly appropriate. Sterling strengthened during the year from US$1.55 to the pound, to US$1.63 to the pound. It is worth remembering that 2012 was a continuation of a recovery from the dark days of 2008 and the chart below illustrates this. S&P 500 Index Performance (US$) Index level 1,625 1,500 1,375 1,250 1,125 1,000 875 750 625 Jan-06 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

S&P 500 Index expressed in US$ total return terms.

The S&P 500 Index has now risen by 71% from the low reached on 27th February 2009 in response to, or because of, the measures taken to stabilise the US financial system and economy. Shareholders might be interested to look at the ten year financial record tables on page 14. In some ways it feels as if the last 10 years have not been particularly profitable for equity investment. However, following the very difficult period for your Company during the unwinding of the dotcom boom, it is worth noting that since the end of December 2002, the NAV has risen from 502.3p per share to 925p per share (taking debt at its par value). The dividend per share has risen from 4.8p per share to 12.5p per share, giving a total return over the last 10 years of 108%, or 7.6%

2 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 per annum (the share price total return is higher). That compares with our benchmark, which has provided a total return of 89.8% over the same period.

Performance of your Company NAV and Gearing Over the last year, your Company provided a positive NAV return, including income of 8.6%, which is somewhat less than the 10.5% return provided by the market (all in sterling terms). Over five years, which covers the downturn and the upturn, the NAV is just ahead of the S&P 500 Index and over 10 years (for all of which time Garrett Fish has had responsibility for the investment management of the Company) the NAV is ahead significantly. Looking at individual years, the NAV has outperformed in five out of the last 10, and the greatest margin of out-performance was in the market collapse in 2008. These facts are unusual and something to be pleased about. For the technicians amongst you, we are looking at the NAV with debt at par here, so are not taking account of movements in the estimated price of our debt. We think that is probably a fair way of assessing the Manager’s performance. The reasons for our underperformance compared with the market index this year were almost all to do with the gearing and its use. Our debenture costs the Company approximately 0.8% per annum. In addition, your investment manager was perhaps understandably rather cautious at various points, and held some cash. In the event (and we will probably not know how close it came) the worst did not happen, and markets bounced significantly in the last six months. Your Company did not benefit quite as much as it might have done from that bounce. We have been considering the way we use gearing. We do think the ability to use borrowings in a reasonably cautious way is an advantage to our structure and will add to returns, given our view of the long term outlook for investment in US equities. The debenture we have in place is expensive, with a coupon of 6.85%, costing us some 0.8% of NAV per annum, but to repay it at this point would involve paying a further premium which seems unwarranted to us. However, we think the level of gearing which it provides, at approximately 10% of net assets, is appropriate. We think shorter term or tactical market timing is very difficult and not the most reliable source of return for anyone. In particular, the use of JPMAM’s gearing models in current times, when quantitative easing is affecting the price of long and short term interest rates, is problematic. Our attribution systems show that Garrett Fish’s large cap investment approach has resulted in out-performance or performance in line with the S&P 500 Index in eight out of the last 10 years at portfolio level (that is the large capitalisation portfolio compared with the index, before costs). Over the last five years, however, the cost of debt and tactical asset allocation have detracted from our returns relative to our benchmark. We have therefore reassessed the way we use gearing and will not seek to vary the level of gearing in normal circumstances to any significant extent (that means by more than approximately 2% above or below the 10% level). However, we do value our investment manager’s conservatism which served shareholders very well in 2008, and will permit him, if he feels that there is a real risk of loss of capital, to hold cash up to 5% of net assets. All of this remains within our stated gearing policy.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 3 Chairman’s Statement continued

Gearing level 25

20

15

10

5

0

–5

–10 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Source: Datastream Gross Gearing level. Net Gearing level (offsetting cash and near cash against £50m debenture).

Dividend We are pleased that the recovery in dividend payments from the US market has flowed through, to allow an increase in your dividend of 13.6% to 12.5p per share for the full year. In order to provide shareholders with more frequent income payments, the Company paid an interim dividend this year of 5.0p on 8th October 2012. Subject to shareholder approval at the AGM, a final dividend of 7.5p will be paid on 8th May 2013 to shareholders on the register on 12th April 2013. For some years, the Company’s dividend policy has been to distribute all, or most, of the available income in each year. This year’s payment does not necessitate drawing on the Company’s reserves. However, we do normally charge 80% of our costs to capital in line with our expected long term split of revenue and capital returns from the Company’s investments. Shareholders should note that dividends could vary significantly both with the level of dividends we received and the translation of those dividends into sterling. However, after the payment of the proposed final dividend, we will have a balance in the revenue reserves of £10.0 million (equivalent to 19.9p per share or 1.6 times the current dividend). We are, in addition, proposing to take the power to pay dividends out of capital. We do not foresee doing so if things continue as they are, but we do believe that there may be circumstances in which shareholders would prefer to see us maintain a dividend if we thought any shortfall in our income was temporary. Share Price and premium/discount Our share price rose during 2012 from 859p to 906p. Compared to NAV taking debt at fair value, the shares have traded at a premium for most of the year, although that premium decreased a little. The chart below shows the movement of the discount/premium over the last five years.

4 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Discount/Premium level 10 8 6 4 2 0 –2 –4 –6 –8 –10 –12 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: Datastream Discount/Premium level (calculated with debt at fair value and including income).

We have issued a significant number of shares during the year: 4,037,545 to be precise, or 8.7% of the issued share capital at the beginning of the year. We have always issued shares at a premium to estimated NAV calculated after deducting the estimated market value of our debt, and have added 0.2% to NAV calculated on that basis during the year. We are asking your permission to continue to issue shares where we are confident of sustainable market demand and are putting the relevant resolutions to shareholders at our Annual General Meeting in May. I would like to reiterate what we said in the half-year report: as a Board, we have demonstrated our willingness to buy shares back when the shares stand at anything more than a small discount. Between 2003 and 2007 we bought back approximately 30% of the outstanding share capital. Having issued shares, we are aware of our obligation not to let the discount widen significantly and are proposing to renew our buy back powers by asking shareholders to approve the relevant resolutions at the forthcoming Annual General Meeting. Investment Manager Your Company’s objective is to achieve capital growth from North American investments by out-performance of the Company’s benchmark, which is the S&P 500 Index (with both net asset value and benchmark measured in sterling total return terms). Your Board has once again thoroughly reviewed the capabilities of the investment manager in order to assess whether J.P. Morgan Asset Management (‘JPMAM’) should remain the Manager of the Company’s assets. We have met with the investment managers and the investment company team in London, had conversations over a remarkable teleconference system and visited the investment management offices in New York. We have spent some time seeking to understand the growth in JPMAM’s asset management business in the US and where the management of your Company fits within the business. We spent time too reviewing the investment managers’ methodologies and understanding how these evolve.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 5 We do look at comparisons with an appropriate peer group both in the UK and the US (with regard to performance, fee rates and costs of management) and spent time reviewing the investment management operation whilst in New York for a Board Meeting. In addition to investment management, the Manager provides many other services to the Company, including marketing, accounting and company secretarial services. We have concluded that the ongoing appointment of JPMAM is in the continuing interests of shareholders. Alternative Investment Fund Managers Directive The European Securities and Markets Authority (ESMA) has published its final advice on implementing the measures of the Alternative Investment Fund Managers Directive (the ‘Directive’). How the UK Financial Services Authority chooses to implement the Directive, and therefore the implications for your Company, is currently the subject of consultation and discussion within the investment company industry. Your Board in conjunction with the Association of Investment Companies (the ‘AIC’) and JPMAM is monitoring developments closely and considering how best to deal with these new regulatory requirements (as they become somewhat more clear). Foreign Account Tax Compliance Act (‘FATCA’) The United States has introduced provisions commonly referred to as ‘FATCA’, which introduce reporting requirements for foreign financial institutions (‘FFI’s’) in respect of their unit or account holders. Last year, my predecessor noted that these requirements appeared very onerous and compliance would be difficult to achieve. However, it does seem that inter-government negotiations conducted by HMRC have resulted in a framework that will allow the Company, as an investment trust, to be deemed as a ‘non-reporting FFI’ and thus be spared most of the difficulties which might have arisen. The Board Your Board has put in place procedures to ensure that the Company complies fully with the Association of Investment Companies (the ‘AIC’) Code on Corporate Governance. In accordance with corporate governance best practice, all continuing Directors will seek reappointment at the Annual General Meeting. Accordingly, I, along with Kate Bolsover and James Williams, all being eligible, offer ourselves for reappointment at this year’s Annual General Meeting. Having been appointed on 4th May 2012 and after the 2012 Annual General Meeting, Simon Bragg and Sir Alan Collins will both be standing for initial appointment by shareholders. I am pleased to be able to report that both Directors have already significantly contributed to the Board’s deliberations and are proving to be excellent additions to the Board. Having served as a Director since 2003, James Fox will be retiring from the Board at the forthcoming Annual General Meeting. James has served as Audit Committee Chairman throughout this time on the Board. His understanding of the US, knowledge of investment and investment company matters and rigour as Chairman of the Audit Committee have contributed significantly to the success of the Company over the last 10 years. The Nomination and Remuneration Committee will continue to manage the process of Board succession and refreshment over the next year, to make sure your Board has the skills and experience to add value to shareholders. It has also reviewed the fees

6 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 paid to Directors and recommended that no increase should be made this year. Details of the fee levels can be found in the Directors’ Remuneration Report on page 35. However, it has recommended that the aggregate maximum level of fees payable to Directors be increased from £175,000. This level was last increased in 2004, and we are proposing to shareholders that the level be raised to £225,000. Although we currently have six board members, James Fox’s retirement will reduce the number of Directors to five following the AGM. However, an increased maximum would give us flexibility to manage the board succession process and recruit good candidates in the future. Communications Please do get in touch if you have questions or comments for your Board. There is a facility on the Company’s website, www.jpmamerican.co.uk, to ask me questions. In addition, you are more than welcome to write to me via our Company Secretary, at the Company’s registered office. Please refer to the ‘Information about the Company’ section in the inside back cover of this Report for contact details. Our Annual General Meeting will be held in a new place this year, so please do come and join us if you are interested to do so. Annual General Meeting This year’s Annual General Meeting will be held on Wednesday, 1st May 2013 at 2.30 p.m. at Holborn Bars, 138–142 Holborn, London EC1N 2NQ. As in previous years, in addition to the formal part of the meeting, there will be a presentation from our investment manager, who will answer questions on the portfolio and performance. There will also be an opportunity to meet the Board, Garrett Fish and representatives of JPMAM after the meeting. I look forward to welcoming as many of you as possible to this meeting. If you have any detailed or technical questions, it would be helpful if you could raise these in advance of the meeting with the Company Secretary, at the address above. Shareholders who are unable to attend the Annual General Meeting are encouraged to use their proxy votes.

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

Sarah Bates Chairman 18th March 2013

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 7 Investment Manager’s Report

Market Review With the chances of another round of credit defaults seemingly receding (especially in Europe) 2012 rewarded investors who stayed with equities, and the US equity market was no exception. The S&P 500 returned 10.5% (in sterling terms) for the year. Reduced uncertainty within markets was a major theme; there were of course some uncomfortable moments but equity investors experienced much less drama than in the previous five years, and by the end of 2012 market measures of volatility had fallen to the lowest levels since the beginning of the financial crisis in 2007. The US equity market has returned only 6% over the past five years with 17% volatility, so last year’s strong returns and realised volatility of only 6% (well below long run averages) were especially welcome. The market improved considerably as the year progressed, helped by better returns from smaller stocks, better returns from value investing, and a sharp drop in intra-stock correlations. The market’s focus on high dividend paying names faded considerably in the last few months and for the year, the financial sector provided many of the best returns as the S&P financials gained 29%. Unmistakable signs of a better housing market (homebuilder stocks gained a spectacular 54% on average) were one key factor for the financial stocks, and investors now appear to believe that the worst of the impact from the 2008 credit crisis has passed. Unimpressive returns came from those sectors most exposed to the weakness in the global economy that was still very much a concern late in the year; energy and basic industry names underperformed the broader market and a few groups (steel and gold miners) actually fell sharply. Many of the more defensive sectors also lagged the broader market, with utility stocks and consumer staples returning 3.5% and 5% respectively. It was not always clear that this would be the case, but in the end the winning ingredients for stock selection in 2012 were stocks with more volatile characteristics, less predictable earnings and higher price/earnings valuations. The Company’s net asset value total return (in sterling terms) rose by 8.6%, which was 1.9% less than our benchmark, the S&P 500 Index.

Overall Asset Allocation and Performance The investment management team is responsible for managing the allocation between the large and the small cap portfolios, together with the levels of cash and gearing. In 2012, the Company’s gearing/(net cash) ranged between (4.4)% and (0.5)% of shareholders’ funds, with the level at the year end being (0.6)%. The level of gearing has been adjusted at regular intervals within the overall gearing guidelines laid down by the Board to reflect the outlook on risk and return for both equities and bonds. We remained ungeared throughout 2012 due to our concerns over the challenging economic and political backdrop. Our cautious stance was, however, a negative factor in that the Company held a relatively high cash weighting and this resulted in a drag on performance of 1.1% as the market rallied for the period under review. The weighting in the small cap portfolio ranged between 3.0% and 5.4% of the Company’s total assets less current liabilities and ended the year at 5.4%. We believe that our ability to move between the two segments enhances returns to shareholders and helps to balance our overall risk.

8 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Attribution data for 2012 shows that our larger companies portfolio was flat for the period and our smaller companies portfolio was a marginal detractor.

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

Sector Weightings of the Large Cap Portfolio versus S&P 500 as at 31st December 2012 Large Company Overweight/ Portfolio S&P 500 Underweight Sector %* % %

Technology 21.4 16.7 4.7 Health Care 16.3 11.9 4.4 Consumer Discretionary 14.7 13.4 1.3 Financial Services 14.2 17.0 –2.8 Energy 12.5 11.0 1.5 Consumer Staples 7.1 9.2 –2.1 Producer Durables 7.8 10.5 –2.7 Utilities 5.0 6.3 –1.3 Materials & Processing 1.0 4.0 –3.0

*Does not include small cap stocks and net current assets. Source: Wilshire. Based on the Russell Global Sector Classification. The largest detractor from performance was weak stock selection in the financial services and consumer discretionary sectors. Within financial services, a lack of exposure to JPMorgan Chase1 and Visa impeded performance the most. We have been increasing the portfolio’s exposure in this segment by adding to higher beta names such as Citigroup and Bank of America. Regarding our performance in the consumer discretionary sector, our exposure to retailers Best Buy and Staples proved disappointing. Best Buy’s share price slipped as the electronics retailer reported a second-quarter profit plunge of 90% and not only suspended its current

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

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 9 Investment Manager’s Report continued

forecast but said that it would not provide a new outlook. We continue to believe Performance attribution for the that the structural issues are overhyped, and that product cycle weakness is the year ended 31st December 2012 primary culprit of this ongoing concern. The shares of Staples came under pressure Year ended Year ended 31st December 31st December after the office-supplies chain announced that fiscal second-quarter earnings fell 2012 2011 32%, prompting the company to trim its full-year outlook. The company has since %% Contributions to total returns announced a restructuring plan that includes cutting its North American retail square footage by approximately 15% by the end of fiscal year 2015. Net asset value total return The table below shows the largest positive and negative stock contributors to the (in sterling terms) 8.6 0.5 Company’s portfolio performance in 2012: Benchmark total return (in sterling terms) 10.5 2.6 Relative Stock Return Excess return –1.9 –2.1 Weighting at in 2012 Contribution Stock year end %% Contributions to total returns Large cap portfolio 0.2 0.2 Positive Contributors Allocation effect 0.1 0.5 Selection effect 0.1 –0.3 Apple Overweight 32.8 0.4 1 Small cap portfolio –0.1 –0.3 Hewlett Packard Overweight –43.1 0.3 Allocation effect –0.1 –0.3 Intel2 —–12.0 0.3 Gearing/(net cash) –1.1 –2.1 News Corp Overweight 44.3 0.3 Currency hedge –0.2 0.8 Time Warner Cable Overweight 57.0 0.2 Management fee/expenses –0.7 –0.7 Negative Contributors Total –1.9 –2.1 Best Buy Overweight –47.3 –0.4

Source: JPMAM and Morningstar. All figures are on a Occidental Petroleum Overweight –16.1 –0.3 total return basis. Sandisk Overweight –11.5 –0.3 Performance attribution analyses how Staples Overweight –15.1 –0.3 the Company achieved its recorded Comcast2 — 60.8 –0.3 performance relative to its benchmark index. 1Only held partly through the year and at year end. 2Not held in the portfolio at year end. A glossary of terms and definitions is Source: Wilshire. Contribution figures are based on stock selection relative to the total contribution return, in US$. provided on page 66. Smaller Companies Portfolio US smaller companies marginally outperformed their large cap brethren in 2012. However, our holding of the US smaller companies portfolio marginally detracted from performance for the year. Stock selection in technology, our largest sector allocation, was the biggest contributor to performance; and stock selection in health care was the largest detractor.

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

10 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 While performance improved during the third quarter due to the continued strength of the technology sector and better performance from our health care positions, the portfolio ended the year with a weak fourth quarter as the market began to sell off some of our outperforming stocks, particularly within technology. Our base case remains that companies continue to look fundamentally attractive highlighted by strong earnings and balance sheets within the small cap space. The small cap portfolio remains positioned for modest economic growth as secular growth drivers remain in place along with the added potential of a cyclical recovery, particularly in the still very depressed auto and housing sectors. In relation to positioning, the small cap portfolio continues to be overweight in technology, as well as modestly overweight in health care and financial services. The portfolio is underweight the materials and processing, producer durables and both of the consumer (discretionary and staples) sectors as we are finding less attractive investment ideas.

Outlook Investors were faced with three looming concerns going into 2012; the European debt crisis, an economic slowdown in China and US fiscal policy. During the year, the European debt crisis worries receded while the economic data has turned more positive in China. In the US, the fiscal cliff legislation was passed on New Year’s Day 2013 and the market has responded very positively to this news in the short term. However, as tough as the tax debate was, more contentious negotiations lie ahead as Republicans are likely to demand spending cuts and entitlement reform before agreeing to raise the debt ceiling. As the US approaches the absolute limits of the debt ceiling with no agreement imminent, we expect markets to be more volatile. While investors may continue to concentrate largely on the events occurring in Washington, it is important to focus on what we believe remains a modestly favourable environment for equities. Central banks across the globe remain accommodative. The US economy continues to rebound from the disruptions caused by Hurricane Sandy and the improvement in the housing market remains solid. Despite posting double digit returns for 2012, equity valuations remain reasonably attractive. All but the more defensive utilities and telecom sectors trade at forward P/E multiples of at least 15% below their 15-year averages. Reaching an agreement on the debt ceiling and fostering credible long term deficit reduction could be what we see as the last of the significant macro hurdles. It would be a welcome relief for markets to focus on the robust fundamentals of corporate America and not on the growing fiscal problems of the US government.

Garrett Fish Investment Manager 18th March 2013

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 11 Summary of Results

2012 2011

Total returns for the year ended 31st December Return to shareholders1 +7.3% +3.9% Return on net assets with debt at par value2 +8.6% +0.5% Return on net assets with debt at fair value2 +9.1% -0.3% Benchmark1,3 +10.5% +2.6%

% change

Net asset value, share price, discount and market data at 31st December Net asset value per share with debt at par value 925.0p 866.5p +6.8 Net asset value per share with debt at fair value4 904.4p 842.8p +7.3 Share price 906.0p 859.0p +5.5 Share price premium/(discount) to net asset value per share with debt at par value (after deducting the proposed final dividend) (1.3)% 0.4% Share price (discount)/premium to net asset value per share with debt at fair value (after deducting the proposed final dividend) 1.0% 3.3% Shareholders’ funds (£’000) 464,734 400,379 +16.1 Market capitalisation (£’000) 455,189 396,893 +14.7 S&P 500 Index expressed in sterling (capital only)5 877.39 809.21 +8.4 Exchange rate £1=$1.6255 £1=$1.5541 –4.6 Shares in issue 50,241,592 46,204,047

Revenue for the year ended 31st December Net revenue attributable to shareholders (£’000) 6,653 4,989 +33.4 Return per share 13.80p 11.20p +23.2 Dividend per share 12.50p 11.00p +13.6

Gearing/(net cash) at 31st December6 (0.6)% (2.8)%

Ongoing charges7 0.68% 0.69%

Ongoing charges including any performance fee payable8 0.68% 0.69%

Management Fee9 0.50% 0.50%

A glossary of terms and definitions is provided on page 66. 1Source: Morningstar. issued by the Association of Investment Companies (the ‘AIC’) in May 2012 and 2Source: J.P. Morgan. replaces the Total Expense Ratio (‘TER’) published on previous years. The comparative figure represents the expenses calculated as above, expressed as a 3 The Company’s benchmark is the S&P 500 Index expressed in sterling total return terms. percentage of the average month-end net asset values during the year, in line with 4The fair value of the £50m debenture issued by the Company has been calculated using TER Methodology. discounted cash flow techniques, using the yield from a similarly dated gilt plus a margin 8Ongoing charges including any performance fee payable represents the management based on the five year average for the AA Barclays Sterling Corporate Bond spread. fee, performance fee and all other operating expenses excluding interest, expressed 5Source: Datastream. as a percentage of the average of the daily net assets during the year. The ongoing 6Gearing represents the excess amount above shareholders’ funds of total assets less charges are calculated in accordance with guidance issued by the Association of cash/cash equivalents, expressed as a percentage of the shareholders’ funds. If the Investment Companies (the ‘AIC’) in May 2012 and replaces the TER published on amount so calculated is negative, this is shown as a ‘net cash’ position. previous years. The comparative figure represents the expenses calculated as above, expressed as a percentage of the average month-end net asset values during the year, 7Ongoing charges represent the management fee and all other operating expenses in line with TER Methodology. excluding interest, expressed as a percentage of the average of the daily net assets during the year. The ongoing charges are calculated in accordance with guidance 9The level of the management fee, excluding any performance fee payable.

12 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Ten Year Performance

Total Return Figures have been rebased to 100 at 31st December 2002 250

200

150

100

50 2002 2003 2004 2005 2006 2007 2008 2009 2010 20122011

Source: Morningstar/Datastream. JPMorgan American – share price total return. JPMorgan American – net asset value per share total return. Benchmark total return.

Performance Relative to Benchmark Figures have been rebased to 100 at 31st December 2002

130

120

110

100

90 2002 2003 2004 2005 2006 2007 2008 2009 2010 22110 102

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.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 13 Ten Year Financial Record

At 31st December 2002 2003 20041 2005 2006 2007 2008 2009 2010 2011 2012

Shareholders’ funds (£m) 295.1 313.1 289.7 309.0 312.0 321.5 293.7 321.5 374.0 400.4 464.7 Net asset value per share (p) 502.3 586.3 615.1 710.7 720.9 752.4 687.4 752.4 872.8 866.5 925.0 Share price (p) 465.0 540.0 548.0 633.0 654.0 665.5 626.0 697.0 837.0 859.0 906.0 Share price premium/ (discount) (%)2 (7.4) (7.9) (8.1) (7.3) (6.3) (8.4) (3.9) (3.3) (0.3) 3.3 1.3

Gearing/(net cash) (%)3 18.6 10.8 12.5 8.8 4.3 (2.9) 12.8 11.3 4.2 (2.8) (0.6) Exchange rate (£1=$) 1.61 1.79 1.92 1.72 1.96 1.99 1.44 1.61 1.57 1.55 1.63

Year ended 31st December

Earnings per share (p) 4.75 6.41 8.20 7.78 11.28 10.70 11.36 10.63 10.56 11.20 13.80 Dividend per share (p) 4.80 6.80 7.50 8.00 11.00 11.00 11.00 11.00 11.00 11.00 12.50

Ongoing charges (%)4 0.69 0.73 0.72 0.72 0.76 0.69 0.71 0.75 0.70 0.69 0.68 Ongoing charges (%) including any performance fee payable5 0.69 0.73 0.72 0.72 0.76 0.69 0.82 0.86 0.81 0.69 0.68

Rebased to 100 at 31st December 2002

Share price total return6 100.0 117.3 120.7 141.3 147.8 152.9 146.4 166.1 202.1 210.0 225.3 Net asset value per share – total return6 100.0 117.8 123.5 146.3 147.7 156.6 145.2 162.0 190.8 191.8 208.2

Benchmark – total return6,7 100.0 115.3 118.8 138.7 140.4 145.1 126.1 141.5 167.4 171.7 189.8

A glossary of terms and definitions is provided on page 66.

1The results for the year ended 31st December 2004 have been restated in accordance with Financial Reporting Standards 21, 25 and 26. Years prior to 2004 have not been restated. 2For 2004 onwards the discount has been calculated using the NAV with debt at fair value after deduction of the proposed final dividend. 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 so calculated 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 during the year. The ongoing charges are calculated in accordance with guidance issued by the Association of Investment Companies (the ‘AIC’) in May 2012 and replaces the Total Expense Ratio (‘TER’) published on previous years. The comparative figure represents the expenses calculated as above, expressed as a percentage of the average month-end net asset values during the year, in line with TER Methodology. 5Ongoing charges including any performance fee payable represents the management fee, performance fee and all other operating expenses excluding interest, expressed as a percentage of the average of the daily net assets during the year. The ongoing charges are calculated in accordance with guidance issued by the Association of Investment Companies (the ‘AIC’) in May 2012 and replaces the TER published on previous years. The comparative figure represents the expenses calculated as above, expressed as a percentage of the average month-end net asset values during the year, in line with TER Methodology. 6Source: Morningstar. 7The Company’s benchmark is the S&P 500 Index expressed in sterling total return terms.

14 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Ten Largest Equity Investments

2012 2011 Valuation Valuation Company Sub Sector £’000 %1 £’000 %1

Apple Technology 21,232 4.1 19,036 4.2 Apple designs, manufactures and markets personal computers and related personal computing and mobile communication devices along with a variety of related software, services, peripherals and networking solutions. The company sells its products worldwide through its online and retail stores, its direct sales force and third-party wholesalers. Exxon Mobil Energy 17,108 3.3 20,134 4.5 Exxon Mobil operates petroleum and petrochemicals businesses on a worldwide basis. The company’s operations include exploration and production of oil and gas, electric power generation and coal and minerals operations. Exxon Mobil also manufactures and markets fuels, lubricants and chemicals.

Microsoft Technology 16,618 3.2 16,334 3.6 Microsoft develops, manufactures, licences, sells and supports software products. The company offers operating system software, server application software, business and consumer applications software, software development tools and internet and intranet software. Microsoft also develops the MSN network of internet products and software.

IBM Technology 12,714 2.5 12,350 2.7 IBM provides computer solutions through the use of advanced information technology. The company’s solutions include technologies, systems, products, services, software and financing. IBM offers its products through its global sales and distribution organisation, as well as through a variety of third party distributors.

Berkshire Hathaway Financial Services 12,466 2.4 10,719 2.4 Berkshire Hathaway operates in a variety of business sectors. The company’s principal operations are insurance businesses conducted nationwide on a primary basis and worldwide on a reinsurance basis. The company’s other operations include a railway, specialty chemicals and an international association of diversified businesses. The company is known for its control by Warren Buffett, who is the company’s chairman and CEO.

Pfizer Health Care 12,317 2.4 9,649 2.2 Pfizer is a research-based, global pharmaceutical company that discovers, develops, manufactures and markets medicines for humans and animals. The company’s products include prescription pharmaceuticals, non-prescription self-medications and animal health products such as anti-infective medicines and vaccines.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 15 Ten Largest Equity Investments continued

2012 2011 Valuation Valuation Company Sub Sector £’000 %1 £’000 %1

Merck Health Care 11,157 2.2 9,812 2.2 Merck is a global pharmaceutical company that discovers, develops, manufactures and markets a broad range of human and animal health products. Merck’s products include a treatment for elevated cholesterol, a treatment for male hair loss, a preventative treatment for osteoporosis, a treatment for hypertension and a treatment for allergic rhinitis.

Philip Morris International Consumer Discretionary 10,813 2.1 8,745 1.9 Philip Morris International, produces, sells, distributes and markets a wide range of branded cigarettes and tobacco products in markets outside of the United States of America. The company’s portfolio comprises both international and local brands.

United Technologies2 Technology 10,409 2.0 7,999 1.8 United Technologies Corporation provides technology products and support services to customers in the aerospace and building industries worldwide. The company’s products include aircraft engines, elevators and escalators, heating and air conditioning equipment, helicopters, aerospace systems, fuel cell systems and fire and safety equipment.

Williams Energy 9,139 1.8 9,316 2.1 Williams is an integrated natural gas company that produces, gathers, processes and transports natural gas. The company’s operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, the Eastern Seaboard and the province of Alberta in Canada. Total 133,973 26.0

1Based on total assets less current liabilities of £514.6m (2011: £450.2m). 2Not included in the ten largest equity investments at 31st December 2011. At 31st December 2011 the value of the ten largest equity investments amounted to £125.0m representing 27.8% of total assets less current liabilities.

16 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Portfolio Analyses

Sector Analysis 31st December 2012 31st December 2011 Portfolio Benchmark Portfolio Benchmark %1 % %1 %

Technology 18.0 16.7 18.1 17.1 Health Care 13.6 11.9 12.7 11.7 Financial Services 12.0 13.4 9.8 14.6 Energy 10.5 17.0 12.0 12.3 Consumer Discretionary 12.4 11.0 9.8 12.5 Consumer Staples 6.0 9.2 7.8 10.1 Producer Durables 6.6 10.5 6.5 11.0 Utilities 4.2 6.3 5.4 6.9 Materials & Processing 0.8 4.0 1.0 3.8 Small and unquoted companies2 5.5 — 3.3 — Net current assets3 10.4 — 13.6 — Total 100.0 100.0 100.0 100.0

1Based on total assets less current liabilities of £514.6m (2011: £450.2m). 2This includes small companies assets of 5.4% and unquoted companies of 0.1%. 3Includes investments in liquidity funds. For the sector weightings of the large cap portfolio versus the S&P 500 Index see page9.

Asset Analysis 2012 2011 At 31st December %1 %1

Large Companies 84.1 83.1 Small Companies 5.4 3.2 Unquoted Companies 0.1 0.1 Net current assets2 10.4 13.6 Total 100.0 100.0

1Based on total assets less current liabilities of £514.6m (2011: £450.2m). 2Includes investments in liquidity funds.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 17 Investment Activity during the year ended 31st December 2012

Value at Value at 31st December 2011 Changes 31st December 2012 % of Purchases Sales in value % of £’000 portfolio £’000 £’000 £’000 £’000 portfolio

Large Companies 373,866 87.9 103,682 78,216 33,209 432,541 86.3 Small Companies1 15,220 3.6 21,271 9,141 1,146 28,496 5.7 Liquidity Fund2 36,156 8.5 75,470 69,490 (1,963) 40,173 8.0 Total investments 425,242 100.0 200,423 156,847 32,392 501,210 100.0

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 exchange rate movements.

18 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 List of Investments at 31st December 2012

Valuation Valuation Company £’000 Company £’000

Large Companies Parker-Hannifin 4,548 These are generally defined as companies which have a Time Warner Cable 4,456 market capitalisation of more than $3 billion. American International Group 4,413 Wyndham Worldwide 4,255 Apple 21,232 Express Scripts 4,233 Exxon Mobil 17,108 Verizon Communications 4,158 Microsoft 16,618 Nextera Energy 4,004 IBM 12,714 Sandisk 3,967 Berkshire Hathaway 12,466 State Street 3,962 Pfizer 12,317 Walgreen 3,836 Merck 11,157 Wellpoint 3,643 Philip Morris International 10,813 Capital One Financial 3,614 United Technologies 10,409 McKesson 3,556 Williams 9,139 General Dynamics 3,459 Qualcomm 8,649 Broadcom 3,267 Oracle 7,948 Constellation Brands 3,220 Wal-Mart Stores 7,937 Coca-Cola Enterprises 3,159 Abbott Laboratories 7,570 Apache 3,153 Wells Fargo 7,435 Staples 3,046 Cisco Systems 7,068 DirecTV 3,034 Mylan Laboratories 7,049 Expedia 2,975 ConocoPhillips 6,927 AES 2,898 News Corporation 6,884 Danaher 2,876 Occidental Petroleum 6,736 Macy’s 2,650 US Bancorp 6,222 United Parcel Service 2,595 EMC 6,205 General Motors 2,553 Ford Motor 6,159 KeyCorp 2,535 United Health 6,136 Altera 2,516 General Electric 6,050 Monsanto 2,515 Chevron 6,011 Gilead Sciences 2,505 Procter & Gamble 5,973 Prudential Financial 2,437 Amerisource Bergen 5,884 Goldman Sachs 2,244 CenturyLink 5,464 MasterCard 2,147 CVS 5,432 Phillips 2,146 Bank of America 5,393 American Express 2,136 AT&T 5,279 Brinker International 2,125 Time Warner 5,184 PNC Financial Services 2,070 Baxter International 4,839 Marathon Petroleum 2,050 Citigroup 4,756 Norfolk Southern 1,883 Amazon 4,591 Marriott International 1,637 Target 4,571

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 19 List of Investments continued

Valuation Valuation Company £’000 Company £’000

National Oilwell Varco 1,635 Watsco 325 Hewlett Packard 1,629 Reachlocal 315 Best Buy 1,439 Wolverine World Wide 313 Devon Energy 1,101 Cornerstone Ondemand 310 UGI 1,081 Rexnord 301 Morgan Stanley 854 Cubist Pharmaceuticals 301 Lumber Liquidators 294 432,540 CommVault Systems 291 Small Companies Douglas Emmett 281 These are generally defined as companies which, at the date of Rosetta Resources 281 investment, have a market capitalisation of less than $3 billion. Bruker 281 The investments within the Small Companies portfolio are listed Mistras 280 separately as they are managed as a discrete portfolio. HEICO 273 Wabtec 270 Emeritus 453 NetSuite 267 Acadia Healthcare 453 Envestnet 266 Rush Enterprises 437 Vail Resorts 263 Dril Quip 431 Syneron Medical 261 Old Dominion Freight Line 420 Fluidigm 259 Carlisle Companies 414 Boingo Wireless 258 Trex Company 412 INPHI 258 Acuity Brands 404 Laredo Petroleum 258 DealerTrack 394 Signature Bank 256 Opentable 391 Aegerion Pharmaceuticals 255 Aruba Networks 389 Conns 251 Middleby 386 WhiteWave Foods 249 Insulet 374 Generac 240 Armstrong World Industries 374 Fusion-Io 237 Fortune Brands Home & Security 372 Homeaway 231 Financial Engines 368 Novadaq Technologies 230 Pennantpark Investment 363 Tornier 227 MSC Industrial Direct 360 Simpson Manufacturing 222 Cavium 356 Titan International 222 Broadsoft 354 Concur Technologies 220 Forum Energy Technologies 352 Wellcare Health Plans 219 Oasis Petroleum 339 TIBCO Software 218 Graco 338 Amtrust Financial Services 218 Hittite Microwave 332 Tesla Motors 217 Infoblox 332 Scientific Games 214 Childrens Place Retail Store 330 Vocera Communications 213 Affiliated Managers 327 Morgans Hotel 211

20 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Valuation Valuation Company £’000 Company £’000

SolarWinds 210 Impax Laboratories 136 Stifel Financial 207 Acorda Therapeutics 136 Onyx Pharmaceuticals 206 Palo Alto Networks 131 Imperva 206 Puma Biotechnology 130 Fortinet 200 Ariad Pharmaceuticals 130 Demandware 198 Sothebys 126 Vera Bradley 196 ViroPharma 120 Arctic Cat 195 BJS Restaurants 119 Unilife 194 Threshold Pharmaceuticals 118 Masimo 191 Bravo Brio Restaurant 115 Realpage 188 Rue21 114 Nektar Therapeutics 179 Servicesource International 91 Synta Pharmaceuticals 177 Audience 89 Cohen & Steers 175 MELA Sciences 23 Splunk 172 27,892 Bazaarvoice 171 Exact Sciences 171 Unquoted Companies BRE Properties 165 Kane Holdings 604 Home Properties 163 Sagent Pharmaceuticals 163 604 Ruckus Wireless 163 Take Two Interactive Software 161 Liquidity Fund Imris 155 JPMorgan US Dollar Liquidity Fund 40,174 Health Net 153 40,174 The Fresh Market 152 Total investments1 501,210 Marten Transport 150 Oxford Industries 143 Net current assets 13,364 Zillow 142 Stage Stores 142 Total assets less current liabilities 514,574 Halozyme Therapeutics 142 Clean Harbors 137 1Total investments includes 0.1% in unquoted companies. Investments are all equities except for the holding in the JPMorgan US Dollar Liquidity Fund. Trulia 136

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 21 Board of Directors

Sarah Bates (Chairman of the Board and Nomination & Remuneration Committee) A Director since 2005. Last reappointed to the Board: 2012. Remuneration: £37,500. Director of the Association of Investment Companies, St. James’s Place plc, New India Investment Trust plc, Witan Pacific Investment Trust plc, Polar Capital Technology Trust plc and Development Securities plc. Mrs Bates is also Chairman of the Stena Line (UK) Pension Scheme, of Rutley Russia Property Fund and the Kings Corner Project and sits on or is advisor to various pension fund and charitable investment committees. She publishes a guide to investment jargon and was formerly CEO of Invesco’s UK Institutional (including investment trusts) business. Shared directorships with other Directors: None. Shareholding in Company: 5,000.

Kate Bolsover* A Director since 2005. Last reappointed to the Board: 2012. Remuneration: £25,000. Until June 2005 Director of Corporate Communications at Cazenove & Co. Mrs Bolsover was previously Managing Director of Signature Financial Group. She is Deputy Chairman of Tomorrow’s People Trust Limited and a Director and Chairman of the Audit Committee of Fidelity Asian Values plc. Shared directorships with other Directors: None. Shareholding in Company: 2,178.

Simon W Bragg* A Director since 2012. Last reappointed to the Board: Seeking initial appointment by shareholders at the 2013 Annual General Meeting. Remuneration: £25,000. Chairman of corporate finance at Oriel Securities Limited, a UK corporate and institutional broker which he co-founded in 2002. Having qualified as a Chartered Accountant at KPMG, Mr Bragg previously worked at Hoare Govett, Cargill and HSBC. Shared directorships with other Directors: None. Shareholding in Company: 1,390.

22 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Sir Alan S Collins* A Director since 2012. Last reappointed to the Board: Seeking initial appointment by shareholders at the 2013 Annual General Meeting. Remuneration: £25,000. Sir Alan Collins has recently retired from the British Diplomatic Service, during which he held a number of Ambassador appointments and was until August 2011, Director General Trade and Investment USA in New York. He was Managing Director of Olympics Legacy in United Kingdom Trade and Investment. He is non-executive Chairman of Nair & Co Limited and Powertec Energy Limited and a non-executive Director of Amlin plc, Prudential Assurance Singapore Limited and ICICI Bank UK plc. Shared directorships with other Directors: None. Shareholding in Company: 555.

James G Fox (Chairman of the Audit Committee)* A Director since 2003. Last reappointed to the Board: 2012. Remuneration: £30,000. A Director of Miton Worldwide Growth Investment Trust plc. Mr Fox has more than forty years’ experience of investment management and is a former Deputy Chairman of the Association of Investment Companies. Shared directorships with other Directors: None. Shareholding in Company: 35,800.

James P Williams* A Director since 2003. Last reappointed to the Board: 2012. Remuneration: £25,000. Mr Williams has been professionally involved in the investment management industry for over 35 years. He retired from Baring Asset Management in 2002, where he was Chief Investment Officer and head of global investment strategy. He is a Director of Investors Capital Trust plc and Prosperity Russia Domestic Fund plc. Shared directorships with other Directors: None. Shareholding in Company: 6,000.

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

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 23 Directors’ Report

The Directors present their report and the audited financial Investment Limits and Restrictions statements for the year ended 31st December 2012. (all at time of investment) • The Company will not normally invest more than 8% of its Business Review gross assets in any one individual stock (31st December 2012: 4.1% largest individual stock). Business of the Company The Company carries on business as an investment trust and • The Company will normally limit its five largest investments was approved by HM Revenue & Customs as an investment to 40% of its gross assets. (31st December 2012: 15.5%). trust in accordance with Section 1158 of the Corporation Tax • The Company will not invest more than 10% of its gross Act 2010 for the year ended 31st December 2011. In the opinion assets in liquidity funds in normal market conditions of the Directors, the Company has subsequently conducted its (31st December 2012: 7.8%). affairs so that it should continue to qualify as an investment trust under the HM Revenue and Customs’ Qualifying rules. • The Company will not invest more than 10% of gross assets in companies that themselves may invest more than 15% of Approval for the year ended 31st December 2011 is subject to gross assets in UK listed investment companies review should there be any subsequent enquiry under (31st December 2012: nil). Corporation Tax Self Assessment. • The Company will not invest more than 15% of its gross The Company is an investment company within the meaning of assets in other UK listed investment companies Section 833 of the Companies Act 2006. The Company is not a (31st December 2012: nil). close company for taxation purposes. • The Company will use gearing when appropriate to A review of the Company’s activities and prospects is given in increase potential returns to shareholders; the Company’s the Chairman’s Statement on pages 2 to 7 and the Investment policy is to use gearing in a range of 95-120% in normal Manager’s Report on pages 8 to 11. market conditions (31st December 2012: 99%). A more Objective specific tactical range is agreed between the Board and the The Company’s objective is to achieve capital growth from Investment Manager from time to time. North American investments by out-performance of the • The Company only hedges its currency risk in respect of the Company’s benchmark, the S&P 500 Index expressed in full value of the debenture. sterling total return terms. Compliance with the Board’s investment restrictions and Investment Policies and Risk Management guidelines is monitored by the Manager and is reported to the In order to achieve its investment objectives and to seek to Board on a monthly basis. manage risk, the Company mainly invests in a diversified portfolio of quoted companies including, when appropriate, Performance exposure to smaller capitalisation stocks. The Company In the year ended 31st December 2012, the Company currently has separate portfolios dedicated to larger produced a total return to shareholders of +7.3% and a total capitalisation and smaller capitalisation exposure. The number return on net assets of +8.6%. This compares with the return of investments in the larger capitalisation portfolio will on the Company’s benchmark in sterling terms, of +10.5%. At normally range between 60-100 stocks representing between 31st December 2012, the value of the Company’s investment 80-100% of the Company’s equity portfolio. The number of portfolio was £501.2 million. The Investment Manager’s investments in the smaller capitalisation portfolio will normally Report on pages 8 to 11 includes a review of developments range between 100-120 stocks representing between 0-20% during the year as well as information on investment activity of the Company’s equity portfolio. The Company may invest within the Company’s portfolio. in pooled funds to achieve these aims. Total Return, Revenue and Dividends As at the year end, the Company was invested in 83 larger Gross total return for the year amounted to £43.3 million capitalisation stocks and 114 smaller capitalisation stocks, (2011: £9.9 million) and net total return after deducting finance representing 84.1% and 5.4% of the Company’s total assets costs, administrative expenses and taxation, amounted to respectively. £35.3 million (2011: £2.7 million return). Distributable income for the year totalled £6.7 million (2011: £5.0 million).

24 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 In addition to the 5.0p interim dividend already paid, the • Performance against the Company’s peers Directors recommend a final dividend of 7.5p per share (2011: The principal objective is to achieve capital growth relative 11.0p), payable on 8th May 2013 to shareholders on the register to the benchmark. However, the Board also monitors at the close of business on 12th April 2013. An interim dividend performance relative to a broad range of appropriate of 5.0p per share (2011: nil) was paid on 8th October 2012. competitor funds both in the UK and the US. These distributions total£6.2 million (2011: £5.1 million). After • Performance attribution payment of the final dividend the revenue reserve will amount The purpose of performance attribution analysis is to to £10.0 million (2011: £9.7 million). assess how the Company achieved its performance relative Key Performance Indicators (‘KPIs’) to its benchmark index, i.e. to understand the impact on The Board uses a number of financial KPIs to monitor and the Company’s relative performance of the various assess the performance of the Company. The principal KPIs are: components such as asset allocation, gearing and stock selection. Details of the attribution analysis for the year • Performance against the benchmark index ended 31st December 2012 are given in the Investment This is an important KPI by which performance is judged. Manager’s Report on page 10. Performance Relative to Benchmark Index • Share price premium/(discount) to net asset value (‘NAV’) per share Figures have been rebased to 100 at 31st December 2002 The Board has adopted a share issuance and repurchase 130 policy that seeks to address imbalances in supply of and demand for the Company’s shares in the market and 120 thereby seeks to manage the volatility and absolute level of the premium and discount to NAV per share at which the 110 Company’s shares trade. The Board’s intention is to use its share issuance and repurchase powers with the aim of 100 establishing a reasonably stable long term level of premium and discount. In the year to 31st December 2012, the shares 90 traded between a discount of 1.3% and a premium of 5.3%. 2002 2003 2004 2005 2006 2007 2008 2009 2010 22110 102 Source: Morningstar. Discount Performance JPMorgan American – share price total return. JPMorgan American – net asset value per share total return. 10 8 The Benchmark total return is represented by the grey horizontal line. 6 4 2 Ten Year Performance 0 –2 Figures have been rebased to 100 at 31st December 2002 –4 250 –6 –8 –10 200 –12 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: Datastream. 150 JPMorgan American – discount using capital NAV with debt at fair value.

100 • Ongoing charges The ongoing charges represent the Company’s 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 20122011 management fee and all other operating expenses, Source: Morningstar. excluding finance costs and any performance fee payable, JPMorgan American – share price total return. expressed as a percentage of the average daily net assets JPMorgan American – net asset value per share total return. during the year. The method of calculating the ongoing Benchmark total return. charges has been changed. In previous years the Total

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 25 Directors’ Report continued

Expense Ratio (‘TER’) was calculated, which represented and shareholder analyses. The Board monitors the the Company’s management fee and other operating implementation and results of the investment process with expenses excluding finance costs and performance fee the investment manager, who attends the majority of Board payable expressed as a percentage of the average month meetings, and reviews data which shows statistical end net assets during the year. The ongoing charges measures of the Company’s risk profile. The investment excluding any performance fee for the year ended manager employs the Company’s gearing within a strategic 31st December 2012 is 0.68% (2011: 0.69%). The ongoing range set by the Board. charges including any performance fee payable is the ratio, • Market: Market risk arises from uncertainty about the expressed in percentage terms, of the management fee future prices of the Company’s investments. This market plus all other operating expenses plus any performance fee risk comprises three elements – currency risk, interest payable, but excluding finance costs, to the average of the rate risk and other price risk. The Board considers asset month end net assets during the year. The ongoing charges allocation, stock selection and levels of gearing on a including performance fee payable for the year ended regular basis and has set investment restrictions and 31st December 2012 is 0.68% (2011: 0.69%). guidelines, which are monitored and reported on by Share Capital JPMAM. The Board monitors the implementation and The Company has authority to both purchase shares for results of the investment process with the Manager. cancellation and issue new shares in the market for cash at a However, the fortunes of the portfolio are significantly premium to net asset value. determined by market movements in US equities, the rate of exchange between US dollars and sterling and interest The Company did not repurchase any shares for cancellation rate changes. during the year (2011: nil). • Accounting, Legal and Regulatory: In order to qualify as During the year, the Company issued 4,037,545 new ordinary an investment trust, the Company must comply with shares to the market at an average price of 908.4p per share, Section 1158 of the Corporation Tax Act 2010 for a total gross consideration of £36,677,000. Since the year (‘Section 1158’). Details of the Company’s approval are given end, the Company has issued a further 250,000 shares to the under ‘Business of the Company’ above. Were the Company market at a price of 967.5p per share, for a total gross to breach Section 1158, it might lose investment trust status consideration received of £2.4 million. and, as a consequence, gains within the Company’s Special Resolutions to renew the authorities to issue and portfolio would be subject to Capital Gains Tax. The repurchase shares will be put to shareholders for approval at Section 1158 qualification criteria are continually monitored the Annual General Meeting. by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions Principal Risks of the Companies Act 2006 and, as its shares are listed on With the assistance of the Manager, the Board has drawn up the London Stock Exchange, the UKLA Listing Rules and a risk matrix, which identifies the key risks to the Company. Disclosure & Transparency Rules (‘DTRs’). A breach of the These key risks fall broadly under the following categories: Companies Act 2006 could result in the Company and/or • Investment and Strategy: An inappropriate investment the Directors being fined or the subject of criminal strategy, for example asset allocation or the level of proceedings. Breach of the UKLA Listing Rules or DTRs gearing, may lead to underperformance against the could result in the Company’s shares being suspended from Company’s benchmark index and peer companies, listing, which in turn would breach Section 1158. The resulting in the Company’s shares trading on a wider Directors seek to comply with all relevant regulation and discount. The Board manages this risk by diversification of legislation in the UK, Europe and the US and rely on the investments and through its investment restrictions and services of its Company Secretary, JPMAM, and its guidelines which are monitored and reported on regularly professional advisors to monitor compliance with all by the Managers. J.P. Morgan Asset Management (‘JPMAM’) relevant requirements. provides the Directors with timely and accurate • Corporate Governance and Shareholder Relations: Details management information, including performance data and of the Company’s compliance with Corporate Governance attribution analyses, revenue estimates, liquidity reports

26 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 best practice, including information on relations with The Board conducts a formal evaluation of the Manager on an shareholders, are set out in the Corporate Governance annual basis. The evaluation includes consideration of the report on pages 30 to 34. investment strategy and the process of the Manager, performance against the benchmark and a relevant peer • Operational: Disruption to, or failure of, JPMAM’s group over the long term and the support the Company accounting, dealing or payments systems could prevent receives from JPMAM. As a result of the evaluation process, accurate reporting and monitoring of the Company’s the Board confirms that it is satisfied that the continuing financial position. The insolvency, negligence, poor appointment of the Manager is in the interest of shareholders administration or fraud at the Company’s custodian could as a whole. result in the Company’s securities being lost or that access to them is compromised. Details of how the Board monitors Management and Performance Fees the services provided by JPMAM and its associates and the key elements designed to provide effective internal control The basic management fee is calculated and paid quarterly in are included within the Internal Control section of the arrears and is charged at a rate of 0.5% per annum of the Corporate Governance report on pages 33 and 34. Company’s total assets less current liabilities. Investments in funds on which JPMAM or any of its associated companies earn • Financial: The financial risks faced by the Company include a management fee are excluded from the calculation and market price risk, interest rate risk, foreign currency risk, therefore attract no fee. In addition, a performance fee may be liquidity risk and credit risk. Further details are disclosed payable. The Company’s investment in the JPMorgan US Dollar in note 21 on pages 54 to 60. Liquidity Fund is not subject to a management fee. • Political and Economic: Changes in financial or tax The performance fee is calculated at the rate of 10% of the legislation, including in the US and the European Union, difference between the net asset value capital return and the may adversely effect the Company: Current examples are capital return of the S&P 500 Index, expressed in sterling the AIFM Directive and FATCA. The Manager makes terms. The performance fee due in respect of any single year is recommendations to the Board on accounting, dividend divided into equal parts payable over three years. and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to Any negative fee resulting from underperformance is deducted political risks, such as the imposition of restrictions on the from any unpaid fees brought forward from prior years with free movement of capital. any remaining amount of the negative fee carried forward to be absorbed in future years. Future Developments The future development of the Company is much dependent The performance fee payable in any one year will not exceed upon the success of the Company’s investment strategy in the 0.25% of the fully diluted net asset value at the previous light of economic and equity market developments. The 31st December, with any unpaid excess being carried forward Investment Manager discusses the outlook in his report on until paid in full. page 11. In the year ended 31st December 2012 the Company’s net asset value capital return underperformed the capital return of the Management of the Company S&P 500 Index, expressed in sterling terms, by 1.2 percentage The Manager and Secretary is JPMorgan Asset Management points on the above basis. This results in a negative (UK) Limited (‘JPMAM’). JPMAM is employed under a contract performance fee calculation of £546,000, which when added to terminable on six month’s notice, without penalty. If the the negative balance brought forward of £588,000 gives a Company wishes to terminate the contract on shorter notice, negative balance of £1,134,000. This amount is carried forward the balance of remuneration is payable by way of and will be offset against any future outperformance. compensation. Going Concern JPMAM is a wholly-owned subsidiary of JPMorgan Chase Bank which, through other subsidiaries, also provides banking, The Directors believe, having considered the Company’s dealing and custodian services to the Company. investment objectives (see page 24), risk management policies (see note 21 on pages 54 to 60), capital management policies

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 27 Directors’ Report continued

and procedures (see note 22 on page 61), nature of the portfolio standing for reappointment continues to be effective and to and expenditure projections; that the Company has adequate demonstrate commitment to the role. resources, an appropriate financial structure and suitable management arrangements in place to continue in operational Director Indemnification and Insurance existence for the foreseeable future. For these reasons, they As permitted by the Articles of Association, the Directors have consider there is reasonable evidence to continue to adopt the the benefit of an indemnity which is a qualifying third party going concern basis in preparing the accounts. indemnity, as defined by Section 234 of the Companies Act 2006. The indemnities were in place during the year and as at Payment Policy the date of this report. It is the Company’s policy to obtain the best terms for all During the year an insurance policy has been maintained by business and therefore it has no standard payment terms. In the Company which indemnifies the Directors of the Company general the Company agrees with its suppliers the terms on against certain liabilities arising in the conduct of their duties. which business will take place and it is the Board’s policy to There is no cover against fraudulent or dishonest actions. abide by these terms. As at 31st December 2012, the Company had no outstanding trade creditors (2011: nil). Disclosure of information to Auditor

Directors In the case of each of the persons who are Directors of the Company at the time when this report was approved: The Directors of the Company who held office at the end of the year, together with their beneficial interests in the Company’s (a) so far as each of the Directors is aware, there is no relevant share capital, are shown below: audit information (as defined in the Companies Act 2006) of which the Company’s auditor is unaware; and 31st December 1st January 2012 2012 (b) each of the Directors has taken all the steps that they ought to have taken as a Director in order to make themselves Sarah Bates 5,000 5,000 aware of any relevant audit information (as defined) and to Kate Bolsover 2,178 1,113 establish that the Company’s auditor is aware of that Simon Bragg1 1,102 — information. 1 Sir Alan Collins 555 — The above confirmation is given and should be interpreted in James Fox 35,800 35,800 accordance with the provision of S418(2) of the Companies Act James Williams 6,000 6,000 2006.

1Appointed to the Board on 4th May 2012. Section 992 Companies Act 2006 Since the year end, Simon Bragg’s beneficial holding has increased by 288 ordinary shares. The following disclosures are made in accordance with Section 992 Companies Act 2006: In accordance with corporate governance best practice, all continuing Directors will retire and seek reappointment at the Capital Structure forthcoming Annual General Meeting. Sarah Bates, Kate The Company’s capital structure is summarised on the inside Bolsover and James Williams, being eligible, offer themselves cover of this report. for reappointment. Having been appointed during the year, Voting Rights in the Company’s shares Simon Bragg and Sir Alan Collins will retire and seek initial Details of the voting rights in the Company’s shares as at the appointment by shareholders. James Fox does not seek date of this report are given in note 16 to the Notice of Annual reappointment. General Meeting on page 65. The Nomination & Remuneration Committee, having Environmental Matters, Social and Community Issues considered their qualifications, performance and contribution Information on environmental matters, social and community to the Board and its Committees, confirms that each Director issues is set out on page 34. The Company has no employees.

28 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Notifiable Interests in the Company’s Voting Rights Annual General Meeting At the date of this report, the following had declared a NOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOUR notifiable interest in the Company’s voting rights: IMMEDIATE ATTENTION. If you are in any doubt as to the action Shareholders Number of you should take, you should seek your own personal financial voting rights % advice from your stockbroker, bank manager, solicitor or other financial adviser authorised under the Financial Services and Brewin Dolphin Limited 7,787,984 15.7 Markets Act 2000. Investec Wealth & Investment Resolutions relating to the following items of special business Limited (including Rensburg) 4,477,181 9.2 will be proposed at the forthcoming Annual General Meeting: Cheviot Asset Management 2,526,177 5.0 Legal & General Group plc 1,688,968 4.0 (i) Authority to allot new shares and to disapply statutory pre-emption rights (resolutions 10 and 11) The Company is also aware that approximately 4.4% of the At the Annual General Meeting the Directors will seek renewal Company’s total voting rights are held by individuals through of the authority to issue up to 5,049,159 new ordinary shares savings products managed by JPMAM, registered in the name for cash up to an aggregate nominal amount of £1,262,289 of Chase Nominees Limited. If those voting rights are not (such amount being equivalent to 10% of the present issued exercised by the beneficial holders, in accordance with the share capital) and disapply pre-emption rights upon such terms and conditions of the savings products, under certain issues. The full text of the resolutions is set out in the Notice of circumstances JPMAM has the right to exercise those voting Meeting on page62. This authority will expire at the conclusion rights. That right is subject to certain limits and restrictions of the Annual General Meeting of the Company in 2014 unless and falls away at the conclusion of the relevant general renewed at a prior general meeting. meeting. It is advantageous for the Company to be able to issue new The rules concerning the appointment and replacement of shares to participants purchasing shares through the JPMorgan Directors, amendment of the Articles of Association and savings products and also to other investors when the powers to issue or repurchase the Company’s shares are Directors consider that it is in the best interests of shareholders contained in the Articles of Association of the Company and to do so. As such issues are only made at prices greater than the Companies Act 2006. the net asset value (the ‘NAV’), they increase the NAV per share There are no restrictions concerning the transfer of securities and spread the Company’s administrative expenses, other than in the Company; no special rights with regard to control the management fee which is charged on the value of the attached to securities; no agreements between the holders of Company’s assets, over a greater number of shares. The issue securities regarding their transfer known to the Company; no proceeds are available for investment in line with the agreements which the Company is party to that affect its Company’s investment policies. The Company currently does control following a takeover bid; and no agreements between not hold any shares in the capital of the Company in Treasury. the Company and its Directors concerning compensation for (ii) Authority to repurchase the Company’s shares for cancellation loss of office. (Resolution 12) At the Annual General Meeting held on 4th May 2012, Independent Auditor shareholders gave authority to the Company to purchase up Deloitte LLP has expressed its willingness to continue in office to 14.99% of its then issued share capital. At that time, as auditor to the Company and a resolution proposing its shareholders were informed that this authority would expire reappointment and authorising the Directors to determine its on 3rd November 2013 but could be renewed by shareholders remuneration for the ensuing year will be put to shareholders at any time at a general meeting of the Company. The Directors at the Annual General Meeting. consider that the renewal of the authority is in the interests of shareholders as a whole, as the repurchase of shares at a discount to the underlying net asset value (‘NAV’) enhances

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 29 Directors’ Report continued

the NAV of the remaining shares and helps to control the The Articles of Association showing all the changes proposed to discount and its volatility. Resolution 12 gives the Company be made to the existing Articles of Association are available for authority to buy back its own issued shares in the market as inspection both at the registered office of the Company from the permitted by the Companies Act 2006 (the ‘Act’). The authority date of this document until the conclusion of the Annual General limits the number of shares that could be purchased to a Meeting and at the location of the Annual General Meeting from maximum of 7,568,689 shares representing approximately 15 minutes before the start of that meeting until its conclusion. 14.99% of the Company’s issued shares as at 15th March 2013 The full text of the proposed amendments are set out in the (being the latest practicable date prior to the publication of Notice of Annual General Meeting on page 63. this document). The authority also sets minimum and maximum prices. Recommendation If resolution 12 is passed at the Annual General Meeting, shares The Board considers that resolutions 10 to 14 are likely to repurchased might not be cancelled but rather held as Treasury promote the success of the Company and are in the best shares. The Company does not have authority to re-issue shares interests of the Company and its shareholders as a whole. The from Treasury at a discount to NAV, therefore any reissue of Directors unanimously recommend that you vote in favour of shares from Treasury would be at a premium to the prevailing the resolutions as they intend to do in respect of their own NAV. The Company has no shares in Treasury at present. beneficial holdings which amount in aggregate to 50,923 As at 15th March 2013 (being the latest practicable date prior to shares representing approximately 0.1% of the existing issued the publication of this document), there were no warrants or share capital of the Company. options over shares in the capital of the Company. The full text of the resolution is set out in the Notice of Meeting Corporate Governance Statement on pages 62 and 63. Repurchases will be made at the discretion of the Board and will only be made in the market at prices below Compliance the prevailing NAV per share, thereby enhancing the NAV of the The Company is committed to high standards of corporate remaining shares as and when market conditions are governance. This statement, together with the Statement of appropriate. Directors’ Responsibilities on page 36, indicates how the (iii) Amendment of the Company’s Articles of Association – to permit Company has applied the principles of good governance of the the distribution of capital profits (resolution 13) UK Corporate Governance Code and the AIC’s Code of The Companies Act 2006 (Amendment of Part 23) (Investment Corporate Governance (the ‘AIC Code’), which complements the Companies) Regulations 2012 removed the requirement that the UK Corporate Governance Code and provides a framework of articles of association of an investment company must prohibit the best practice for investment trusts.1 distribution of capital profits. In line with many other investment The Board is responsible for ensuring the appropriate level of companies, the Company proposes to amend its articles of corporate governance and considers that the Company has association in order to allow the flexibility to take advantage of this complied with the best practice provisions of the UK Corporate change in the future. The proposed amendments therefore reflect Governance Code, insofar as they are relevant to the Company’s this change and remove all references to the prohibition of the business, and the AIC Code throughout the year under review. distribution of capital profits by way of dividend. The Board currently has no intention of using this power. Role of the Board (iv) Amendment of the Company’s Articles of Association – to amend A management agreement between the Company and JPMAM the maximum aggregate Directors’ fees payable (resolution 14) sets out the matters over which the Manager has authority. This The Company’s Articles of Association currently state that the includes management of the Company’s assets within the remuneration of the Directors should not exceed in aggregate guidelines established by the Board from time to time and the the sum of £175,000 per annum. The Company proposes to provision of accounting, company secretarial, administration amend its Articles of Association by increasing the maximum and some marketing services. All other matters are reserved aggregate sum to £225,000 per annum.

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

30 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 for the approval of the Board. A formal schedule of matters shareholders if they have concerns that cannot be resolved reserved to the Board for decision has been approved. This through discussion with the Chairman. James Fox will retire at includes determination and monitoring of the Company’s the Company’s forthcoming Annual General Meeting and will investment objectives and policy and its future strategic be succeeded as Audit Committee Chairman by Simon Bragg. direction, gearing policy, management of the capital structure, appointment and removal of third party service providers, Tenure review of key investment and financial data and the Company’s Directors are initially appointed until the following Annual corporate governance and risk control arrangements. General Meeting when, under the Company’s Articles of The Board meets at least quarterly during the year and Association, it is required that they be reappointed by additional meetings are arranged as necessary. Full and timely shareholders. Subject to the performance evaluation carried information is provided to the Board to enable it to function out each year, the Board will agree whether it is appropriate for effectively and to allow Directors to discharge their Directors to seek annual reappointment in accordance with responsibilities. corporate governance best practice. The Board does not believe that length of service in itself necessarily disqualifies The Board has procedures in place to deal with potential a Director from seeking reappointment but, when making a conflicts of interest and, following the introduction of the recommendation, the Board will take into account the ongoing Bribery Act 2010, has adopted appropriate procedures requirements of the UK Corporate Governance Code, including designed to prevent bribery. It confirms that the procedures the need to refresh the Board and its Committees. have operated effectively during the year under review. The terms and conditions of Directors’ appointments are set There is an agreed procedure for Directors to take independent out in formal letters of appointment, copies of which are professional advice in the furtherance of their duties and at the available for inspection on request at the Company’s registered Company’s expense. This is in addition to the access that every office and at the Annual General Meeting. Director has to the advice and services of the Company Secretary, JPMAM, which is responsible to the Board for During the year Simon Bragg and Sir Alan Collins were ensuring adherence to Board procedures and compliance with appointed to the Board on 4th May 2012. Hamish Buchan applicable rules and regulations. retired as Chairman and Director at the Annual General Meeting held on 4th May 2012 and Sarah Bates became his Board Composition successor. The Board consists of six non-executive Directors, chaired by Induction and Training Sarah Bates, all of whom are considered to be independent of the Company’s Manager. The Board will consist of five On appointment, the Manager and Company Secretary provide Directors following the retirement of James Fox at the all Directors with induction training. Thereafter, regular forthcoming Annual General Meeting. The Directors have a briefings are provided on changes in law and regulatory breadth of investment knowledge, business and financial skills requirements that affect the Company and Directors. Directors and experience relevant to the Company’s business and brief are encouraged to attend industry and other seminars covering biographical details of each Director are set out on pages 22 issues and developments relevant to investment trusts. Regular and 23. reviews of the Directors’ training needs are carried out by the Board by means of the evaluation process described below. A review of Board composition and balance is included as part of the annual performance evaluation of the Board, details of Meetings and Committees which may be found below. The Board has considered whether a senior independent director should be appointed and has The Board delegates certain responsibilities and functions to concluded that, as the Board is comprised entirely of committees. Details of membership of committees are shown non-executive directors, this is unnecessary. However, the with the Directors’ profiles on pages 22 and 23. Chairman of the Audit Committee, James Fox, is available to

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 31 Directors’ Report continued

The table below details the number of Board and Committee The Committee also reviews Directors’ fees and makes meetings attended by each Director. During the year there recommendations to the Board as and when required. were five Board meetings, including a private meeting of the Audit Committee Directors to evaluate the Manager. In addition, two Audit The Audit Committee, chaired by James Fox and comprising Committee meetings and a meeting of the Nomination & five of the Directors, meets at least twice each year. Sarah Remuneration Committee were held. Bates, as Chairman of the Company, is not a member of the Nomination & Committee and attends by invitation only. The members of the Audit Remuneration Committee consider that they have the requisite skills and Board Committee Committee experience to fulfil the responsibilities of the Committee. Meetings Meetings Meetings Director Attended Attended Attended The Committee reviews the actions and judgements of the Manager in relation to the half year and annual accounts and Sarah Bates 521 1 the Company’s compliance with the UK Corporate Governance Kate Bolsover 421Code and the AIC Code. It reviews the terms of the Hamish Buchan2 311 1 management agreement, examines the effectiveness of the Simon Bragg3 21–Company’s internal control systems and receives information Sir Alan Collins3 21–from the Manager’s compliance department. It also reviews the James Fox 521scope and results of the external audit, its cost effectiveness James Williams 521and the independence and objectivity of the external auditors, including the provision of non-audit services and the period of 1Attended by invitation of the Committee. service held by the senior statutory auditor. Representatives of 2Retired from the Board on 4th May 2012. the Company’s auditor attend the Committee meeting at which 3 Appointed to the Board on 4th May 2012. the draft annual report and accounts are considered. There are Board Committees no contractual restrictions on the choice of the Committee as to the external auditor. The current tenure of the external auditor Nomination & Remuneration Committee dates from 10th August 2006. Any decision to open the The Nomination & Remuneration Committee, chaired by Sarah external audit to tender is taken on the recommendation of the Bates, consists of all of the Directors and meets at least Audit Committee. The Directors’ statement on the Company’s annually to ensure that the Board has an appropriate balance system of internal control is set out below. of skills and experience to carry out its fiduciary duties and to select and propose suitable candidates for appointment when Terms of Reference necessary. The appointment process takes account of the benefits of diversity, including gender. In relation to the Both the Nomination & Remuneration Committee and the appointment of Simon Bragg and Sir Alan Collins an external Audit Committee have written terms of reference which define recruitment consultant was engaged by the Company. clearly their respective responsibilities, copies of which are available on the Company’s website and for inspection on The Committee conducts an annual performance evaluation of request at the Company’s registered office and at the Annual the Board, its committees and individual Directors to ensure General Meeting. that all Directors have devoted sufficient time and contributed adequately to the work of the Board and its Committees. The Relations with Shareholders evaluation of the Board considers the balance of experience, skills, independence, corporate knowledge, its diversity, The Board regularly monitors the shareholder profile of the including gender, and how it works together. Questionnaires, Company. It aims to provide shareholders with a full drawn up by the Board, with the assistance of JPMAM and a understanding of the Company’s activities and performance firm of independent consultants, are completed by each and reports formally to shareholders four times a year by way Director. The responses are collated and then discussed by the of the Annual Report and Accounts, the Half Year Report and Committee. The evaluation of all Directors is led by the two Interim Management Statements. This is supplemented by Chairman who also meets individually with each Director. The the daily publication, through the London Stock Exchange, of Audit Committee Chairman leads the evaluation of the the net asset value of the Company’s shares. Chairman’s performance.

32 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 All shareholders have the opportunity, and are encouraged, to identifying, evaluating and managing the significant risks faced attend the Company’s Annual General Meeting at which the by the Company (see Principal Risks on pages 26 and 27). The Directors and representatives of the Manager are available in Company does not have an internal audit function of its own, person to meet with shareholders and answer questions. In but relies on the internal audit department of JPMAM which addition, a presentation is given by the investment manager reports any material failings or weaknesses. This arrangement who reviews the Company’s performance. During the year the is kept under annual review. The key elements designed to investment management team, JPMAM and the Company’s provide effective internal control are as follows: brokers hold regular discussions with larger shareholders. The Financial Reporting – Regular and comprehensive review by Directors are made fully aware of their views. The Chairman the Board of key investment and financial data, including and Directors make themselves available as and when required management accounts, revenue projections, analysis of to address shareholder queries. The Directors may be transactions and performance comparisons. contacted through the Company Secretary whose details are shown on page 69. Management Agreement – Evaluation and appointment of a manager and custodian regulated by the Financial Services The Company’s Annual Report and Accounts is published in Authority (‘FSA’), whose responsibilities are clearly defined in time to give shareholders at least 20 working days’ notice of a written agreement. the Annual General Meeting. Shareholders wishing to raise questions in advance of the meeting are encouraged to submit Management Systems – The Manager’s system of internal questions via the Company’s website or write to the Company control includes organisational agreements which clearly Secretary at the address shown on page 69. define the lines of responsibility, delegated authority, control procedures and systems. These are monitored by JPMAM’s Details of the proxy voting position on each resolution will be Compliance department which regularly monitors compliance published on the Company website shortly after the Annual with FSA rules and reports to the Board. General Meeting. Investment Strategy – Authorisation and monitoring of the Internal Control Company’s investment strategy and exposure limits by the Board. The UK Corporate Governance Code requires the Directors, at least annually, to review the effectiveness of the Company’s The Board keeps under review the effectiveness of the system of internal control and to report to shareholders that Company’s system of internal control by monitoring the they have done so. This encompasses a review of all controls, operation of the key operating controls of the Manager and which the Board has identified to include business, financial, its associates as follows: operational, compliance and risk management. • the Board, through the Audit Committee, reviews the terms The Directors are responsible for the Company’s system of of the management agreement and receives regular internal control which is designed to safeguard the Company’s reports from JPMAM’s Compliance department; assets, maintain proper accounting records and ensure that • the Board reviews a report, which is also independently financial information used within the business, or published, reviewed, on the internal controls and the operations of is reliable. However, such a system can only be designed to its custodian, JPMorgan Chase Bank; and manage rather than eliminate the risk of failure to achieve business objectives and therefore can only provide reasonable, • the Directors review every six months an independent but not absolute, assurance against fraud, material report on the internal controls and the operations of misstatement or loss. JPMAM. Since investment management, custody of assets and all By means of the procedures set out above, the Board confirms administrative services are provided to the Company by that it has reviewed the effectiveness of the Company’s system JPMAM and its associates, the Company’s system of internal of internal control for the year ended 31st December 2012, and control mainly comprises monitoring the services provided by to the date of approval of this Annual Report and Accounts. JPMAM and its associates, including the operating controls During the course of its review of the system of internal control, established by them, to ensure they meet the Company’s the Board has not identified nor been advised of any failings or business objectives. There is an ongoing process for weaknesses which it has determined to be significant.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 33 Directors’ Report continued

Therefore a confirmation in respect of necessary actions has JPMAM endorses the Stewardship Code for its investments and supports not been considered appropriate. its principles as best practice. We believe that regular contact with the companies in which we invest is central to our investment process and we Corporate Governance, Voting Policy and Corporate Social also recognise the importance of being an ‘active’ owner on behalf of our Responsibility clients. The Company delegates responsibility for voting to JPMAM. Social & Environmental The following is a summary of JPMAM’s policy statements on JPMAM believes that companies should act in a socially responsible corporate governance, voting policy and social and manner. Although our priority at all times is the best economic interests environmental issues, which has been reviewed and noted by of our clients, we recognise that, increasingly, non-financial issues such the Board: as social and environmental factors have the potential to impact the share price, as well as the reputation of companies. Specialists within Corporate Governance JPMAM’s environmental, social and governance (‘ESG’) team are tasked JPMAM believes that corporate governance is integral to our investment with assessing how companies deal with and report on social and process. As part of our commitment to delivering superior investment environmental risks and issues specific to their industry. This analysis performance to our clients, we expect and encourage the companies in is then used to identify outliers which require further engagement. which we invest to demonstrate the highest standards of corporate governance and best business practice. We examine the share structure JPMAM is also a signatory to the United Nations Principles of Responsible and voting structure of the companies in which we invest, as well as the Investment, which commits participants to six principles, with the aim of board balance, oversight functions and remuneration policy. These incorporating ESG criteria into their processes when making stock analyses then form the basis of our proxy voting and engagement selection decisions and promoting ESG disclosure. Our detailed approach activity. to how we implement the principles is available on request. JPMAM is also a signatory to the Carbon Disclosure Project. JPMorgan Chase is a Proxy Voting signatory to the Equator Principles on managing social and JPMAM manages the voting rights of the shares entrusted to it as it would environmental risk in project finance. manage any other asset. It is the policy of JPMAM to vote in a prudent and diligent manner, based exclusively on our reasonable judgement of what JPMAM’s Voting Policy and Corporate Governance will best serve the financial interests of our clients. So far as is practicable, Guidelines are available on request from the Company we will vote at all of the meetings called by companies in which we are Secretary or can be downloaded from JPMAM’s website: invested. http://www.jpmorganassetmanagement.co.uk/Institutional/ CommentaryAndAnalysis/CorporateGovernance, which also Stewardship/Engagement sets out its approach to the seven principles of the FRC JPMAM recognises its wider stewardship responsibilities to its clients as Stewardship Code, its policy relating to conflicts of interest a major asset owner. To this end, we support the introduction of the FRC and its detailed voting record. Stewardship Code, which sets out the responsibilities of institutional shareholders in respect of investee companies. Under the Code, managers should: By order of the Board – publicly disclose their policy on how they will discharge their Alison Vincent, for and on behalf of stewardship responsibilities to their clients; JPMorgan Asset Management (UK) Limited, – disclose their policy on managing conflicts of interest; Secretary – monitor their investee companies; 18th March 2013 – establish clear guidelines on how they escalate engagement; – be willing to act collectively with other investors where appropriate; – have a clear policy on proxy voting and disclose their voting record; and – report to clients.

34 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Directors’ Remuneration Report

The Board has prepared this report in accordance with the stipulate that aggregate fees must not exceed £175,000. requirements of Section 421 of the Companies Act 2006. An Any increase in this amount requires both the Board’s and ordinary resolution to approve this report will be put to the shareholders’ approval. The Directors propose that the members at the forthcoming Annual General Meeting. aggregate maximum be increased to £225,000 per annum. A resolution proposing the above amendment will be put to The law requires the Company’s auditor to audit certain of the shareholders at the Annual General Meeting to be held on disclosures provided. Where disclosures have been audited 4th May 2013. The full text of the resolution is set out in the they are indicated as such. The auditor’s opinion is included Notice of Meeting on page 63. in its report on page37. The Company does not operate any type of incentive or Directors’ Remuneration pension scheme and therefore no Directors receive bonus (Audited Information) payments or pension contributions from the Company or hold 2012 2011 options to acquire shares in the Company. Directors are not Directors’ Name £ £ paid compensation for loss of office. No other payments are Hamish Buchan1 13,076 37,500 made to Directors, other than the reimbursement of Sarah Bates (Chairman)2 33,253 25,000 reasonable out-of-pocket expenses incurred in connection with Kate Bolsover 25,000 25,000 attending the Company’s business. Simon Bragg3 16,506 — The Directors do not have service contracts with the Company. Alan Collins3 16,506 — Details of the Board’s policy on tenure are set out on page 31. James Fox (Chairman of the A graph showing the Company’s share price total return Audit Committee) 30,000 30,000 compared with its benchmark index, the S&P 500 Index James Williams 25,000 25,000 expressed in sterling total returns terms, over the last five years Total 159,341 142,500 is shown below:

1Retired from the Board on 4th May 2012. Five Year Ordinary Share Price and 2Appointed Chairman on 4th May 2012. 3Appointed to the Board on 4th May 2012. Benchmark Total Returns to 31st December 2012 For the year under review, Directors’ fees were paid at a fixed rate of £37,500 per annum for the Chairman, £30,000 per 150 annum for the Chairman of the Audit Committee and £25,000 140 per annum for the other Directors. Directors’ fees were last 130 increased in 2011. No increase is being proposed for 2013. 120

The Board’s policy for this and subsequent years is that 110 Directors’ fees should properly reflect the time spent by the 100 Directors on the Company’s business and should be at a level to ensure that candidates of a high calibre are recruited to the 90 Board. The Chairman of the Board and the Chairman of the 80 2007 2008 2009 2010 2011 2012 Audit Committee are paid higher fees than the other Directors, Source: Morningstar/Datastream. reflecting the greater time commitment involved in fulfilling Share price total return. these roles. Benchmark total return. As all of the Directors are non-executive, the Nomination & Remuneration Committee reviews Directors’ fees on a regular By order of the Board basis and makes recommendations to the Board as and when Alison Vincent, for and on behalf of appropriate. Reviews are based on information provided by the JPMorgan Asset Management (UK) Limited, Manager, JPMAM, and relevant third parties on the level of fees Secretary paid to the Directors of the Company’s peers and within the investment trust industry generally. The Directors’ fees are not 18th March 2013 performance-related. The Company’s Articles of Association

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 35 Statement of Directors’ Responsibilities

The Directors are responsible for preparing the financial JPMorgan Asset Management (UK) Limited (‘JPMAM’). The statements in accordance with applicable law and regulations. maintenance and integrity of the website maintained by JPMAM is, so far as it relates to the Company, the Company law requires the Directors to prepare financial responsibility of JPMAM. The work carried out by the auditor statements for each financial year. Under that law, the Directors does not involve consideration of the maintenance and have elected to prepare the financial statements in accordance integrity of this website and, accordingly, the auditor accepts with United Kingdom Generally Accepted Accounting Practice no responsibility for any changes that have occurred to the (United Kingdom Accounting Standards and applicable law). accounts since they were initially presented on the website. Under Company law the Directors must not approve the The accounts are prepared in accordance with UK legislation, financial statements unless they are satisfied that they give a which may differ from legislation in other jurisdictions. true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing Under applicable law and regulations the Directors are also these financial statements, the Directors are required to: responsible for preparing a Directors’ Report and Directors’ Remuneration Report that comply with that law and those • select suitable accounting policies and then apply them regulations. consistently; Each of the Directors, whose names and functions are listed in • make judgements and estimates that are reasonable and the Directors’ Report confirm that, to the best of their prudent; knowledge: • state whether applicable UK Accounting Standards have • the financial statements, which have been prepared in been followed, subject to any material departures disclosed accordance with United Kingdom Generally Accepted and explained in the financial statements; and Accounting Practice (United Kingdom Accounting • prepare the financial statements on the going concern basis Standards and applicable law), give a true and fair view of unless it is inappropriate to presume that the Company will the assets, liabilities, financial position and return or loss of continue in business. the Company; and The Directors are responsible for keeping proper accounting • the Directors’ Report includes a fair review of the records that are sufficient to show and explain the Company’s development and performance of the business and the transactions and disclose with reasonable accuracy, at any position of the Company, together with a description of the time, the financial position of the Company and to enable principal risks and uncertainties that it faces. them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking For and on behalf of the Board reasonable steps for the prevention and detection of fraud Sarah Bates and other irregularities. Director The accounts are published on the www.jpmamerican.co.uk 18th March 2013 website, which is maintained by the Company’s Manager,

36 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Independent Auditor’s Report

Independent Auditor’s Report to the members of JPMorgan American • have been properly prepared in accordance with United Investment Trust plc. Kingdom Generally Accepted Accounting Practice; and We have audited the financial statements of JPMorgan American • have been prepared in accordance with the requirements of Investment Trust plc (the ‘Company’) for the year ended the Companies Act 2006. 31st December 2012 which comprise the Income Statement, Reconciliation of Movements in Shareholders’ Funds, Balance Opinion on other matters prescribed by the Companies Act 2006 Sheet, Cash Flow Statement, and the related notes 1 to 22. The In our opinion: financial reporting framework that has been applied in their • the part of the Directors’ Remuneration Report to be audited preparation is applicable law and United Kingdom Accounting has been properly prepared in accordance with the Standards (United Kingdom Generally Accepted Accounting Companies Act 2006; and Practice). • the information given in the Directors’ Report for the This report is made solely to the Company’s members, as a body, financial year for which the financial statements are prepared in accordance with Chapter 3 of Part 16 of the Companies Act is consistent with the financial statements. 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required Matters on which we are required to report by exception to state to them in an auditor’s report and for no other purpose. We have nothing to report in respect of the following: To the fullest extent permitted by law, we do not accept or Under the Companies Act 2006 we are required to report to you assume responsibility to anyone other than the Company and the if, in our opinion: Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. • adequate accounting records have not been kept, or returns adequate for our audit have not been received from Respective Responsibilities of Directors and Auditors branches not visited by us; or The Directors are responsible for the preparation of the financial • the financial statements and the part of the Directors’ statements and for being satisfied that they give a true and fair Remuneration Report to be audited are not in agreement view. Our responsibility is to audit and express an opinion on the with the accounting records and returns; or financial statements in accordance with applicable law and • certain disclosures of Directors’ remuneration specified by International Standards on Auditing (UK and Ireland). Those law are not made; or standards require us to comply with the Auditing Practices • we have not received all the information and explanations we Board’s (APB’s) Ethical Standards for Auditors. require for our audit. Scope of the Audit of the Financial Statements Under the Listing Rules we are required to review: An audit involves obtaining evidence about the amounts and • the Directors’ statement, set out on page 36, in relation to disclosures in the financial statements sufficient to give going concern; reasonable assurance that the financial statements are free from • the part of the Corporate Governance Statement relating to material misstatement, whether caused by fraud or error. This the Company’s compliance with the nine provisions of the UK includes an assessment of: whether the accounting policies are Corporate Governance Code specified for our review; and appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed, the • certain elements of the report to shareholders by the Board reasonableness of significant accounting estimates made by the on Directors’ remuneration. Directors, and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material Stuart McLaren (Senior Statutory Auditor) inconsistencies with the audited financial statements. If we for and on behalf of Deloitte LLP become aware of any apparent material misstatements or Chartered Accountants and Statutory Auditor, inconsistencies, we consider the implications for our report. London, United Kingdom

Opinion on the Financial Statements 18th March 2013 In our opinion the financial statements: • give a true and fair view of the state of the Company’s affairs as at 31st December 2012 and of its net return for the year then ended;

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 37 Income Statement for the year ended 31st December 2012

2012 2011 Revenue Capital Total Revenue Capital Total Notes £’000 £’000 £’000 £’000 £’000 £’000

Gains on investments held at fair value through profit or loss 2 — 32,386 32,386 — 1,260 1,260 Net foreign currency gains* — 1,025 1,025 — 951 951 Income from investments 3 9,821 — 9,821 7,682 — 7,682 Other interest receivable and similar income 3 18 — 18 18 — 18 Gross return 9,839 33,411 43,250 7,700 2,211 9,911 Management fee 4 (493) (1,972) (2,465) (432) (1,727) (2,159) Other administrative expenses 5 (577) — (577) (497) — (497) Net return on ordinary activities before finance costs and taxation 8,769 31,439 40,208 6,771 484 7,255 Finance costs 6 (693) (2,775) (3,468) (694) (2,775) (3,469) Net return/(loss) on ordinary activities before taxation 8,076 28,664 36,740 6,077 (2,291) 3,786 Taxation 7 (1,423) — (1,423) (1,088) — (1,088) Net return/(loss) on ordinary activities after taxation 6,653 28,664 35,317 4,989 (2,291) 2,698 Return/(loss) per share 9 13.80p 59.46p 73.26p 11.20p (5.14)p 6.06p

*Includes gains and losses on forward foreign currency contracts which are used to hedge the currency risk in respect of the geared portion of the portfolio. Details of the Company’s hedging strategy are given in note 21(a)(i) on page 56. The dividends proposed in respect of the year ended 31st December 2012 amountto12.5p (2011: 11.0p) per share, costing £6,191,000 (2011: £5,082,000). Details of dividends paid and proposed are given in note 8 on page 47.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses (‘STRGL’). For this reason a STRGL has not been presented. The notes on pages42to61form an integral part of these accounts.

38 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Reconciliation of Movements in Shareholders’ Funds

Called up Capital share Share redemption Capital Revenue capital premium reserve reserves reserve Total £’000 £’000 £’000 £’000 £’000 £’000

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

The notes on pages42to 61 form an integral part of these accounts.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 39 Balance Sheet at 31st December 2012

2012 2011 Notes £’000 £’000

Fixed assets 10 Investments held at fair value through profit or loss 461,036 389,086 Investment in liquidity fund held at fair value through profit or loss 40,174 36,156 501,210 425,242 Current assets 11 Derivative financial instruments 794 507 Debtors 568 486 Cash and short term deposits 12,339 24,835 13,701 25,828 Current liabilities 12 Creditors: amounts falling due within one year (337) (294) Derivative financial instruments — (586) Net current assets 13,364 24,948 Total assets less current liabilities 514,574 450,190 Creditors: amounts falling due after more than one year 13 (49,840) (49,811) Net assets 464,734 400,379

Capital and reserves Called up share capital 14 12,560 11,551 Share premium 15 82,996 47,328 Capital redemption reserve 15 8,151 8,151 Capital reserves 15 347,225 318,561 Revenue reserve 15 13,802 14,788 Total equity shareholders’ funds 464,734 400,379

Net asset value per share 16 925.0p 866.5p

The accounts on pages38to 61 were approved and authorised for issue by the Directors on 18th March 2013 and were signed on their behalf by:

Sarah Bates Director The notes on pages42to 61 form an integral part of these accounts.

The Company’s registration number is 15543.

40 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Cash Flow Statement for the year ended 31st December 2012

2012 2011 Notes £’000 £’000

Net cash inflow from operating activities 17 5,302 3,482

Returns on investments and servicing of finance Interest (3,440) (3,440) Taxation Overseas tax recovered 17 1 Capital expenditure and financial investment Purchases of equity investments (124,935) (109,891) Purchases of liquidity fund (75,470) (50,056) Sales of equity investments 86,985 112,652 Sales of liquidity fund 69,862 44,059 Other capital charges (8) (7) Net cash outflow from capital expenditure and financial investment (43,566) (3,243) Dividends paid (7,639) (4,727) Net cash outflow before financing (49,326) (7,927) Financing Issue of ordinary shares to the market 36,678 28,388 Net cash inflow from financing 36,678 28,388 (Decrease)/increase in cash in the year 18 (12,648) 20,461

The notes on pages42to 61 form an integral part of these accounts.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 41 Notes to the Accounts for the year ended 31st December 2012

1. Accounting policies (a) Basis of accounting The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (the ‘SORP’) issued by the Association of Investment Companies in January 2009. All of the Company’s operations are of a continuing nature. The disclosures on going concern on pages 27 and 28 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 investments The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy and information is provided internally on that basis to the Company’s Board of Directors. Accordingly, upon initial recognition the investments are designated by the Company as ‘held at fair value through profit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental to purchase which are written off in the capital column of the income statement at the time of acquisition. Subsequently the investments are valued at fair value, which are quoted bid prices for investments traded in active markets. For investments which are not traded in active markets, unlisted and restricted investments, the Board takes into account the latest traded prices, 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 reserves Gains and losses on sales of investments including the related foreign exchange gains and losses, realised exchange gains and losses 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 Statement and 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 and losses, unrealised gains and losses on forward foreign currency contracts and any performance fee provision, are included in the Income Statement and dealt with in capital reserves within ‘Holding gains and losses on investments’. (d) Income Dividends receivable from equity shares are included in revenue on an ex-dividend basis except where, in the opinion of the Board, 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 of the cash dividend foregone is recognised in revenue. Any excess in the value of the shares received over the amount of the cash dividend is recognised in capital. Interest receivable from debt securities together with any premiums or discounts on purchase are allocated to revenue on a time apportionment basis so as to reflect the effective interest rate of those securities. Deposit interest receivable is taken to revenue on an accruals basis.

42 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 (e) Expenses All 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 of revenue 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 incidental to the sale are deducted from the sale proceeds. These expenses are commonly referred to as transaction costs and comprise mainly brokerage commission. Details of transaction costs are given in note 10 on page 48. (f) Finance costs Finance costs are accounted for on an accruals basis using the effective interest rate method in accordance with the provisions of 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 revenue and capital return from the Company’s investment portfolio. (g) Financial instruments Cash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount of cash 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 as reduced 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. Finance costs, including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in profit or loss using the effective interest rate method. Forward foreign currency contracts are included in the balance sheet as derivative financial instruments and are carried at fair value, which is the cost of closing out those contracts. Changes in the fair value of derivative instruments that do not qualify for hedge accounting are recognised in profit or loss as they arise. (h) Foreign currency In accordance with FRS 23: ‘The effects of changes in Foreign Currency Exchange Rates’ the Company is required to nominate a functional currency, being the currency in which the Company predominantly operates. The Board, having regard to the currency of the Company’s share capital and the predominant currency in which its shareholders operate, has determined that sterling 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. Assets and liabilities denominated in foreign currencies at the year end are translated at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in the income statement as an exchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capital nature.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 43 Notes to the Accounts continued

1. Accounting policies continued (i) Taxation Current 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 tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it is more 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 being entirely 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 expected to reverse, based on tax rates that have been enacted or substantively enacted at the balance sheet date and is measured on an undiscounted basis. (j) Dividends payable In accordance with FRS 21: ‘Events after the Balance Sheet Date’, the final dividend is included in the accounts in the year in which 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 partial exemption method based on the proportion of zero rated supplies to total supplies.

2012 2011 £’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 14,507 10,802 Amounts recognised in investment holding gains and losses in the previous year in respect of investments sold during the year (11,360) (18,088) Gains/(losses) on sales of investments based on the carrying value at the previous balance sheet date 3,147 (7,286) Net movement in investment holding gains and losses 29,245 8,554 Other capital charges (6) (8) Total capital gains on investments held at fair value through profit or loss 32,386 1,260

44 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 2012 2011 £’000 £’000

3. Income Income from investments Dividends from overseas investments 9,663 7,568 Dividends from liquidity funds 140 94 Scrip dividends 18 20 9,821 7,682

Other interest receivable and similar income Deposit interest 18 18 18 18 Total income 9,839 7,700

The Company does not currently lend stock. 2012 2011 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

4. Management fee Management fee1 493 1,972 2,465 432 1,727 2,159

1Details of the management fee and performance fee are given in the Directors’ Report on page27.

2012 2011 £’000 £’000

5. Other administrative expenses Administration expenses 307 242 Directors’ fees1 159 143 Savings scheme costs2 83 83 Auditors’ remuneration – for audit services 20 21 Auditors’ remuneration – for all other services3 8 8 577 497

1Full disclosure is given in the Directors’ Remuneration Report on page35. 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 (2011: £5,000), plus fees payable for the audit of the debenture compliance certificate amounting to £3,000 (2011: £3,000).

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 45 Notes to the Accounts continued

2012 2011 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

6. Finance costs Interest on debenture 693 2,774 3,467 694 2,773 3,467 Overdraft interest —11— 22 693 2,775 3,468 694 2,775 3,469

7. Taxation (a) Analysis of tax charge in the year 2012 2011 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Overseas withholding tax 1,423 — 1,423 1,088 — 1,088 Current tax charge for the year 1,423 — 1,423 1,088 — 1,088

(b) Factors affecting current tax charge for the year The tax assessed for the year is lower (2011: higher) than the Company’s applicable rate of corporation tax for the year of 24.5% (2011: 26.5%). The factors affecting the current tax charge for the year are as follows: 2012 2011 Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

Net return/(loss) on ordinary activities before taxation 8,076 28,664 36,740 6,077 (2,291) 3,786

Net return/(loss) on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of 24.5% (2011: 26.5%) 1,979 7,023 9,002 1,610 (607) 1,003 Effects of: Non taxable overseas dividends (2,367) — (2,367) (2,005) — (2,005) Non taxable capital returns — (8,186) (8,186) — (586) (586) Non taxable scrip dividends (4) — (4) (5) — (5) Overseas withholding tax 1,423 — 1,423 1,088 — 1,088 Unrelieved expenses and charges 392 1,163 1,555 400 1,193 1,593 Current tax charge for the year 1,423 — 1,423 1,088 — 1,088

46 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 (c) Deferred taxation The Company has an unrecognised deferred tax asset of £10,045,000 (2011: £9,333,000) based on a prospective corporation tax rate of 23% (2011: 25%). The reduction in the standard rate of corporation tax was substantively enacted on 26th March 2012 and is effective from 1st April 2012. The deferred tax asset has arisen due to the cumulative excess of deductible expenses over taxable income. Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in the foreseeable 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 to obtain such approval, the Company has not provided for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

8. Dividends (a) Dividends paid and proposed 2012 2011 £’000 £’000

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

1Represents dividends which remain unclaimed after a period of 12 years and thereby become the property of the Company. 2012 2011 £’000 £’000

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

The final dividend proposed in respect of the year ended 31st December 2011 amounted to £5,082,000. However, the actual payment amounted to £5,220,000 due to shares issued after the Balance Sheet date but prior to the share register Record Date. The final dividend has been proposed in respect of the year ended 31st December 2012 and is subject to approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2013. (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:

2012 2011 £’000 £’000

Interim dividend of 5.0p (2011: 0.0p) 2,423 — Final dividend proposed of 7.5p (2011: 11.0p) 3,768 5,082 Total 6,191 5,082

The revenue available for distribution by way of dividend for the year is £6,653,000 (2011: £4,989,000).

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 47 Notes to the Accounts continued

9. Return/(loss) per share The revenue return per ordinary share of 13.80p (2011: 11.20p) is based on the revenue earnings attributable to the ordinary shares of £6,653,000 (2011: £4,989,000) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344). The capital return per ordinary share of59.46p (2011: 5.14p loss) is based on the capital return attributable to the ordinary shares of £28,664,000 (2011: £2,291,000 loss) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344). The total return per ordinary share of 73.26p (2011: 6.06p) is based on the total return attributable to the ordinary shares of £35,317,000 (2011: £2,698,000) and on the weighted average number of shares in issue during the year of 48,208,366 (2011: 44,547,344). 2012 2011 £’000 £’000

10. Investments Investments listed or quoted on a recognised stock exchange 460,432 388,454 Investment in liquidity fund 40,174 36,156 Unquoted investments 604 632 501,210 425,242

Listed overseas Unquoted Total £’000 £’000 £’000

Opening book cost 352,299 116 352,415 Opening investment holding gains 72,311 516 72,827 Opening valuation 424,610 632 425,242 Movements in the year: Purchases at cost 200,423 — 200,423 Sales – proceeds (156,847) — (156,847) Gains on sales of investments based on the carrying value at the previous balance sheet date 3,147 — 3,147 Net movement in investment holding gains and losses 29,273 (28) 29,245 Closing valuation 500,606 604 501,210

Closing book cost 410,382 116 410,498 Closing investment holding gains 90,224 488 90,712 Total investments held at fair value through profit or loss 500,606 604 501,210

During the year, prior year investment holding gains amounting to £11,360,000 were transferred to gains on sales of investments as disclosed in notes 2 and 16.

48 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Transaction costs on purchases during the year amounted to £93,000 (2011: £87,000) and on sales during the year amounted to £50,000 (2011: £92,000). 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 following company, which is valued in the accounts at the Company’s share of net assets: 2012 2011 % %

Kane Holdings 15.8 15.8

The Company does not exercise significant influence over the operating and financial policies of the above company, which is therefore not considered to be an associated company. 11. Current assets 2012 2011 £’000 £’000

Derivative financial instruments Forward foreign currency contracts held at fair value 794 507

The forward currency contracts settle on 15 January 2013 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 21(a)(i) on page 56. 2012 2011 £’000 £’000

Debtors Overseas tax recoverable 166 16 Dividends and interest receivable 360 429 Other debtors 42 41 568 486

The Directors consider that the carrying amount of debtors approximates to their fair value. Cash and short term deposits Cash and short term deposits comprises bank balances and cash held by the Company, including short term deposits. The carrying amount of these represents their fair value. Cash balances in excess of a predetermined amount are placed on short term deposit at market rates of interest.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 49 Notes to the Accounts continued

12. Current liabilities 2012 2011 £’000 £’000

Creditors: amounts falling due within one year Other creditors and accruals 337 294

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

2012 2011 £’000 £’000

Derivative financial instrument Forward foreign currency contracts held at fair value — 586

2012 2011 £’000 £’000

13. Creditors: amounts falling due after more than one year Falling due after more than five years £50,000,000 6.875% debenture June 2018 49,840 49,811

The debenture is secured by a floating charge over the assets of the Company.

2012 2011 £’000 £’000

14. Called up share capital Allotted and fully paid Opening balance of 46,204,047 (2011: 42,850,949) ordinary shares of 25p each 11,551 10,713 Issue of 4,037,545 (2011: 3,353,098) ordinary shares to the market 1,009 838 Closing balance of 50,241,592 (2011: 46,204,047) ordinary shares 12,560 11,551

During the year, 4,037,545 new ordinary shares were issued to the market at an average price of 908.4p per share, for a total gross consideration of £36,677,000.

50 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Capital reserves Gains and Holding Capital losses on gains and Share redemption sales of losses on Revenue premium reserve investments investments reserve £’000 £’000 £’000 £’000 £’000

15. Reserves Opening balance 47,328 8,151 245,813 72,748 14,788 Gains on sales of investments based on the carrying value at the previous balance sheet date ——3,147 —— Net movement in investment holding gains and losses ———29,245 — Net currency gains on cash and short term deposits held during the year ——231 —— Unrealised gains on forward foreign currency contracts ———794 — Unrealised gains on forward foreign currency contracts now realised ——(79) 79 — Transfer on disposal of investments ——11,360 (11,360) — Issue of ordinary shares to the market 35,668 ———— Management fee and finance costs charged to capital ——(4,747) —— Other capital charges ——(6) —— Dividends appropriated in the year ————(7,639) Retained revenue for the year ————6,653 Closing balance 82,996 8,151 255,719 91,506 13,802

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

2012 2011 £’000 £’000

17. Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities Total return on ordinary activities before finance costs and taxation 40,208 7,255 Less capital return before finance costs and taxation (31,439) (484) Scrip dividends received as income (18) (20) Decrease/(increase) in accrued income 69 (52) (Increase)/decrease in other debtors (1) 14 Increase/(decrease) in accrued expenses 45 (33) Management fee charged to capital (1,972) (1,727) Overseas withholding tax (1,590) (1,088) Performance fee paid — (383) Net cash inflow from operating activities 5,302 3,482

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 51 Notes to the Accounts continued

At At 31st December Exchange Other 31st December 2011 Cash flow movements movements 2012 £’000 £’000 £’000 £’000 £’000

18. Analysis of changes in net debt Cash and short term deposits 24,835 (12,648) 152 — 12,339 Debenture falling due after more than five years (49,811) ——(29) (49,840) Net debt (24,976) (12,648) 152 (29) (37,501)

19. Transactions with the Manager Details of the management contract are set out in the Directors’ Report on page 27. The management fee payable to J.P. Morgan Asset Management (UK) Limited (‘JPMAM’) for the year was £2,465,000 (2011: £2,159,000), of which £nil (2011: £nil) was outstanding at the year end. Details of the performance fee are set out in the Directors’ Report on page 27. No performance fee is payable to JPMAM for the year (2011: £nil) and £nil (2011: £nil) was outstanding at the year end. During the year £83,000 (2011: £83,000) was payable to JPMAM for the marketing and administration of savings scheme products, of which £nil (2011: £nil) was outstanding at the year end. Included in other administration expenses in note 5 on page 45 are safe custody fees amounting to £4,000 (2011: £3,000) payable to JPMorgan Chase of which £1,000 (2011: £nil) was outstanding at the year end. Handling charges on dealing transactions amounting to £6,000 (2011: £8,000) were payable to JPMorgan Chase during the year of which £1,000 (2011: £3,000) was outstanding at the year end. The Company holds an investment in the JPMorgan US Dollar Liquidity Fund which is managed by JPMAM. The administrator of the JPMorgan US Dollar Liquidity Fund does not charge a management fee on the share class held by the Company. At 31st December 2012 this investment was valued at £40.2 million (2011: £36.2 million) and represented 8.0% (2011: 8.5%) of the Company’s total investments of £501.2 million (2011: £425.2 million). During the year the Company made purchases of this investment with a total value of £75.5 million (2011: £50.1 million) and sales with a total value of £70.0 million (2011: £44.1 million). Income receivable from this investment for the year amounted to £140,000 (2011: £94,000) of which £nil (2011: £8,000) was outstanding at the year end. The JPMorgan US Dollar Liquidity Fund invests primarily in certificates of deposit and commercial paper. At the year end, a cash balance of £12,339,000 (2011: £24,835,000) was held by JPMorgan Chase. This cash is placed on external deposits, with a list of counterparty banks as approved by JPMorgan Chase. Information on the Company’s exposure to counterparty risk is given in note 21(c) on pages 59 and 60. A net amount of interest of £19,000 (2011: £18,000) was receivable by the Company during the year from JPMorgan Chase of which £1,000 (2011: £1,000) was outstanding at the year end.

52 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 20. 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 portfolio and 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 included within 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 fair value measurement of the relevant asset. Details of the valuation techniques used by the Company are given in note 1(b) on page 42. The following table sets out the fair value measurements using the FRS 29 hierarchy at 31st December. 2012 Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or loss at 31st December 2012 Equity investments 460,432 — 604 461,036 Liquidity fund 40,174 ——40,174 Derivatives – forward foreign currency contracts — 794 — 794 Total 500,606 794 604 502,004

2011 Level 1 Level 2 Level 3 Total £’000 £’000 £’000 £’000

Financial instruments held at fair value through profit or loss at 31st December 2011 Equity investments 388,454 — 632 389,086 Liquidity fund 36,156 ——36,156 Derivatives – forward foreign currency contracts — (79) — (79) Total 424,610 (79) 632 425,163

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 53 Notes to the Accounts continued

20. Disclosures regarding financial instruments measured at fair value continued

There have been no transfers between Levels 1, 2 or 3 during the year. A reconciliation of the fair value measurements in Level 3 is set out below. 2012 2011 Equity Equity investments Total investments Total £’000 £’000 £’000 £’000

Level 3 financial instruments held at fair value through profit or loss Opening balance 632 632 628 628 Total (losses)/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 (28) (28) 44 Closing balance 604 604 632 632

21. 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 investment objective stated on the ‘Features’ page. In pursuing this objective, the Company is exposed to a variety 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 Company Secretary, in close cooperation with the Board and the Manager, coordinates the Company’s risk management strategy. The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set out below, 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 investment objective; • short term debtors, creditors and cash arising directly from its operations; • a debenture issued by the Company, 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’s investment 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 market prices. This market risk comprises three elements – currency risk, interest rate risk and other price risk. Information to enable an 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 and these policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure to market risk when making each investment decision and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis.

54 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 (i) Currency risk The majority of the Company’s assets and income are denominated in currencies other than sterling which is the Company’s functional currency and the currency in which it reports. As a result, movements in exchange rates will affect the sterling value of those items. Management of currency risk The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, which meets on at least four occasions each year. The Manager measures the risk to the Company of the foreign currency exposure by considering the effect on the Company’s net asset value and income of a movement in the rates of exchange to 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 the currency risk in respect of this geared portion of the portfolio using three month forward contracts. At 31st December 2012 the Company held a number of open contracts with UBS, Citibank, Barclays and Credit Suisse. The net effect of these contracts is to purchase £50 million for settlement in $ and the latest settlement date of these contracts was 15th January 2013. Upon maturity, these contracts were rolled over with the same counterparties and the settlement date of these new contracts is 15th April 2013. Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between the time that income is included in the financial statements 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 been included separately in the analysis so as to show the overall level of exposure.

2012 2011 USD Euro Total USD £’000 £’000 £’000 £’000

Investments held at fair value through profit or loss that are monetary items 40,174 — 40,174 36,156 Cash and short term deposits 12,315 15 12,330 24,835 Debtors–securities sold awaiting settlement, overseas tax recoverable, dividends and interest receivable 526 — 526 445 Creditors–securities purchased awaiting settlement ———— Forward foreign currency contracts 794 — 794 (50,034) Foreign currency exposure on net monetary items 53,809 15 53,824 11,402 Investments held at fair value through profit or loss that are equities 461,036 — 461,036 389,086 Total net foreign currency exposure 514,845 15 514,860 400,488

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

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 55 Notes to the Accounts continued

21. Financial instruments’ exposure to risk and risk management policies continued (a) Market risk continued (i) Currency risk continued Foreign currency sensitivity The following tables illustrate the sensitivity of the return after taxation for the year and net assets with regard to the Company’s monetary financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on the Company’s monetary currency financial instruments held at each balance sheet date and the income receivable in foreign currency and assumes a 10% (2011: 10%) appreciation or depreciation of sterling against the $ which is deemed to be a reasonable illustration based on the volatility of exchange rates during the year. If sterling had weakened by 10% (2011: 10%) against the $ this would have had the following effect: 2012 2011 £’000 £’000

Income statement return after taxation Revenue return 966 768 Capital return 5,383 1,140 Total return after taxation for the year 6,349 1,908 Net assets 6,349 1,908

If sterling had strengthened by 10% (2011: 10%) against the $ this would have had the following effect: 2012 2011 £’000 £’000

Income statement return after taxation Revenue return (966) (768) Capital return (5,383) (1,140) Total return after taxation for the year (6,349) (1,908) Net assets (6,349) (1,908)

In the opinion of the Directors, the above sensitivity analyses with respect to monetary financial assets and liabilities are broadly representative of the whole of the current and comparative year. The sensitivity with regard to the Company’s investments and foreign currency is subsumed into other price risk sensitivity on page 58.

(ii) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the liquidity fund. The Company’s exposure to floating interest rates, giving cash flow interest rate risk when rates are re-set, is as follows: 2012 2011 £’000 £’000

Exposure to floating interest rates Cash and short term deposits 12,339 24,835 JPMorgan US Dollar Liquidity Fund 40,174 36,156 Total exposure 52,513 60,991

56 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Interest receivable on cash balances is at a margin below LIBOR and interest payable on overdrafts is at a margin over LIBOR or its foreign currency equivalent (2011: same). The target interest earned on the JPMorgan US Dollar Liquidity Fund is the 7 day $ London Interbank Bid Rate (2011: same). The £50 million debenture, which the Company has in issue, carries a fixed interest rate of 6.875% until the repayment date in June 2018. The above year end exposures are not necessarily representative of the exposure to interest rates during the year as the cash balances and investments in the liquidity fund have fluctuated. The maximum and minimum exposures during the year, arising from cash balances and the liquidity fund were as follows: 2012 2011 £’000 £’000

Maximum interest rate exposure to floating rates 70,437 74,756 Minimum interest rate exposure to floating rates 52,513 29,861

Interest rate sensitivity The following table illustrates the sensitivity of the return after taxation for the year and net assets to a 0.5% (2011: 0.5%) increase or decrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company’s monetary financial instruments held at the balance sheet date, with all other variables held constant. 2012 2011 0.5% 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 taxation Revenue return 263 (263) 305 (305) Capital return ———— Total return after taxation for the year and net assets 263 (263) 305 (305)

In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposure to 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, which may 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 risk associated with particular industry sectors. The investment management team has responsibility for monitoring the portfolio, which is selected in accordance with the Company’s investment objectives and seeks to ensure that individual stocks meet an acceptable risk/reward profile.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 57 Notes to the Accounts continued

21. Financial instruments’ exposure to risk and risk management policies continued (a) Market risk continued (iii) Other price risk continued Other price risk exposure The Company’s total exposure to other changes in market prices at 31st December comprises its holdings in equity investments as follows: 2012 2011 £’000 £’000

Equity investments held at fair value through profit or loss 461,036 389,086

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 19 to 21. This shows that all of the investments’ value is in the USA. Accordingly, there is a concentration of exposure to that country. However, it should be noted that an investment may not be 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 or decrease of 10% (2011: 10%) in the market value of equity investments. This level of change is considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis is based on the Company’s equities and includes the impact on the management fee but assumes all other variables are held constant. 2012 2011 10% Increase 10% Decrease 10% Increase 10% Decrease in fair value in fair value in fair value in fair value £’000 £’000 £’000 £’000

Income statement – return after taxation Revenue return (46) 46 (39) 39 Capital return 45,919 (45,919) 38,753 (38,753) Total return after taxation for the year 45,873 (45,873) 38,714 (38,714) Net assets 45,873 (45,873) 38,714 (38,714)

(b) Liquidity risk This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled 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 to meet funding requirements if necessary.

58 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Liquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required are as follows:

2012 More than Three three months months but not more More than or less than one year one year Total £’000 £’000 £’000 £’000

Debenture stock including interest — 3,438 65,471 68,909 Other creditors and accruals 337 ——337 Derivative financial instruments ———— 337 3,438 65,471 69,246

2011 More than Three three months months but not more More than or less than one year one year Total £’000 £’000 £’000 £’000

Debenture stock including interest — 3,438 68,906 72,344 Other creditors and accruals 77 ——77 Derivative financial instruments 586 ——586 663 3,438 68,906 73,007

The liabilities shown above against debenture stock are the undiscounted contractual amounts that are to be paid and, as such 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 could result in loss to the Company. Management of credit risk Portfolio dealing The Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates the risk of losing the principal of a trade during the settlement process. The Manager regularly monitors dealing activity to ensure best execution, a process that involves measuring various indicators including the quality of trade settlement and incidence of failed trades. Counterparty lists are maintained and adjusted accordingly.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 59 Notes to the Accounts continued

21. Financial instruments’ exposure to risk and risk management policies continued (c) Credit risk continued Management of credit risk continued Cash Counterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties that have a minimum rating of A1/P1 (2011: A1/P1) from Standard & Poor’s and Moody’s respectively.

Exposure to JPMorgan Chase JPMorgan Chase is the custodian of the Company’s assets. The Company’s assets are segregated from JPMorgan Chase’s own trading assets. Therefore these assets are designed to be protected from creditors in the event that JPMorgan Chase were to cease 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 and comparative year end. 2012 2011 Balance Maximum Balance Maximum sheet exposure sheet exposure £’000 £’000 £’000 £’000

Fixed assets – investments held at fair value through profit or loss 501,210 40,174 425,242 36,156 Current assets Cash and short term deposits 12,339 12,339 24,835 24,835 Debtors 568 568 486 486 Derivative financial instruments 794 794 507 507 514,911 53,875 451,070 61,984

The 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 by Standard & 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 a minimum rating of A1/P1 (2011: A1/P1) from Standard & Poor’s and Moody’s respectively. (d) Fair values of financial assets and financial liabilities All financial assets and liabilities are either included in the balance sheet at fair value or the carrying value in the balance sheet is 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 yield from a similarly dated gilt plus a margin based on the 5 year average for the AA Barclays Sterling Corporate Bond spread. 2012 2011 Accounts Fair Accounts Fair value value value value as restated £m £m £m £m

£50 million 6.875% debenture June 2018 49.8 60.2 49.8 60.8

60 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 22. Capital management policies and procedures The Company’s debt and capital structure comprises the following: 2012 2011 £’000 £’000

Debt: £50,000,000 6.875% debenture June 2018 50,000 50,000 50,000 50,000 Equity: Equity share capital 12,560 11,551 Reserves 452,174 388,828 464,734 400,379 Total debt and equity 464,734 450,379

The Company’s capital management objectives are to ensure that it will continue as a going concern and seek to maximise income 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. 2012 2011 £’000 £’000

Investments excluding liquidity fund holdings 461,036 389,086 Current assets excluding cash 1,362 993 Current liabilities excluding bank loans (337) (880) Total Assets 462,061 389,199 Net assets 464,734 400,379

Gearing Factor (0.6)% (2.8)%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on an ongoing 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 price discount 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.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 61 Notice of Annual General Meeting

Notice is hereby given that the ninety-seventh Annual General Authority to disapply pre-emption rights on allotment of relevant Meeting of JPMorgan American Investment Trust plc will be securities – Special Resolution held at Holborn Bars, 138-142 Holborn, London EC1N 2NQ on 11. THAT subject to the passing of Resolution 10 set out above, Wednesday, 1st May 2013 at 2.30 p.m. for the following the Directors of the Company be and they are hereby purposes: empowered pursuant to Section 570 and 573 of the Act to allot equity securities (within the meaning of Section 560 of 1. To receive the Directors’ Report, the Annual Accounts and the Act) for cash pursuant to the authority conferred by the Auditors’ Report for the year ended 31st December Resolution 10 or by way of a sale of Treasury shares as if 2012. Section 561(1) of the Act did not apply to any such 2. To approve the Directors’ Remuneration Report for the allotment, provided that this power shall be limited to the year ended 31st December 2012. allotment of equity securities for cash up to an aggregate nominal amount of £1,262,289, representing approximately 3. To declare a final dividend on the ordinary shares of 10% of the issued ordinary share capital as at the date of 7.5 pence per share. the passing of this resolution at a price of not less than the 4. To reappoint Sarah Bates as a Chairman of the Company. net asset value per share and shall expire upon the expiry of the general authority conferred by Resolution 10 above, 5. To reappoint Kate Bolsover as a Director of the Company. save that the Company may before such expiry make offers, 6. To reappoint James Williams as a Director of the Company. or agreements which would or might require equity securities to be allotted after such expiry and so that the 7. To reappoint Simon Bragg as a Director of the Company. Directors of the Company may allot equity securities in 8. To reappoint Alan Collins as a Director of the Company. pursuant of such offers, or agreements as if the power conferred hereby had not expired. 9. To reappoint Deloitte LLP as auditors to the Company and to authorise the Directors to determine their remuneration. Authority to repurchase the Company’s shares for cancellation – Special Resolution Special Business 12. THAT the Company be generally and subject as hereinafter appears unconditionally authorised in accordance with To consider the following resolutions: Section 701 of the Companies Act 2006 (the ‘Act’) to make Authority to allot new shares – Ordinary Resolution market purchases (within the meaning of Section 693 of the 10. THAT the Directors of the Company be and they are hereby Act) of its issued shares of 25p each in the capital of the generally and unconditionally authorised, (in substitution of Company (‘ordinary shares’). any authorities previously granted to the Directors), PROVIDED ALWAYS THAT pursuant to Section 551 of the Companies Act 2006 (the ‘Act’) to exercise all the powers for the Company to allot (i) the maximum number of shares hereby authorised to relevant securities (within the meaning of Section 551 of the be purchased shall be 7,568,689 or if less, that number Act) up to an aggregate nominal amount of £1,262,289, of shares which is equal to 14.99% of the Company’s representing approximately 10% of the Company’s issued issued share capital as at the date of the passing of this ordinary share capital as at the date of the passing of this resolution; resolution, provided that this authority shall expire at the (ii) the minimum price which may be paid for a share shall conclusion of the Annual General Meeting of the Company be 25p; to be held in 2014 unless renewed at a general meeting prior to such time, save that the Company may before such (iii) the maximum price which may be paid for a share shall expiry make offers, agreements or arrangements which be an amount equal to the highest of: (a) 105% of the would or might require relevant securities to be allotted average of the middle market quotations for a share after such expiry and so that the Directors of the Company taken from and calculated by reference to the London may allot relevant securities in pursuance of such offers, Stock Exchange Daily Official List for the five business agreements or arrangements as if the authority conferred days immediately preceding the day on which the share hereby had not expired. is contracted to be purchased; or (b) the price of the last

62 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 independent trade; or (c) the highest current • Article 121(1)(b): appropriate the sum resolved to be independent bid; capitalised to the members in proportion to the nominal amounts of the shares (whether or not fully (iv) any purchase of shares will be made in the market for paid) held by them respectively which would (or in the cash or prices below the prevailing net asset value per case of treasury shares, which would if such shares share (as determined by the Directors); were not held as treasury shares) entitle them to (v) the authority hereby conferred shall expire on participate in a distribution of that sum if the shares 31st October 2014 unless the authority is renewed at the were fully paid and the sum were then distributable and Company’s Annual General Meeting in 2014 or at any were distributed by way of dividend and apply such other general meeting prior to such time; and sum on their behalf either in or towards paying up the amounts, if any, for the time being unpaid on any shares (vi) the Company may make or contract to purchase shares held by them respectively, or in paying up in full shares under the authority hereby conferred prior to the expiry or debentures of the Company of a nominal amount of such authority and may make a purchase of shares equal to that sum, and allot such shares or debentures pursuant to any such contract notwithstanding such credited as fully paid to those members or as they may expiry. direct, in those proportions, or partly in one way and Amendment of Articles of Association – to permit the distribution of partly in the other. capital profits – Special Resolution Amendment of Articles of Association - to amend the maximum 13. THAT the Company’s Articles of Association be amended by aggregate Directors’ fees payable – Special Resolution deleting the existing Articles 111, 120(2) and 121(1)(b) and 14. THAT in accordance with Article 97 of the Company’s inserting the following new Articles 111, 120(2) and 121(1)(b) Articles of Association, the maximum aggregate Directors’ in their place: fees payable be increased from £175,000 to £225,000 per • Article 111: The Company may by ordinary resolution annum with immediate effect. declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Directors. If any shares or By order of the Board securities are purchased cum dividend or interest such Alison Vincent, for and on behalf of dividend or interest when paid may, at the discretion of JPMorgan Asset Management (UK) Limited, the Board, be treated as revenue and it shall not be Secretary obligatory to capitalise the same or any part thereof. 25th March 2013 • Article 120(2): Any surplus over the book value derived from the sale or realisation of any capital asset (including any surplus arising on changes or transpositions of investments) shall be credited to a Capital Reserve or applied for some capital purpose, including a distribution to shareholders out of capital. There shall also be credited to such Reserve, or applied as aforesaid, any other sums representing accretions to capital assets, including in particular any sums resulting from the writing up of the book values of any capital assets. Such Reserve may be used to meet depreciation of capital assets or for the improvement of capital assets or for such other capital purposes as the Board may think fit. Any taxation arising in consequence of the disposal of any capital asset and any deficit below book value resulting on the disposal of any capital asset may be debited in whole or in part against such Reserve.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 63 Notice of Annual General Meeting continued

Notes 6. Entry to the above Meeting will be restricted to shareholders and These notes should be read in conjunction with the notes on the their proxy or proxies, with guests admitted only by prior reverse of the proxy form. arrangement. 1. A member entitled to attend and vote at the meeting may appoint 7. A corporation, which is a shareholder, may appoint individuals to another person(s) (who need not be a member of the Company) act as its representatives and to vote in person at the meeting (see to exercise all or any of his rights to attend, speak and vote at the instructions given on the proxy form). In accordance with the meeting. A member can appoint more than one proxy in relation to provisions of the Companies Act 2006, each such representative the meeting, provided that each proxy is appointed to exercise the may exercise (on behalf of the corporation) the same powers as the rights attaching to different shares held by him. corporation could exercise if it were an individual member of the company, provided that they do not do so in relation to the same 2. A proxy does not need to be a member of the Company but must shares. It is therefore no longer necessary to nominate a attend the Meeting to represent you. Your proxy could be the designated corporate representative. Chairman, another director of the Company or another person who has agreed to attend to represent you. Details of how to appoint Representatives should bring to the meeting evidence of their the Chairman or another person(s) as your proxy or proxies using appointment, including any authority under which it is signed. the proxy form are set out in the notes to the proxy form. If the 8. Members that satisfy the thresholds in Section 527 of the voting box on the proxy form is left blank, the proxy or proxies will Companies Act 2006 can require the Company to publish a exercise his/ their discretion both as to how to vote and whether statement on its website setting out any matter relating to: (a) the he/they abstain(s) from voting. Your proxy must attend the audit of the Company’s accounts (including the Auditors’ report meeting for your vote to count. Appointing a proxy or proxies does and the conduct of the audit) that are to be laid before the AGM; or not preclude you from attending the Meeting and voting in person. (b) any circumstances connected with Auditors of the Company If you attend the Meeting in person, your proxy appointment will ceasing to hold office since the previous AGM, which the members automatically be terminated. propose to raise at the Meeting. The Company cannot require the 3. Any instrument appointing a proxy, to be valid, must be lodged in members requesting the publication to pay its expenses. Any accordance with the instructions given on the proxy form. statement placed on the website must also be sent to the Company’s Auditors no later than the time it makes its statement 4. You may change your proxy instructions by returning a new proxy available on the website. The business which may be dealt with at appointment. The deadline for receipt of proxy appointments (see the AGM includes any statement that the Company has been above) also applies in relation to amended instructions. Any required to publish on its website pursuant to this right. attempt to terminate or amend a proxy appointment received after the relevant deadline will be disregarded. Where two or more valid 9. Pursuant to Section 319A of the Companies Act 2006, the Company separate appointments of proxy are received in respect of the must cause to be answered at the AGM any question relating to the same share in respect of the same meeting, the one which is last business being dealt with at the AGM which is put by a member received (regardless of its date or the date of its signature) shall be attending the Meeting except in certain circumstances, including if treated as replacing and revoking the other or others as regards it is undesirable in the interests of the Company or the good order that share if the Company is unable to determine which was last of the Meeting or if it would involve the disclosure of confidential received, none of them shall be treated as valid in respect of that information. share. 10. Under Sections 338 and 338A of the 2006 Act, members meeting 5. To be entitled to attend and vote at the Meeting (and for the the threshold requirements in those sections have the right to purpose of the determination by the Company of the number of require the Company: (i) to give, to members of the Company votes they may cast), members must be entered on the Company’s entitled to receive notice of the Meeting, notice of a resolution register of members as at 6.00 p.m. two business days prior to the which those members intend to move (and which may properly be meeting (the ‘specified time’). If the meeting is adjourned to a time moved) at the Meeting; and/or (ii) to include in the business to be not more than 48 hours after the specified time applicable to the dealt with at the Meeting any matter (other than a proposed original meeting, that time will also apply for the purpose of resolution) which may properly be included in the business at the determining the entitlement of members to attend and vote (and Meeting. A resolution may properly be moved, or a matter properly for the purpose of determining the number of votes they may cast) included in the business unless: (a) (in the case of a resolution only) at the adjourned meeting. If however the meeting is adjourned for it would, if passed, be ineffective (whether by reason of any a longer period then, to be so entitled, members must be entered inconsistency with any enactment or the Company’s constitution or on the Company’s register of members as at 6.00 p.m. two otherwise); (b) it is defamatory of any person; or (c) it is frivolous or business days prior to the adjourned meeting or, if the Company vexatious. A request made pursuant to this right may be in hard gives notice of the adjourned meeting, at the time specified in that copy or electronic form, must identify the resolution of which notice changes to entries on the register after this time shall be notice is to be given or the matter to be included in the business, disregarded in determining the rights of persons to attend or vote must be accompanied by a statement setting out the grounds for at the meeting or adjourned meeting. the request, must be authenticated by the person(s) making it and must be received by the Company not later than the date that is six

64 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 clear weeks before the Meeting, and (in the case of a matter to be (Saturdays and public holidays excepted). It will also be available included in the business only) must be accompanied by a for inspection at the Annual General Meeting. No Director has any statement setting out the grounds for the request. contract of service with the Company. 11. A copy of this notice has been sent for information only to persons 14. You may not use any electronic address provided in this Notice of who have been nominated by a member to enjoy information Meeting to communicate with the Company for any purposes other rights under Section 146 of the Companies Act 2006 (a ‘Nominated than those expressly stated. Person’). The rights to appoint a proxy can not be exercised by a 15. As an alternative to completing a hardcopy Form of Proxy/Voting Nominated Person: they can only be exercised by the member. Direction Form, you can appoint a proxy or proxies electronically However, a Nominated Person may have a right under an by visiting www.sharevote.co.uk. You will need your Voting ID, agreement between him and the member by whom he was Task ID and Shareholder Reference Number (this is the series of nominated to be appointed as a proxy for the Meeting or to have numbers printed under your name on the Form of Proxy/Voting someone else so appointed. If a Nominated Person does not have Direction Form). Alternatively, if you have already registered with such a right or does not wish to exercise it, he may have a right Equiniti Limited’s online portfolio service, Shareview, you can under such an agreement to give instructions to the member as to submit your Form of Proxy at www.shareview.co.uk. Full the exercise of voting rights. instructions are given on both websites. 12. In accordance with Section 311A of the Companies Act 2006, the 16. As at 15th March 2013 (being the latest business day prior to the contents of this notice of meeting, details of the total number of publication of this Notice), the Company’s issued share capital shares in respect of which members are entitled to exercise voting consists of 50,491,592 shares, (carrying one vote each). Therefore rights at the AGM, the total voting rights members are entitled to the total voting rights in the Company are 50,491,592. exercise at the AGM and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received by the Company after the date of this notice will be available on the Electronic appointment – CREST members Company’s website www.jpmamerican.co.uk. CREST members who wish to appoint a proxy or proxies by utilising the 13. The register of interests of the Directors and connected persons in CREST electronic proxy appointment service may do so for the Meeting the share capital of the Company and the Directors’ letters of and any adjournment(s) thereof by using the procedures described in appointment are available for inspection at the Company’s the CREST Manual. See further instructions on the proxy form. registered office during usual business hours on any weekday

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 65 Glossary of Terms and Definitions

Return to Shareholders Share Price Discount/Premium to Net Asset Value (‘NAV’) per Share Total return to the investor, on a mid-market price to If the share price of an investment trust is lower than the NAV mid-market price basis, assuming that all dividends received per share, the shares are said to be trading at a discount. The were reinvested, without transaction costs, into the shares of discount is shown as a percentage of the NAV per share. The the Company at the time the shares were quoted ex-dividend. opposite of a discount is a premium. It is more common for an investment trust’s shares to trade at a discount than at a Return on Net Assets premium. Total return on net asset value (‘NAV’) per share, on a bid value to bid value basis, assuming that all dividends paid out Performance Attribution by the Company were reinvested, into the shares of the Analysis of how the Company achieved its recorded Company at the NAV per share at the time the shares were performance relative to its benchmark. quoted ex-dividend. Performance Attribution Definitions: Benchmark Return Total return on the benchmark, on a mid-market value to Allocation Effect mid-market value basis, assuming that all dividends received Measures the effect of allocating assets to sectors or asset were reinvested, without transaction costs, into the shares of types differently to the weighting in the benchmark. the underlying companies at the time the shares were quoted Selection Effect ex-dividend. Measures the effect of investing in securities to a greater or The benchmark is a recognised index of stocks which should lesser extent than their weighting in the benchmark, or of not be taken as wholly representative of the Company’s investing in securities which are excluded from the benchmark. investment universe. The Company’s investment strategy does Gearing/(Net Cash) not ‘track’ this index and consequently there may be some Measures the impact of borrowings or cash balances on the divergence between the Company’s performance and that of Company’s performance relative to its benchmark. the benchmark. Currency Hedge Actual Gearing Factor Measures the effect on the Company’s performance of a gain or Investments excluding holdings in liquidity funds, expressed as loss arising from the Company’s hedging activities. a percentage of net assets. This shows the effect of gearing on the net asset value if the market value of the portfolio were to Management Fee/Expenses increase by 100%. The payment of fees and expenses reduces the level of total assets and therefore has a negative effect on the Company’s Ongoing Charges relative performance. The ongoing charges represent the Company’s management fee and all other operating expenses excluding finance costs Shares Issued payable, expressed as a percentage of the average of the daily The issue of shares at a price in excess of the net asset value net assets during the year and is calculated in accordance with per share, has a positive effect on the Company’s relative guidance issued by the Association of Investment Companies. performance. The method of calculating the ongoing charges (2011: Total Expense Ratio or ‘TER’) has changed. The TER represented the Company’s management fee and all other operating expenses excluding interest, expressed as a percentage of the average of the month end net assets during the year.

66 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Warning to shareholders – Boiler Room Scams

In recent years, many companies have become aware that their shareholders have been targeted by unauthorised overseas-based brokers selling what turn out to be non-existent or high risk shares, or expressing a wish to buy their shares. If you receive unsolicited investment advice or requests:

• Make sure you get the correct name of the person or organisation

• Check that they are properly authorised by the FSA before getting involved by visiting www.fsa.gov.uk/pages/register/

• Report the matter to the FSA by calling 0845 606 1234

• If the calls persist, hang up.

More detailed information on this can be found on the Money Advice Service website www.moneyadviceservice.org.uk

68 JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 Information about the Company

Financial Calendar Financial year end 31st December Final results announced March Half year end 30th June Half year results announced August Interim Management Statements announced April and October Dividend on ordinary shares paid May/October Interest payments on 6.875% debenture stock 2018 June/December Annual General Meeting May

History Manager and Company Secretary The Company has its origins in the Alabama, New Orleans, Texas and JPMorgan Asset Management (UK) Limited Pacific Junction Railways Company Limited which was formed in 1881 to acquire interests in, and to undertake the completion of, three Company’s Registered Office American railroads – the Vicksburg and Meridian, the Vicksburg, Finsbury Dials Shreveport and Pacific and the New Orleans and North Eastern. 20 Finsbury Street In 1917 the Company was reorganised, a proportion of the railroad London EC2Y 9AQ interests were sold, and the investment powers were widened Telephone number: 020 7742 4000 enabling its assets to be invested in several countries including the For company secretarial and administrative matters, please contact United Kingdom. To reflect the new objectives the name was Alison Vincent. changed to The Sterling Trust. The Company’s investment policy Custodian reverted to North American securities in 1982 when the name was changed to The Fleming American Investment Trust plc. The name JPMorgan Chase Bank, N.A. was changed to JPMorgan Fleming American Investment Trust plc in 25 Bank Street April 2002 and to its present form in 2006. JPMorgan, and its Canary Wharf predecessor company, has been the Company’s manager and London E14 5JP secretary since 1966. Registrars Company Numbers Equiniti Limited Company registration number: 15543 Reference 1077 London Stock Exchange number: 08456505 Aspect House ISIN: GB0008465055 Spencer Road Bloomberg code: JAM LN West Sussex BN99 6DA Telephone number: 0871 384 2316 Market Information Calls to this number cost 8p per minute from a BT landline. Other The Company’s net asset value (‘NAV’) is published daily via the London providers’ costs may vary. Lines open 8.30 a.m. to 5.30 p.m., Monday to Stock Exchange. The Company’s shares are listed on the London Stock Friday. The overseas helpline number is +44 (0)121 415 7047 Exchange and the price is noted daily in the Financial Times, The Times, Notifications of changes of address and enquiries regarding share The Daily Telegraph, The Scotsman, The Independent and on the certificates or dividend cheques should be made in writing to the J.P. Morgan website at www.jpmamerican.co.uk, where the share price Registrar quoting reference 1077. is updated every fifteen minutes during trading hours. Registered shareholders can obtain further details on their holdings on Website the internet by visiting www.shareview.co.uk www.jpmamerican.co.uk Independent Auditor Share Transactions Deloitte LLP The Company’s shares may be dealt in directly through a stockbroker Chartered Accountants and Statutory Auditor or professional adviser acting on an investor’s behalf. They may also be 2 New Street Square purchased and held through the J.P. Morgan Investment Account, London EC4A 3ZB J.P. Morgan ISA and J.P. Morgan SIPP. These products are all available Brokers on the online wealth manager service, J.P. Morgan WealthManager+ Canaccord Genuity Limited available at www.jpmorganwealthmanagerplus.co.uk 88 Wood Street London EC2V 7QR Savings Product Administrators For queries on the J.P. Morgan Investment Account, J.P. Morgan ISA and A member of the AIC J.P. Morgan SIPP, see contact details on the back cover of this report.

JPMorgan American Investment Trust plc. Annual Report & Accounts 2012 69 J.P. Morgan Helpline Freephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security www.jpmamerican.co.uk