JPMorgan American Investment Trust plc Annual General Meeting 13 May 2015
1
Agenda
Performance Review
Current Economic and Market Data
Current Asset Allocation and Fund Structure
2
2014 Results
1 Source: J.P. Morgan and based on cum income debt at par. 2 Source: Morningstar. 3 Source: Morningstar. The Company’s benchmark index is the S&P 500 Index, net of the appropriate withholding tax, expressed in sterling total return terms. 4The October 2013 and May 2014 dividend amounts have been restated due to the sub-division of each existing ordinary share of 25p into five ordinary shares of 5p each on 8th May 2014.
NAV return1 20.8%
Ordinary share price2 22.6%
S&P 500 Composite Index (£) 20.4%
NAV relative return 0.4%
Interim Dividend (Net) payment (October 2013)4 1.0p
Dividend (Net) Payment (May 2014) 4 1.7p
Interim Dividend (Net) Payment (October 2014) 1.0p = 20.4% increase
on 2013 Final Dividend (Net) Proposed Payment (May 2015) 2.25p
3
Performance Attribution – Contributions to Total Returns JPM American Investment Trust plc
Source: Wilshire, JPMAM and MorningStar. All figures are on a total return basis. Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.
Contributions To Total Returns Year ended 31st December 2014
Net Asset Value Total Return (In sterling terms) 20.8%
Benchmark Total Return (In sterling terms) 20.4%
Excess Return 0.4%
Contributions To Total Returns
Large Cap Portfolio 1.1%
Allocation Effect -0.8%
Selection Effect 1.9%
Small Cap Portfolio -0.5%
Allocation Effect -0.5%
Cash -0.2%
Gearing 1.5%
Cost Of Debt -0.5%
Currency Hedge -0.5%
Share Issuance 0.2%
Management Fee/Expenses -0.6%
Performance Fee -0.1%
Total 0.4%
4
Sector attribution (relative to S&P 500)
JPMorgan American Investment Trust: 2014 performance attribution (USD)
1 Attribution breakdown equates to the gross performance of the portfolio. *Indicates stock was not held as of 31 December 2014. Source: Wilshire. The portfolio is an actively managed portfolio; holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not positions on behalf of its clients in any or all of the aforementioned securities.
Stock attribution (relative to S&P 500)
2.2%
0.7% 0.4% 0.3% 0.0%
-0.2% -0.4% -0.6% -0.6% -0.6% Information Technology
Consumer Staples
Industrials Telecom Services
Materials Energy Utilities Consumer Discretionary
Health Care Financials
Positive contributors
Ending Weight Difference Return Impact
Apple 2.40% 40.60% 0.53%
Southwest Airlines 0.62% 126.30% 0.39%
Yahoo 1.06% 44.56% 0.37%
Hewlett Packard 1.25% 46.03% 0.34%
Amazon* -0.65% -22.18% 0.33%
Negative contributors
Ending Weight Difference Return Impact
Peabody Energy* 0.00% -54.04% -0.44%
Terex* 0.00% -23.55% -0.29%
Devon Energy 1.09% 0.37% -0.28%
General Motors* -0.26% -16.46% -0.28%
Intel* -0.96% 44.27% -0.24%
Attribution Summary1 Stock: +1.85% Sector: -0.75%
For the twelve month period ending 31 December 2014 Excludes Cash & Gearing (USD)
5
Four Months to April 2015 Results
NAV return1 +2.4%
Ordinary share price2 -4.1%
S&P 500 Composite Index (£)3 3.3%
NAV relative return -0.9%
1 Source: J.P. Morgan and based on cum income with debt at par. 2 Source: Morningstar. 3 Source: Morningstar. The Company’s benchmark index is the S&P 500 Index, net of the appropriate withholding tax, expressed in sterling total return terms.
6
Performance in USD
Source: J.P. Morgan Asset Management, Morningstar, Bloomberg. Performance figures of those of the JPM American Investment Trust using month end CAPITAL NAV’s released to the market on 30 April 2015. The figures are on a total return basis in USD. 1 Competitive universe includes all Europe Open ended, US Large Cap Blend Category funds, in the Morningstar Global database.(only the oldest share class of each fund was included)
As of 30 April 2015
NAV Performance (USD) Dec - April 1 Year 3 Years 5 Years 10 Years
JPMAIT – Net of Fees 1.23% 12.29% 16.10% 12.67% 8.47%
Competitive ranking percentile 1 - 27 16 23 3
Number of Funds 1 - 417 387 351 255
7
Agenda
Performance Review
Current Economic and Market Data
Current Asset Allocation and Fund Structure
8
-$1
$1
$3
$5
$7
$9
$11
$13
$15
$17
$19
'65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Real GDPYear-over-year % chg
4Q14YoY % chg: 2.4%
Components of GDP4Q14 nominal GDP, trillions USD
13.4% Investment Ex-housing
68.5% Consumption
18.0% Gov’t Spending
3.3% Housing
- 3.1% Net Exports
Average: 3.0%
QoQ % chg: 2.2%
Real GDP
Expansion Average:
2.3%
Economic Growth and the Composition of GDP
Source: BEA, FactSet, J.P. Morgan Asset Management. Values may not sum to 100% due to rounding. Quarter over quarter percent changes are at an annualized rate. Average represents the annualized growth rate for the full period. Expansion average refers to the period starting in the second quarter of 2009. Guide to the Markets – U.S.Data are as of 31 March 2015
9
% of GDP
We think we have a few years left in an up cycle
Source: J.P. Morgan Asset Management and US Bureau of Economic Analysis. Data as of 31 December 2014.
Durable goods and fixed investment as % of GDP
12/14 24.1% LT average: 25.7%
18%
20%
22%
24%
26%
28%
30%
51 56 61 66 71 76 81 86 91 96 01 06 11
10
Sector performance in 2015 could depend in part on interest rates
Source: Standard & Poor’s, U.S. Treasury, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Markers represent monthly 2-year correlations only. Guide to the Markets – U.S. Data are as of 31 March 2015
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
0% 2% 4% 6% 8% 10% 12% 14% 16%
Correlations Between Weekly Stock Returns and Interest Rate Movements Weekly S&P 500 returns, 10-year Treasury yield, rolling 2-year correlation, May 1963 – Mar. 2015
Positive relationship between yield movements and stock returns
Negative relationship between yield movements and stock returns
When yields are below 5%, rising rates are generally associated with rising stock prices
10-Year Treasury Yield
Co
rre
lati
on
Co
eff
icie
nt
Sector correlations to rates 2-year rolling, 1994-2013
Max Average
Current Min
-1.00 -0.50 0.00 0.50 1.00
Utilities
Telecom
Cons. Staples
Materials
Technology
Health Care
Energy
Cons. Disc.
S&P 500
Industrials
Financials
More positively correlated with rising interest rates
Less positively correlated with rising interest rates
11
26
-10
1517
1
26
15
2
12
27
-7
26
47
-2
34
20
3127
20
-10-13
-23
26
9
3
14
4
-38
23
13
0
13
30
11
.4
-17 -18 -17
-7
-13
-8 -9
-34
-8 -8
-20
-6 -6 -5-9
-3
-8-11
-19
-12
-17
-30-34
-14
-8 -7 -8-10
-49
-28
-16-19
-10-6 -7
-4
-60%
-50%
-40%
-30%
-20%
-10%
%
10%
20%
30%
40%
'80 '85 '90 '95 '00 '05 '10 '15
S&P 500 Intra-year Declines vs. Calendar Year ReturnsDespite average intra-year drops of 14.2%, annual returns positive in 27 of 35 years*
YTD
Annual Returns and Intra-year Declines
Source: Standard & Poor’s, FactSet, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. *Returns shown are calendar year returns from 1980 to 2014 excluding 2015 which is year to date. Guide to the Markets – U.S. Data are as of 31 March 2015
12
S&P 500 Index at Inflection Points
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '148x
10x
12x
14x
16x
18x
20x
22x
24x
26x
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '142%
4%
6%
8%
10%
12%
14%S&P 500 Earnings Yield vs. Baa Bond Yield
S&P 500 Earnings Yield (Inverse of fwd. P/E): 5.9%
Moody’s Baa Yield: 4.5%
S&P 500 Index: Forward P/E Ratio
Average: 15.7x
Current: 16.9x
+1 Std. Dev.: 19.0x
-1 Std. Dev.: 12.4x
U.S. Equity: Valuation Measures Historical AveragesValuation Measure Description Latest
1-year ago
5-year avg.
10-year avg.
25-year avg.*
P/E Price to Earnings 16.9x 15.5x 13.6x 13.8x 15.7xCAPE Shiller's P/E 27.8 25.9 22.7 22.9 25.4Div. Yield Dividend Yield 1.9% 1.9% 2.0% 2.0% 2.1%REY Real Earnings Yield 3.9% 4.2% 5.0% 4.5% 2.9%P/B Price to Book 2.8 2.7 2.3 2.4 2.9P/CF Price to Cash Flow 11.8 11.1 9.4 9.7 11.3EY Spread EY Minus Baa Yield 1.4% 1.7% 2.2% 1.3% -0.6%
Source: Standard & Poor’s, FactSet Robert Shiller, FRB, J.P. Morgan Asset Management. Price to Earnings is price divided by consensus analyst estimates of earnings per share for the next 12 months. Shiller’s P/E uses trailing 10 years of inflation adjusted earnings as reported by companies. Dividend Yield is calculated as the trailing 12-month average dividend divided by price. Real Earnings Yield is defined as (trailing four quarters of reported earnings/price) - year over year core CPI inflation. Price to Book Ratio is the price divided by book value per share. Price to Cash Flow is price divided by NTM cash flow. EY Minus Baa Yield is the forward earnings yield (consensus analyst estimates of EPS over the next 12 months divided by price minus the Moody’s Baa seasoned corporate bond yield. *P/CF is a 20 - year avg. due to cash flow data availability. Data are as at 31 March 2015
13
4%
5%
6%
7%
8%
9%
10%
11%
'86 '91 '96 '01 '06 '11
-$1
$3
$7
$11
$15
$19
$23
$27
$31
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '96 '98 '00 '02 '04 '06 '08 '10 '12 '1480%
100%
120%
140%
160%
180%
200%
220%
S&P 500 Earnings Per ShareIndex quarterly operating earnings
Profit Margins
4Q14*: $26.77
2Q07: $24.06
Total LeverageS&P 500, ratio of total debt to total equity, quarterly
1Q15: 103%
Average: 161%
S&P 500 Operating EPS % of Sales per Share**
4Q14:8.7%
After-Tax, Adj. Corp. Profits, % of GDP
4Q14*:9.0%
Corporate Profits and Leverage
Source: BEA, Standard & Poor’s, Compustat, FactSet, J.P. Morgan Asset Management. EPS levels are based on operating earnings per share. *Most recently available data is 4Q14, which is a Standard & Poor’s estimate. **S&P 500 Operating EPS % of Sales per Share fell to 0% in 4Q2008 and is adjusted on the chart. Past performance is not indicative of future returns. Data are as of 31 March 2015
14
Energy: Supply, Demand and Prices
Source: EIA, Factset, J.P. Morgan Asset Management. *Forecasts are from EIA Short-Term Energy Outlook and start in 2015. ** Forecasts are from EIA Annual Energy Outlook and start in 2014. *** Production numbers as of 2015. **** Other includes conventional on and offshore natural gas drilling, tight gas, and coalbed methane. Natural gas prices are $/mmbtu and are of February 2015. Guide to the Markets – U.S. Data are as of 31 March 2015
'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$0
$20
$40
$60
$80
$100
$120
$140
$160
'95 '00 '05 '10 '15 '20 '250
5
10
15
20
25
30
35
Change in Production and Consumption of OilProduction, consumption and inventories, million barrels per day
Price of OilBrent crude, nominal prices, USD/barrel
Mar. 2015: $58.17
Gbl. Natural Gas PricesJapan $13.37Germany $9.29U.S. $2.74
U.S. Natural Gas Production***Trillions of cubic feet, USD
Other****
Shale Gas
EIA Forecast**
2013 2014 2015*Production
U.S. 12.4 14.0 14.9 20.8%
OPEC 36.5 36.5 36.5 -0.1%
Other 42.0 42.6 42.7 1.5%
Global 90.9 93.0 94.1 3.5%
Consumption
U.S. 19.0 19.0 19.3 2.0%
Europe 14.3 14.2 14.1 -1.6%
Japan 4.5 4.3 4.2 -7.5%
China 10.3 10.7 11.0 6.8%
Other 43.2 44.0 44.5 3.2%
Global 91.2 92.2 93.1 2.1%
Inventory Change -0.3 0.9 1.0
Growth since 2013
15
Return and Valuation Dispersion
Source: Standard & Poor’s, CBOE, Factset, , J.P. Morgan Asset Management. *EPS growth projections are Standard and Poor’s estimates for full year 2015 Data are as of 31 March 2015
10
12
14
16
18
20
22
24
26
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
Dec '13 Feb '14 Apr '14 Jun '14 Aug '14 Oct '14 Dec '14 Feb '15
4.2
1.20.4 0.3 0.3 0.2 0.1 0.1 -0.4 -0.6 -0.7
-1
0
1
2
3
4
5
Ener
gy
Util
ities
Con
s. S
tapl
es
Fina
ncia
ls
Mat
eria
ls
S&P
500
Con
s. D
isc.
Hea
lth C
are
Indu
stria
ls
Info
Tec
h
Tele
com
Sector DispersionStandard deviation across annual S&P 500 sector returns
S&P 500 Sector Projected 2015 Annual EPS Growth*S&P 500 Sector P/Es Relative to History15 year NTMA P/E, standard deviations above/below average
Expe
nsive
rel
ative
to hi
story
Inexp
ensiv
erel
ative
to hi
story
Dispersion (LHS) VIX (RHS)
53.5%
28.4%15.9% 13.3% 9.5% 8.2% 4.9% 3.5% 3.1% 3.0%
-55.7%-80%
-60%
-40%
-20%
0%
20%
40%
60%
Tele
com
Hea
lth C
are
Info
Tec
h
Indu
stria
ls
Con
s. D
isc.
Mat
eria
ls
S&P
500
Util
ities
Con
s. S
tapl
es
Fina
ncia
ls
Ener
gy
16
Consumer Finances
Source: (Left) FRB, J.P. Morgan Asset Management. Data include households and nonprofit organizations. (Right) BEA, FRB, FactSet , J.P . Morgan Asset Management. SA - seasonally adjusted. *Revolving includes credit cards. **1Q15 household debt service ratio and 1Q15 household net worth are J.P. Morgan Asset Management estimates. Values may not sum to 100% due to rounding. Data are as of 31 March 2015
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '149%
10%
11%
12%
13%
14%
Household Debt Service RatioDebt payments as % of disposable personal income, sa
1Q80: 10.6% 1Q15**:
9.9%
4Q07:13.2%
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
Household Net WorthBillions USD, not seasonally adjusted
1Q15**:$83,8992Q07:
$67,866
Consumer Balance Sheet4Q14, Trillions of dollars outstanding, not seasonally adjusted
Total Assets: $97.1tn
Total Liabilities: $14.2tn
Homes: 24%
Deposits: 9%
Pension Funds: 21%
Other Financial Assets: 39%
Other Tangible: 6%
Mortgages: 68%
Other Non-revolving: 1%Revolving*: 6%
Auto Loans: 7%Other Liabilities: 9%
Student Debt: 9%
3Q-‘07 Peak: $82.1tn1Q-‘09 Low: $67.1tn
17
0%
10%
20%
30%
40%
50%
60%
70% S&P/Topix Index (Japan) S&P UK Index
S&P 350 (Europe) S&P 500 (US)
The S&P 500 is a well-diversified benchmark
Source: (Both), J.P. Morgan Asset Management. Data are as of 31 March 2015 * GICS Sectors
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
S&P 500 S&P UK S&P 350 (Europe)
S&P/TOPIX (Japan)
S&P Asia 50
Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommuncation Services Utilities
Regional Index Sector Composition*
Market Cap Concentration By Regional Index, Top 10 Names As A % Of Total Market Cap
18
Agenda
Performance Review
Current Economic and Market Data
Current Asset Allocation and Fund Structure Asset Allocation
Sector Weights
Stock Weights
19
Asset Allocation
31-Mar 15 31-Dec 14 30-Sep 14 30-Jun-14 31-Mar-14 31-Dec-13 30-Sep-13 30-Jun-13
Large Cap Portfolio 94.0% 95.4% 95.7% 94.7% 96.3% 95.6% 90.6% 90.2%
Small Cap Growth Portfolio 4.7% 3.5% 3.4% 3.6% 2.8% 3.2% 6.0% 5.8%
Liquidity 1.4% 1.3% 1.2% 1.5% 0.6% 0.7% 2.8% 4.0%
Unrealized Hedge Value -0.1% -0.2% -0.3% 0.1% 0.1% 0.3% 0.5% -0.1%
Total* 100% 100% 100% 100% 100% 100% 100% 100%
Actual Gearing 109% 109% 109% 109% 109% 109% 105% 105%
Source: J.P. Morgan Asset Management as at 31 March 2015. The Fund is an actively managed portfolio; holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. *Figures may not add up to 100% due to the removal of the allocation to the US Small & Micro Cap and unquoted portions of the Investment Trust from prior periods.
20
Source: (Both), J.P. Morgan Asset Management, Company Data
Financial Metrics: Illinois Tool Works
21
Source: (Both), J.P. Morgan Asset Management, Company Data
Financial Metrics: Apple
22
JPM American Investment Trust: Sector allocation
24.8%
15.3% 14.9%
12.2% 11.4%
9.0% 8.3%
2.3% 1.1% 0.8%
4.8%
0.7%
-1.3%
2.7%
-1.1% -1.2% -0.2% -0.1%
-1.9% -2.4%
Information Technology
Health Care Financials Consumer Staples
Consumer Discretionary
Industrials Energy Telecom Services
Utilities Materials
Absolute
Relative
As of 30 April 2015
For illustrative purposes only. 1Relative to the S&P 500 Index. Source: Wilshire (excludes cash).
23
JPM American Investment Trust: Stock allocation
For illustrative purposes only. 1Relative to the S&P 500 Index. 2The portfolio is unable to hold JPMorgan Chase for regulatory reasons. *Indicates a stock not held as of 30 April 2015. Source: Wilshire (excludes cash).
Top 10 Holdings (%)
Apple 6.8
Microsoft 4.5
Wells Fargo 2.3
Gilead Sciences 2.2
Bank Of America 2.2
Pfizer 2.1
Time Warner 2.0
Citigroup 1.9
Northrop 1.9
Cisco 1.8
As of 30 April 2015
Top 5 Overweights1 (%)
Apple 2.9
Microsoft 2.3
Northrop 1.7
Time Warner 1.6
CenturyLink 1.5
Top 5 Underweights1 (%)
Johnson & Johnson* -1.5
General Electric* -1.5
Berkshire Hathaway* -1.4
JPMorgan Chase & Co2 -1.3
Procter & Gamble* -1.2
24
Conclusions
Valuations are high but not alarming
The US continues its modest growth trajectory
Corporate America continues to prudently manage its capital
25
J.P. Morgan Asset Management
Any forecasts or opinions expressed are J.P. Morgan’s own at the date of this document and may be subject to change. The value of investments and the income from them may fluctuate and your investment is not guaranteed and investors may not get back the full amount invested. Past performance is not a guide to future performance. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitive to market movements. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Telephone lines are recorded and may be monitored for security and training purposes