Annual Financial Report

RNS Number : 2386S

JPMorgan Claverhouse IT PLC

08 March 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2018

Legal Entity Identifier: 549300NFZYYFSCD52W53

Information disclosed in accordance with the DTR 4.1.3

The Directors of JPMorgan Claverhouse Investment Trust plc announce the Company's results for the year ended 31st December 2018.

CHAIRMAN'S STATEMENT

Performance and Manager Review

2018 proved to be a disappointing year for investors in equities. Whilst I was able to report a positive return on the Company's net assets for the first half of 2018, an outperformance compared to the benchmark index (FTSE All-Share Index, total return) of +1.7%, this performance was not sustained in the second half of the year. Stock markets generally were under pressure in the latter months of 2018, reflecting, amongst other things, concerns of a US trade war with China and the 'Brexit' outcome. Against this backdrop the Company's net asset total return for the full financial year to 31st December 2018 was -13.5%. This compares with a total return for the same period from the Company's benchmark index of -9.5%, an underperformance of 4.0%. The reasons for this are explained in detail in the Investment Manager's report. On a positive note the discount to net asset value at which the shares trade narrowed over the period, from a discount of 5.4% to a premium of 3.3%. As a result the total return to shareholders showed an outperformance compared to the Company's benchmark index of 4.0%.

I would again emphasise the long term performance of our Investment Managers. There has been a cumulative outperformance against the Company's benchmark since the change of Investment Manager in March 2012 of 2.1% per annum.

The Investment Managers' report reviews the market and provides more detail on performance and the stocks in which the Company is invested.

Revenue and Dividends

Revenue for the year to 31st December 2018 increased to 30.09p per share (2017: 29.32p). The Directors have declared a fourth quarterly interim dividend of 9.5p per share for the year ended 31st December 2018 which will bring the total dividend per share for the year to 27.5p (2017 total: 26.0p). This represents the 46th successive year in which the dividend has been raised and is an increase of 5.8% over the previous year, following a 13.0% increase in respect of 2017. The dividend was more than covered by the revenue generated by the Company's portfolio and this once again allowed us to make a transfer to the Company's revenue reserves.

The Board's dividend policy remains to seek to increase the dividend each year and, taking a run of years together, to increase dividends at a rate close to or above the rate of inflation. Given the Company's strong revenue reserves, the Board currently expects future dividend increases to continue to exceed the rate of inflation. The Board also intends to increase the first three quarterly interim dividends in 2019 from 6.00p per share to 6.25p per share. The Company continues to benefit from a high level of revenue reserves and the ability to utilise these, if necessary, to support the dividend.

Discount and Share Repurchases

At the beginning of the year the Directors resolved to implement a more active discount and premium management policy in order to bring the share price more into line with the net asset value. At the Annual General Meeting in April 2018 shareholders authorised the sale of shares from Treasury at a discount of no more than 2% to the prevailing net asset value per share. The Company's discount narrowed significantly during the year and I can report that all of the shares held in Treasury (2,206,674) were sold, the final sale being in November 2018.

Having utilised the majority of the existing shareholder authority, and in anticipation of being able to issue new shares at some time in the near future, the Board sought shareholder approval in November 2018 to renew the authority to allot new shares and dis-apply pre-emption rights up to 10% of the issued share capital. Since the renewed authority was granted I am pleased to report that in the current financial year 105,000 new shares have been issued, the first issue of new shares by the Company for over 20 years. In total since April 2018 over £16.0 million has been raised from the sale of Treasury shares and issuance of new shares. Renewal of the authority to issue new shares and repurchase shares will be sought at the AGM in April this year.

As agreed in 2018, the Company intends to continue its more active discount and premium management policy and intends in normal market conditions to repurchase shares offered on the market at prices representing discounts to NAV of 5% or more, with such shares to be held in Treasury. In response to market demand the Company will be willing to sell shares from Treasury at a discount to NAV, subject to a maximum discount of 2%. Additionally, new shares will be available for issue at a premium to NAV, after the costs of issue.

Gearing/Long Term Borrowing

The Company's gearing policy is to operate within a range of 5% net cash and 20% geared and the Investment Managers have discretion to vary the gearing level between 5% net cash and 17.5% geared. The level of gearing reduced from approximately 11.3% at the beginning of the year to 2.5% at 31st December 2018. In addition to its 7% 2020 debenture the Company has a revolving credit facility of £50 million, none of which was drawn down as at 31st December 2018. Since the year end £10 million of the revolving credit facility has been drawn down.

Board of Directors

Mr Humphrey van der Klugt has indicated that he intends to retire as a Director of the Company at the Annual General Meeting in 2020 and as part of the Board's succession planning Mr David Fletcher replaced Mr van der Klugt as Audit Committee Chairman with effect from 1st December 2018. The Board will start a recruitment process with a view to appointing a new director over the coming year.

In accordance with UK Corporate Governance requirements all Directors will stand for re-appointment at the Annual General Meeting.

Board Apprentice

The Board has continued to support the Board Apprentice initiative that it joined in 2016. Harish Bhayani's term will come to an end in April this year and we are in the process of appointing the replacement for Harish, Caroline Troy, by the time of the Annual General Meeting. We hope that the new Board Apprentice will find the experience as valuable as Harish has found it and I look forward to introducing Caroline at the AGM.

Annual General Meeting

This year's Annual General Meeting will, as usual, be held at JPMorgan's offices at 60 Victoria Embankment, London EC4Y 0JP, on Thursday 25th April 2019 at 12.00 noon. William Meadon and Callum Abbot will give a presentation to shareholders, reviewing the past year and commenting on the outlook for the current year. The meeting will be followed by a sandwich lunch, thus providing shareholders with the opportunity to meet the Directors and representatives of the Manager. We look forward to seeing as many shareholders as possible at the AGM.

If you have any detailed or technical questions, it would be helpful if you could raise them in advance with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's website. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.

Outlook

While Brexit has continued to dominate the headlines in the UK and has adversely affected business and investor confidence, the fall in global markets in 2018 was caused by a number of factors. These included a slowing of growth in China, Europe and elsewhere, and political upheavals in a number of countries. Many of the Company's portfolio companies operate internationally and will continue to be affected by such global issues.

At the time of writing, the Brexit political endgame is still uncertain and the risks of falls, or at least volatility, in sterling and the UK equity market will remain for some time. However, these risks have to an extent already been priced in and there are a number of opportunities for investment at acceptable valuations. Since the year end there has been some recovery in stockmarkets and, as at 28th February 2019, the Company's share price was 702.0p, a 5.6% increase on its closing price on 31st December 2018.

The Company has strong revenue reserves and a good record of dividend growth. It is also structured, with its diversified portfolio and risk controls, to help it withstand challenging market conditions. With these strengths I am hopeful that the Company will provide strong performance over the years to come.

Andrew Sutch

Chairman

7th March 2019

INVESTMENT MANAGERS' REPORT

Market Review

It was only recently that investor talk was of global economies being in a 'Goldilocks' period of synchronised growth (not too hot, not too cold). Interest rates were low, employment was rising, confidence indicators were high and tax cuts in the US were spurring on global equity markets. By mid-year many equity markets, including the UK, were hitting new highs and investor confidence was buoyant. However, by the autumn the mood had darkened and Goldilocks was greeted by the bears.

The change in market sentiment was driven by growing concern that the economic environment was not strong enough to stand up to tightening monetary policy at the same time as several geopolitical situations flared. Market concerns included weaker Chinese growth, a broad slowdown in European business confidence, escalating trade wars between the US and China, Italian politics, US central bank rate rises and, of course, Brexit. 'Safety first' became the over-riding theme and few asset classes were spared the down draught. By the end of 2018, 90% of global investable assets had fallen in value, the highest of any year on record.

UK equities were not spared the sell-off with the lack of progress in Brexit negotiations adding to the nervousness. With the UK parliament unable to agree what - if any - sort of exit deal it wanted, sterling fell and the Brexit clock continued to tick. By the year end, sentiment was poor indeed with both bonds and equities pricing in a global recession.

Performance Review

In the year to 31st December 2018, your Company delivered a total return on net assets (capital plus dividends re-invested) of -13.5%, compared to the benchmark FTSE All-Share Index return of -9.5%. However, with the Company's shares moving from a discount of 5.4% to a 3.3% premium over the course of the year, the total return for shareholders was limited to a fall of 5.5%. A detailed breakdown of the performance is given in Annual Report.

It was a frustrating year, with the portfolio performing relatively well for the first half of the year. However, in the fourth quarter, as the market became fixated with a number of macro-economic and political concerns, the portfolio performed poorly absolutely and relatively, leading to the fund underperforming over the twelve month period.

Your fund owns stocks in reasonably valued, good quality companies with improving prospects. Going into the fourth quarter this led to a cyclical positioning in the portfolio. As fear of a global recession spread through the market there was a rapid change in market sentiment. The fundamentals we target were overlooked in favour of defensive stocks. The speed and extent of this sell-off led to the portfolio struggling towards the end of the year with the fall in many stock prices often being indiscriminate and driven largely by fear and emotion rather than fundamentals. Thankfully, the new year has seen a marked improvement in sentiment and your Company's performance has benefitted accordingly.

Our most positive contributor to performance during 2018 was our underweight position in British American Tobacco (BAT). BAT generates just over 40% of its profit in the US and roughly half this comes from menthol cigarettes. In 2018, the US's Food & Drug Agency targeted tobacco and particularly menthol cigarettes, with a view to banning menthol cigarettes completely.This has come at a time when next generation products have vastly increased in popularity and new entrants have surged into this market leaving incumbent tobacco companies, like BAT, looking flat-footed. Against this challenging backdrop, concerns over the company's growth expectations, together with the extensive debt it is carrying, saw the share price halve during the year.

Fever-Tree was again a positive contributor to the portfolio. The company's profits continued to beat market expectations, with growth in the UK and Europe continuing apace while the opportunity to expand their range into the much larger US market showed early signs of promise. As the share price has risen we have taken profits along the way, so when the shares fell sharply in the fourth quarter market sell-off, our position was not outsized.

The biggest detractor from performance during 2018 was our position in Jupiter Fund Management. Poor performance in their Dynamic Bond Fund and Merlin fund of funds product led to outflows, which was compounded by weak markets, leading to falling revenues. Costs also rose due to the increased regulatory burden on asset managers post MiFID II.

Thomas Cook, the package holiday company, was another detractor. The hot British summer and World Cup kept customers at home while management made frequent errors in their communications with the market that led to a loss of credibility. We sold out of the stock before its capitulation in September but the share price had fallen materially already.

Top Contributors and Detractors to Performance vs FTSE All Share Index

Top Five Contributors			Top Five Detractors
British American Tobacco*	+0.50%		Jupiter	-0.53%
Fenner	+0.33%		Thomas Cook Group	-0.40%
Fever-Tree	+0.32%		Smurfit Kappa	-0.33%
John Laing Group	+0.29%		Astra Zeneca*	-0.32%
Softcat	+0.27%		Tesco	-0.24%

Source: JPMAM, as at 31st December 2018,

*underweight position

Portfolio Review

The portfolio held 60 stocks at the year end.

Given the volatility in the year and the change in market sentiment, turnover in the portfolio was higher than usual. Part of this was to gradually bring down gearing from a February high of 14% to much lower levels by the end of the year. Reducing risk in the portfolio as market volatility picked up also led to increased turnover.

New holdings included some blue chip defensive holdings like BT Group, which after several years of warring with the regulator seems to have found a stable footing. We also added to the catering and outsourcing company Compass Group and the supermarket Tesco, both of which we view as stable businesses with visible earnings growth.

Other new holdings were started in companies which we believe to have a structural growth driver that underpins their earnings for the long term. Segro, for example, is a real estate investment trust that has around 90% of its assets in big box and urban warehouses across Europe. Demand for these properties is rising as they help accommodate rising urbanisation and the increasing complexity of online retailing. A tight supply of land, driven by other demands such as housing, has enabled Segro to charge higher rents.

Other new holdings included Burford Capital, a first mover in the nascent litigation finance market, and Unite Group, the market leader in student accommodation with sites in many of the UK's best university towns.

Throughout the year we added to our position in Diageo, the global spirits company, making it our biggest overweight position. The company has a strong portfolio of premium brands across a number of markets which gives it both considerable resilience and a high degree of pricing authority. The result is consistent organic growth and sufficient cash generation to enable it to buy back its own shares. We added to another consumer staples company, Unilever, as its defensive growth characteristic is attractive in this uncertain market environment.

We built an overweight position in global pharmaceutical company, GlaxoSmithKline (GSK). Investors had fallen out of love with GSK due to its lack of research and development success leading to it being the cheapest European major pharmaceutical company with a dividend yield of over 5%. However, a change in management of the pharmaceutical business should over time improve perceptions. Further, the recent joint venture with Pfizer's consumer health business demonstrates the ability of GSK's management to create value from the company's assets. We also purchased an overweight position in pharmaceutical company AstraZeneca as their new drugs are selling well and their future pipeline should support growth in the medium term.

Through the year we added to the large integrated oil companies Royal Dutch Shell and BP. In recent years the low oil price has forced both companies to vastly improve their cost control, capital allocation and efficiency. This means even in an environment where the oil price remains depressed they can generate significant cash to fund dividends and buybacks.

Over the year we meaningfully reduced our exposure to financials as we felt the cycle was maturing. We reduced exposure to Asian exposed companies including selling down to an underweight position in HSBC and selling out of Prudential, where we felt the slowing Chinese economy was impacting trading. We also sold stock in the other large banks, Lloyds Banking Group, RBS and Barclays. We sold out of non-life insurers Beazley and Direct Line Group; the former's valuation had became too expensive while the latter faces considerable competitive pressure in its key lines which is keeping pricing under pressure.

As economies slowed we sold out of some of the portfolio's cyclical holdings such as industrial conglomerate Melrose, which has considerable exposure to the autos market following its recent acquisition of GKN. The automotive market is currently facing considerable pressure, which will make the job of improving GKN's margins difficult.

We also sold our holding in the luxury fashion company Burberry. The Chinese market is a key end market and the Chinese consumer is under pressure as the country's economic growth has slowed over the past year. Burberry is also in the process of reinvigorating its range under a new designer, which carries risks if it is not successfully executed.

During the year we regularly trimmed our position in Fever-Tree taking substantial profits as we did. The sales were partly due to risk control, as the stock materially outperformed in the first half of the year but also to reflect the increased risk of future growth. We believe that the company can repeat its UK success in the much larger US market but acknowledge that this will not be without its attendant risks. We therefore viewed a smaller position as logical.

We also exited positions in Fenner, Shire and Sky as they were taken over at material premiums. We purchased Shire and Sky opportunistically as the former was trading at a material discount to terms and the latter was being bid up by two rival suitors.

Top Over and Under-weight positions vs FTSE All Share Index

Top Five Overweight Positions			Top Five Underweight Positions
Diageo	+1.9%		Prudential	-1.8%
Unilever	+1.9%		British American Tobacco	-1.4%
GlaxoSmithKline	+1.8%		Barclays	-1.3%
Legal & General	+1.5%		Vodafone	-1.0%
Rio Tinto	+1.4%		CRH	-0.8%

Source: JPMAM, as at 31st December 2018.

The portfolio is constructed principally from bottom-up stock selection; sector and macro views have less influence on the portfolio. We aim to run a stock-focused but sector diversified portfolio.

We actively managed the gearing of the fund through the year, reducing it from a peak of 14% in February to low single digits during the fourth quarter sell off. Since markets are likely to remain volatile in the year ahead, we will continue to manage gearing in a flexible manner.

FTSE 100 futures can be used to manage the level of gearing, but we did not employ any in 2018.

Market Outlook

The world economy is slowing and profit forecasts for many companies are being trimmed accordingly. However, we do not believe that the world is about to enter the recession which equities have recently priced in. Consequently, we believe that the risk/reward in UK equities for medium term investors like us is now looking much more attractive. Indeed, for those prepared to weather the new levels of stock and market volatility, a prospective yield on the FTSE 100 of 5% looks very appealing in a world where inflation remains low.

However, some patience will be required, since the subdued market sentiment may linger for some time. A clear path to resolve many of the macro and geo-political issues will be needed before many investors are prepared to commit new money to volatile equities. A failure by politicians and policy-makers to deal successfully with them may lead to further market falls but this will simply throw up even more opportunities for us to take advantage of.

Whilst the new year has seen us adding to a few stocks, we are moving gently, cautiously and selectively. We still have relatively low levels of gearing which will put us in a strong position to take advantage of any further falls.

As markets oscillate, pricing in new perceived levels of risk, Claverhouse shareholders can take comfort from being invested in a company with fortress revenue reserves which, even under the bleakest of scenarios, will continue to provide shareholders with one of the most secure dividends in the UK stock market.

At the time of writing gearing is 5.8%.

William Meadon

Callum Abbot

Investment Managers

7th March 2019

Principal Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. In assessing the risks and how they can be mitigated, the Board has given particular attention to those risks that might threaten the viability of the Company. These key risks fall broadly under the following categories:

•   Cybercrime

The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Company benefits directly or indirectly from all elements of JPMorgan's cyber security programme. The Board reviews the cyber security precautions taken by its third party suppliers on a regular basis. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by independent reporting accountants and reported on every six months against the AAF Standard.

•   Share price discount

If the Company's share price lags the NAV by a significant level, this may result in lower returns to shareholders. The Board seeks to manage the volatility and absolute level of the discount by judicious use of its share repurchase authority taking account of market conditions and having established explicit guidelines.

•   Political

The Board has considered, and continues to keep under review, the political, economic and regulatory risks to the Company associated with the UK's decision to leave the European Union and the Brexit process, including the effect of Brexit on the business and economic environment in which the companies in the portfolio operate; the effect of volatility in sterling on the portfolio companies and the dividends received from them; possible changes in regulation affecting the listing and promotion of shares in UK companies, including the Company itself; and possible changes in direct and indirect taxes which may affect the Company's returns.

•   Investment and Strategy

An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on by the Manager. JPMF provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.

•   Market

Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Company may use Index Futures to manage the effective level of gearing. Such instruments are also subject to fluctuations in value and may therefore result in gains or losses. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager. The Board monitors the implementation and results of the investment process with the Manager.

•   Operational

Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position.

Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Corporate Governance report in the Annual Report.

The risk of fraud or other control failures or weaknesses within the Manager or other service providers could result in losses to the Company. The Audit Committee receives independently audited reports on the Manager's and other service providers' internal controls, as well as report from the Manager's Compliance function. The Company's management agreement obliges the Manager to report on the detection of fraud relating to the Company's investments and the Company is afforded protection through its various contracts with suppliers, of which one of the key protections is the Depositary's indemnification for loss or misappropriation of the Company's assets held in custody.

•   Loss of Investment Team

Loss of key staff by the Manager, such as the Investment Managers, could affect the performance of the Company. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team-based approach.  

•   Legal and Regulatory/Corporate Governance

In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given on page 16. Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules, Prospectus, Market Abuse Regulation and Disclosure Guidance & Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules and DTRs.

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

•   Financial

Poor control of expenses can lead to an escalation of costs and high ongoing charges. The Board monitors the expenses of the Company and is provided with detailed information.

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

Transactions with the Manager and related parties

Details of the management contract are set out in the Directors' Report on page 23. The management fee payable to the Manager for the year was £2,399,000 (2017: £2,324,000) of which £nil (2017: £nil) was outstanding at the year end.

During the year £185,000 (2017: £172,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which £nil (2017: £nil) was outstanding at the year end.

Included in administration expenses in note 6 on page 52 are safe custody fees amounting to £7,000 (2017: £7,000) payable to JPMorgan Chase Bank N.A. of which £1,000 (2017: £2,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £39,000 (2017: £142,000) of which £nil (2017: £nil) was outstanding at the year end.

The Company holds an investment in JPMorgan Smaller Companies Investment Trust plc which is managed by JPMorgan. At the year end this was valued at £14.7 million (2017: £17.9 million) and represented 3.8% (2017: 3.8%) of the Company's investment portfolio. During the year the Company made £nil (2017: £2,519,000) purchases of this investment and sales with a total value of £1,305,000 (2017: £nil). Dividend income amounting to £412,000 (2017: £380,000) was receivable during the year of which £nil (2017: £nil) was outstanding at the year end.

The Company also holds cash in the JPMorgan Sterling Liquidity Fund, which is managed by JPMorgan. At the year end this was valued at £20.1 million (2017: £16.2 million). Interest amounting to £113,000 (2017: £47,000) was receivable during the year of which £nil (2017: £7,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £7,000 (2017: £4,000) were payable to JPMorgan Chase Bank N.A. during the year of which £2,000 (2017: £1,000) was outstanding at the year end.

At the year end, total cash of £359,000 (2017: £302,000) was held with JPMorgan Chase Bank N.A.. A net amount of interest of £nil (2017: £nil) was receivable by the Company during the year from JPMorgan Chase Bank N.A. of which £nil (2017: £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found in the Annual Report.

STATEMENT of directors' Responsibilities

The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.

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

•   select suitable accounting policies and then apply them consistently;

•   make judgements and estimates that are reasonable and prudent;

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

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

and the Directors confirm that they have done so.

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

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

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Annual Report, confirm that, to the best of their knowledge, the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return or loss of the Company.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, business model and strategy of the Company.

For and on behalf of the Board
Andrew Sutch
Chairman

7th March 2019

Statement of Comprehensive income

for the year ended 31st December 2018

	2018			2017
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair value through profit or loss	-	(70,369)	(70,369)	-	47,672	47,672
Net foreign currency gains	-	31	31	-	17	17
Income from investments	19,039	-	19,039	18,484	-	18,484
Interest receivable and similar income	119	-	119	47	-	47
Gross return/(loss)	19,158	(70,338)	(51,180)	18,531	47,689	66,220
Management fee	(840)	(1,559)	(2,399)	(813)	(1,511)	(2,324)
Other administrative expenses	(739)	-	(739)	(780)	-	(780)
Net return/(loss) on ordinary activities before finance costs and taxation	17,579	(71,897)	(54,318)	16,938	46,178	63,116
Finance costs	(911)	(1,691)	(2,602)	(921)	(1,711)	(2,632)
Net return/(loss) on ordinary activities before taxation	16,668	(73,588)	(56,920)	16,017	44,467	60,484
Taxation	(45)	-	(45)	(20)	-	(20)
Net return/(loss) on ordinary activities after taxation	16,623	(73,588)	(56,965)	15,997	44,467	60,464
Return/(loss) per share (note 2)	30.09p	(133.20)p	(103.11)p	29.32p	81.50p	110.82p
Dividends declared and payable in respect of the year	27.50p			26.00p
Dividends paid during the year	27.50p			24.50p

statement of changes in equity

for the year ended 31st December 2018

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2016	14,192	149,641	6,680	192,118	19,676	382,307
Repurchase of the Company's shares into Treasury	-	-	-	(918)	-	(918)
Net return on ordinary activities	-	-	-	44,467	15,997	60,464
Dividends paid in the year (note 3)	-	-	-	-	(13,355)	(13,355)
At 31st December 2017	14,192	149,641	6,680	235,667	22,318	428,498
Issuance of the Company's shares from Treasury	-	5,821	-	9,898	-	15,719
Expenses related to listing of shares	-	(78)	-	-	-	(78)
Net (loss)/return on ordinary activities	-	-	-	(73,588)	16,623	(56,965)
Dividends paid in the year (note 3)	-	-	-	-	(15,141)	(15,141)
At 31st December 2018	14,192	155,384	6,680	171,977	23,800	372,033

¹ This reserve forms the distributable reserve of the Company and may be used to fund distributions to investors via dividend payments.

statement of financial position

at 31st December 2018

	2018	2017
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	381,377	476,819
Current assets
Debtors	869	877
Cash and cash equivalents	20,436	16,489
	21,305	17,366
Current liabilities
Creditors: amounts falling due within one year	(703)	(768)
Net current assets	20,602	16,598
Total assets less current liabilities	401,979	493,417
Creditors: amounts falling due after more than one year	(29,946)	(64,919)
Net assets	372,033	428,498
Capital and reserves
Called up share capital	14,192	14,192
Share premium	155,384	149,641
Capital redemption reserve	6,680	6,680
Capital reserves	171,977	235,667
Revenue reserve	23,800	22,318
Total shareholders' funds	372,033	428,498
Net asset value per share (note 4)	655.4p	785.4p

statement of cash flows

for the year ended 31st December 2018

	2018	2017
	£'000	£'000
Net cash outflow from operations before dividends and interest	(3,096)	(3,055)
Dividends received	18,928	18,422
Interest received	120	43
Interest paid	(2,649)	(2,560)
Overseas tax recovered	69	37
Net cash inflow from operating activities	13,372	12,887
Purchases of investments	(206,973)	(135,101)
Sales of investments	232,047	134,197
Settlement of foreign currency contracts	-	8
Net cash inflow/(outflow) from investing activities	25,074	(896)
Dividends paid	(15,141)	(13,355)
Issuance of the Company's shares from Treasury	15,719	-
Repurchase of the Company's shares into Treasury	-	(918)
Repayment of bank loans	(45,000)	-
Drawdown of bank loans	10,000	7,000
Expenses related to listing of shares	(78)	-
Net cash outflow from financing activities	(34,500)	(7,273)
Increase in cash and cash equivalents	3,946	4,718
Cash and cash equivalents at start of year	16,489	11,771
Exchange movements	1	-
Cash and cash equivalents at end of year	20,436	16,489
Increase in cash and cash equivalents	3,946	4,718
Cash and cash equivalents consist of:
Cash and short term deposits	359	302
Cash held in JPMorgan Sterling Liquidity Fund	20,077	16,187
Total	20,436	16,489

Notes to the financial statements

for the year ended 31st December 2018

1.     Accounting policies

        Basis of accounting

The financial statements are prepared under historical cost convention, modified to include fixed asset investments at fair value, and in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014, and updated in February 2018.

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

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 30 of the Directors' Report form part of these financial statements.

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

2.     Return/(loss) per share

		2018	2017
		£'000	£'000
	Revenue return	16,623	15,997
	Capital (loss)/return	(73,588)	44,467
	Total (loss)/return	(56,965)	60,464
	Weighted average number of shares in issue during the year	55,249,240	54,564,897
	Revenue return per share	30.09p	29.32p
	Capital (loss)/return per share	(133.20)p	81.50p
	Total (loss)/return per share	(103.11)p	110.82p

3.     Dividends

(a)   Dividends paid and declared

		2018	2017
		£'000	£'000
	Dividends paid
	Unclaimed dividends refunded to the Company1	(8)	(13)
	2017 fourth quarterly dividend of 9.5p (2016: 8.0p) paid in March 2018	5,183	4,365
	First quarterly dividend of 6.0p (2017: 5.5p) paid in June 2018	3,281	3,001
	Second quarterly dividend of 6.0p (2017: 5.5p) paid in September 2018	3,303	3,001
	Third quarterly dividend of 6.0p (2017: 5.5p) paid in December 2018	3,382	3,001
	Total dividends paid in the year of 27.5p (2017: 24.5p)	15,141	13,355
	Dividend declared
	Fourth quarterly dividend declared of 9.5p (2017: 9.5p) paid in March 2019	5,403	5,183

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

All dividends paid and declared in the period have been funded from the Revenue Reserve.

The fourth quarterly dividend has been declared and paid in respect of the year ended 31st December 2018. This dividend will be reflected in the financial statements for the year ending 31st December 2019.

4.     Net asset value per share

		2018	2017
	Net assets (£'000)	372,033	428,498
	Number of shares in issue (excluding shares held in Treasury)	56,765,653	54,558,979
	Net asset value per share	655.4p	785.4p

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

JPMORGAN FUNDS LIMITED                              

ENDS

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

The annual report will shortly be available on the Company's website at www.jpmclaverhouse.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED

7th March 2019

 

END

 

 

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