JPMorgan Fleming Claverhouse IT PLC
12 March 2004
JPMORGAN FLEMING CLAVERHOUSE INVESTMENT TRUST PLC
LONDON STOCK EXCHANGE ANNOUNCEMENT
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS
The Board of JPMorgan Fleming Claverhouse Investment Trust plc announces its
preliminary results for the year ended 31st December 2003.
Review of the Year
In the year to 31st December 2003, the Company produced a total return on net
assets of +26.2% and a total return to shareholders of +27.6%. This compares
favourably with a total return on the FTSE All-Share Index, the benchmark
against which the Directors judge performance, of +20.8% over the same period.
This is a very good performance, both in absolute and relative terms. Underlying
attribution data, which analyses the relative return (i.e. the 5.4%
out-performance), shows that the Investment Managers' allocation and stock
selection during the year added approximately 3.5%, and that this was enhanced
by the positive impact of the Company's long-term strategic gearing in a rising
market, which added 2.5%.
In previous years, I have stated that gearing is one of the key advantages that
an investment trust has over other collective investment vehicles and that over
the long-term it will, in the Board's view, enhance investment returns. The
Board continues to hold this view but it does review the Company's gearing
policy on a regular basis. Our belief is that long term strategic gearing of
approximately 20% is appropriate and we are disinclined to allow it to rise much
higher than that level. It is pleasing to note that the Company's gearing made a
positive impact on performance for the year.
Revenue and Dividends
In recent times, the levels of dividends in the UK market have been under
pressure. However, over the last five years, the Company's dividend has
increased by almost 46% and the Board's intention remains to increase the
dividend annually by at least the rate of inflation, thereby continuing the
Company's record of increasing its dividend every year since 1972. The Board has
decided that the total dividend for 2003 should be 10.20p per share,
representing an increase of 5.7% over 2002. This payment has not necessitated a
transfer from the revenue reserve. However, the Board remains prepared to use
the revenue reserve to support its dividend policy rather than constrain the
Investment Managers' management of the portfolio. In keeping with the practice
adopted in recent years, the Board intends to continue to spread the payment of
the total annual dividend more evenly over the year.
During the year the Company repurchased a total of 9,149,437 ordinary shares for
cancellation. Included within this total was 7.6m ordinary shares repurchased
from JPMorgan Fleming Managed Growth plc (which has since been re-structured to
form JPMorgan Fleming Elect plc) as a result of a decision to diversify its
portfolio. At the time of the repurchase, the Board of JPMorgan Fleming Managed
Growth plc reiterated that the Company remained core to its investment strategy.
The Board's objective remains to use the share repurchase authority to manage
any imbalance between the supply and demand of the Company's shares, thereby
minimising the volatility of the discount.
Board of Directors
John Redwood will retire as a Director of the Company at this year's AGM. John
has been a Director since 1985, having previously been the Company's investment
manager. Indeed, John has been associated with Flemings for 50 years. This is a
notable achievement and on behalf of the Board I would like to express my thanks
to John for his contributions to the Board's deliberations and wish him well for
On 12th March 2004 Virginia Holmes was appointed a Director of the Company.
Virginia brings a wealth of investment experience to the Board. She was, until
2002, Chief Executive of AXA Investment Managers in the UK, having previously
been global head of strategic development, and has held senior positions with
Barclays Bank Group in the UK and Overseas. Having been appointed by the Board
during the year, she will stand for election at the forthcoming AGM.
During the past year, there has been a good deal of focus on corporate
governance in the UK, with various corporate governance and regulatory
consultations resulting in revisions to the UKLA Listing Rules for investment
companies, the issue of the code of corporate governance by the Association of
Investment Trust Companies and the revised Combined Code. We welcome these
developments and I am pleased to confirm that the Company operates in accordance
with best practice.
Earlier this year, the Directors held a private meeting to evaluate the
performance of the Manager and of the Board itself. In accordance with the
Company's Articles of Association, Sir Michael Bunbury is required to retire by
rotation at this year's AGM and will stand for re-election. I am pleased to
confirm that Sir Michael continues to be a very effective Director and
demonstrates commitment to his role, including that of Audit Committee Chairman.
The other Directors reviewed my position and confirmed their satisfaction with
my performance and my independence from the Manager and I will therefore stand
for re-election as Chairman for another 12 months. Having now served on the
Board for over 10 years, I will stand for annual re-election from now on.
The Board is satisfied that the continuing appointment of the Manager is in the
best interests of shareholders. In arriving at this view, the Board considered
the above-average performance, the investment strategy and process of the
Investment Manager and the support that the Company receives from JPMorgan
As many shareholders will be aware, investment trust companies currently suffer
VAT on management fees. This is not the case for other collective investment
vehicles, such as unit trusts and open ended investment companies, and your
Board believes that this is inequitable. Consequently, the Company has lodged a
joint appeal with the Association of Investment Trust Companies for VAT to be
removed from the payment of investment trust management fees. The costs of the
appeal will be borne by the investment trust industry through the AITC.
The Directors' fees were last increased in 2000. Having reviewed the level of
fees paid to directors in the investment trust industry and taken into account
the increasing responsibilities placed on directors, and the time commitment
involved, as a result of corporate governance requirements, the Board is
recommending shareholders approve an increase in fees at the forthcoming Annual
General Meeting. If the recommendation is approved, the Chairman's fees will
rise from £15,000 to £17,500 and the other Directors' fees from £11,000 to
£13,000. Recognition of the Audit Committee Chairman's additional
responsibilities will be reflected in an increase in fees from £11,000 to
Annual General Meeting
This year the Company's Annual General Meeting is being held in London, in
Cinema 1 at The Barbican Centre, Silk Street, London EC2Y 8DS on Thursday 29th
April 2004 at 12.00 noon.
Chairman 12th March 2004
For further information:
JPMorgan Fleming Asset Management 020 7742 6000
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