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JPMorgan Claver IT (JCH)

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Friday 04 March, 2011

JPMorgan Claver IT

Final Results

RNS Number : 3862C
JPMorgan Claverhouse IT PLC
04 March 2011
 



LONDON STOCK EXCHANGE ANNOUNCEMENT

 

JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC

 

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2010

 

Chairman's Statement

 

Performance

After three years of relatively disappointing performance against the Company's benchmark, the FTSE All-Share Index, I am pleased to report a better year to 31st December 2010 relative to that index and a respectable year in absolute terms. The total return on net assets was +16.8% for the year. This compares favourably with the total return on the benchmark of +14.5% for the year. The total return to shareholders was +15.1%, being a combination of the appreciation in the share price and of dividends paid.

 

A year ago I suggested that most shareholders could live with a more boring year in stock markets after the extreme volatility of 2009 and that is what 2010 delivered. At the low point on 1st July the All-Share Index had declined by 11.4% from the beginning of the financial year. But from that point an almost uninterrupted rally resulted in the index ending the year just below its high for the year.

 

Many of the larger companies listed in London have global businesses and the performance of the world economy is more important than that of the United Kingdom. However, in the UK the beginnings of the restoration of sanity to the Government's finances are most welcome. Although many citizens may not be able to define a billion or a trillion and nor have a clear understanding of the mechanism by which a large and growing Government deficit affects the individual, the electorate decided in May to elect a new Government intent upon reducing the deficit and eliminating the structural element of it.

 

There were, of course, extraordinary and unforeseen events as there will be every year for investors and managers to absorb. The problems of Greece and Ireland and the consequent threats to the survival of the Euro resulted in a number of worrying days for stock and bond markets. At an individual stock level, the tribulations for BP following the Deepwater Horizon rig explosion in the Gulf of Mexico resulted in huge uncertainty, and hence volatility. But markets will always be faced with 'unknown unknowns' which have to be overcome. Overall 2010 was a satisfactory and unthreatening year for equity investors and one in which the Company's Managers' disciplined and intellectually robust investment management process added value.

 

Continuing appointment of the Manager

Once again the Board requested a detailed submission from J.P. Morgan Asset Management ('JPMAM') as to the effectiveness of the investment process and the justification for their continuing appointment as the Company's investment managers. That submission was carefully considered by the Board, together with the historical evidence for the soundness of the process. The Managers continue to believe that their process, as described in the Investment Managers' Report, will deliver superior performance against the benchmark over a ten-year horizon.

 

The Board considers that the process is sound and justifies the continuing appointment of JPMAM as Investment Managers to the Company. But there is still some way to go to make up for the disappointments of 2007 and 2008. JPMAM's strategy aims to deliver out-performance over the FTSE All-Share Index averaging 2% per annum over a ten-year time horizon. On this basis Claverhouse should appeal to long-term investors in equities seeking exposure to the UK market at modest levels of risk.

 

Revenue and Dividends

The Company's revenue derives almost entirely from dividends paid by companies in which we have holdings. 2010 was a very good year for company profits and, as discussed in the Investment Managers' report, company earnings increased by some 40% from the recession affected figures of 2009. However, dividends paid to the Company did not increase in line with earnings as companies rebuilt their balance sheets. In addition we suffered from the suspension of the BP dividend for three quarterly payments.

 

In 2010 the revenue per share fell by 7.7%. Nevertheless, the Board was of the opinion that it was appropriate to draw further on the revenue reserves which have been built up and so decided that the total dividend for the year should be increased from 16.9p to 17.5p, a rise of 3.6%, thus increasing the total dividend for the 38th successive year. I have written before of the strength that the Company's revenue reserve brings which has allowed the Board to maintain a progressive dividend policy. We recognise the importance of dividends to our many individual shareholders, particularly at a time when interest rates on cash savings are so low.

 

As expected, and as budgeted for, the payment of the annual dividend necessitated a transfer from the revenue reserve for the second consecutive year. Whilst we cannot go on drawing on the revenue reserve indefinitely if our earnings do not cover our own dividends, the Company still has a revenue reserve equivalent to 17 pence per share after the latest transfer. We have questioned JPMAM closely on their expectations of future earnings and their estimates indicate a smaller transfer is likely for 2011 and that we should return to a position of our revenue covering our own dividends within three years.

 

It remains the Board's aim to increase the dividend each year. With inflation having increased recently, we cannot be certain that the increase in the dividend will match the latest single year inflation figure. However, taking a run of years together, we will aspire to deliver increases in dividends that will at least match the rate of inflation as long as the present increase in the rate is temporary and that we do not return to the high inflation era epitomised by the 1970s which did so much damage to the United Kingdom's economy.

 

Gearing

The Company ended the year approximately 9% geared. During the year the gearing varied between 8% and 13%. As stated in previous years, it is the Board's intention to keep gearing within the range of 0-15% under normal market conditions, whilst reserving the right to allow gearing to increase in the event of a serious setback in markets.

 

Share Repurchases and Discount

During the year the Company repurchased 987,570 shares at an average discount to net asset value (with debt at par value) of 8.3%. These shares are all held in Treasury for possible re-issue, should the Company's shares move to premium to net asset value ('NAV'). The Board's objective remains to use the share repurchase authority to assist in managing any imbalance between supply and demand for the Company's shares, thereby reducing the volatility of the discount. Shares held in Treasury will only be re-issued at a premium to NAV unless shareholders were to grant authority for them to be re-issued at less than NAV. No such authority exists and the Board does not intend to seek such authority at the present time.

 

Should it not prove possible to re-issue shares held in Treasury at a premium to NAV then a sufficient number of shares so held will be cancelled so as to keep the Treasury holding within 5% of the issued share capital.

 

The year-end discount of the share price to NAV widened from 4.9% to 7.0% but remained within a narrow range during the year, averaging 7.9%.

 

Board of Directors

Directors conduct a self-assessment of their performance each year and this is followed up by a conversation with me as Chairman. My own performance is assessed by the Senior Independent Director after he has consulted with all other Directors. A report is made to the Nomination Committee which meets annually to evaluate the performance of the Board, its Committees and the individual Directors.

 

I became Chairman of the Company in April 2005. In my absence, the members of the Nomination Committee considered my service and confirmed that they recommend that I should continue as Chairman. As I have served as a Director for more than nine years, I am required to seek re-election on an annual basis. The Company's Articles require that each Director must retire by rotation at least every three years. However, the new UK Corporate Governance Code introduced in June 2010 requires all directors of companies within the FTSE 350 Index to offer themselves for annual re-election. The Company does not fall within the FTSE 350 but the Board has always sought to achieve the highest standards of governance and therefore the Board has decided that all Directors will stand for annual re-election from this AGM onwards.

 

The Directors' Remuneration Report discloses that the base fee for a Director was increased on 1st January 2011 by approximately 17% after two years in which it has remained unchanged. The Chairman's fee alone was increased last year. I realise that increases in fees are never popular with every shareholder. In total, though, Directors' fees account for only 5.8% of the costs of running the Company which continues to have a relatively low total expense ratio of 0.72% as compared with most of our peers and particularly with most open-ended funds which do not have a Board of Directors to fight the shareholders' corner on expenses.

 

Annual General Meeting

This year's AGM will be held at Trinity House, Tower Hill, London EC3N 4DH on Tuesday 12th April 2011 at 2.00 p.m. The Investment Managers will give a presentation to shareholders, reviewing the past year and commenting on the outlook for the current year.

 

The Future

Equity investors have to live with uncertainty as part of the price they pay for higher long-term returns. At times they have to endure long periods of unexciting, but volatile, performance as excesses, whether of over-exuberance or of deep fears, are corrected. The decade leading up to 2010 certainly confirmed that characteristic. But 2010 was for stock markets and for the world economy a much calmer year and it is very much to be hoped that 2011, which has started positively, will continue in the same vein.

 

There will be unforeseen events which will cause excitements and genuine worries about supply of food, oil and other essentials, and of raw materials. In addition, there are many structural problems in the world's economy with debt-fuelled over-consumption in slow growing developed countries being financed by savings in the developing world.

 

In the United Kingdom we clearly face some difficult political and economic times ahead. Restoring the Government's finances to health will not be easy or painless. Whilst there is a valid debate about the speed of reduction and substantial media coverage of detailed consequences for certain groups, failure to tackle the deficit would, in the long-term, bring increased misery for all with rising inflation and a depreciating currency. So it is very much to be hoped that the Government will keep its resolve to move towards sounder finances, including improving the productivity and value for money that the taxpayer receives from money spent by the State. Meanwhile, though, inflation remains stubbornly above the target of 2.0% presenting the Authorities with a very difficult decision as to when, and by how much, to raise interest rates.

 

The substantial injection of taxpayers' money - most of it borrowed or created through Quantitative Easing - has not begun to be unwound whilst parts of the economy remain weak. However, many UK companies are performing robustly, particularly those which have been able to benefit from the fall in the value of sterling in 2008 or which are exposed to the fast growing markets of the developing world. The international nature of many UK companies' businesses gives the Company substantial exposure to those growing markets. Both in the developed world and in the developing, company profits are in general robustly healthy with further growth expected in 2011. The prospects for company dividends are good with BP returning to the list of dividend payers and the possibility of resumed or increased dividends from the banks.

 

The FTSE All-Share Index has nearly doubled since I signed out my report two years ago on 3rd March 2009. In that report I urged shareholders to keep faith with equities and they have been rewarded for their fortitude. Despite the rise, as the Investment Managers demonstrate in their report which follows, shares are still not expensive relative to company earnings even if they are not as cheap as they were relative to bonds which, finally, and for very good reasons, appear to have ended their 20 year bull market. So for long-term investors the Company's shares can be regarded as a core holding in wealth preserving equities and the Board and Managers will strive to add value over a cycle beyond that delivered by index tracking funds.

 

I look forward to meeting shareholders at the AGM and discussing the prospects further at that time.

 

 

Michael Bunbury

Chairman                                                                                                                     4th March 2011

 



Investment Managers' Report

 

Market Review

The UK market overcame various headwinds in 2010 to deliver strong performance for the year. Challenges included the European sovereign debt crisis, the lack of a single-party majority in May's general election, persistently high inflation and austerity measures implemented to deal with the UK's unsustainably high budget deficit. However, strong corporate earnings and evidence of an ongoing global economic recovery served to help the market overcome these challenges.

 

The FTSE All-Share returned 14.5% (with dividends reinvested) for the year to 31st December 2010. Mid cap stocks were the best performers, with the FTSE Mid 250 up 27.4%, even beating the MSCI Emerging Markets index return of 22.9%. The FTSE 100 and FTSE Small Cap also performed strongly returning 12.6% and 19.5%, respectively.

 

One of the biggest challenges faced by the UK market in 2010 was the European sovereign debt crisis, which was triggered in the spring by worries that Greece could default on its debt payments. The Greek crisis led to concerns about the financial status of other highly indebted peripheral eurozone countries. Ireland, Portugal and Spain, as well as Greece, received credit rating downgrades from the main credit ratings agencies. Bond prices fell, causing yields to rise to new highs as risk appetite fell across most markets and concerns escalated over the stability of the Euro.

 

Later in the year fears of contagion re-emerged, prompting a renewed flight to quality, as the Irish government, faced with the mounting cost of supporting its ailing banks, was forced to go to the European Union and International Monetary Fund for a bail-out in November. Although the crisis was the cause of much volatility, ultimately, the European Central Bank's commitment to its bond purchasing programme and increased support for debt-laden eurozone countries from the EU helped ease concerns.

 

Despite its own high levels of Government debt, the UK avoided most of the eurozone's woes by dint of having both a floating exchange rate and control over the setting of its domestic interest rates. In June 2010, the new Conservative/Liberal Democrat coalition won the support of markets for its plan to restore the country to a sustainable fiscal path by announcing plans for cuts to public spending and substantial tax rises.

 

With fiscal conditions tightening, the Bank of England's Monetary Policy Committee ('MPC') kept the base rate on hold at a record low of 0.5% for the year despite persistently high inflation, which remained well above the target rate of 2%. The MPC announced no further additions to its asset purchase programme, but left the door open for more quantitative easing should the economic situation deteriorate.

 

Despite the austerity measures implemented by the Government, the UK economy continued to grow through most of the year, boosted by strong manufacturing performance. In the second quarter UK GDP grew 1.2% quarter on quarter, its fastest rate in nine years, with construction output at its highest since 1982. Growth slowed somewhat in the third quarter but remained positive. However, concerns were raised over the Government's approach as data showed the economy had contracted again, by 0.6% in the fourth quarter, although these numbers were heavily impacted by the adverse weather conditions in December.

The key corporate news story of the year was the BP oil leak in the Gulf of Mexico caused by the explosion of the Deepwater Horizon platform. BP's share price plunged and the company suspended its dividend amid uncertainty over the costs of the disaster, both in monetary terms and in the damage done to the company s reputation. By the end of the year, its share price had recovered some of the lost ground, but profitability for the year was severely impacted.

 

Elsewhere, the UK corporate sector had a much better year. Second and third-quarter corporate earnings data were stronger than expected, boosted by both cost cutting and revenue growth. With earnings momentum remaining strong, valuations remained supportive throughout the year.

 

Performance Review

In the year to 31st December 2010 the Company delivered a total return on net assets (capital plus dividends re-invested) of +16.8%, well ahead of the benchmark FTSE All-Share Index total return of +14.5%. Both stock selection and gearing into the rising equity market contributed to the Company s outperformance. The underlying equity performance was the most significant contributor.

 

In terms of the underlying performance of the equity portfolio, the combination of the two styles that we focus on to deliver outperformance (being overweight in both value and growth) contributed positively to returns. In particular, the outperformance was driven by the growth side of the process: price momentum and earnings momentum. Returns from the value style were mixed, being favourable in the first half, but not so in the second half of the financial year. Some of the strongest contributors to performance were those stocks that delivered results that beat the market's expectations and consequently had their earnings forecasts upgraded strongly as a result of greater optimism on their future prospects. Such stocks also then delivered strong share price performance over the year, as greater confidence developed in the ongoing global economic recovery and the expectation that these stocks would continue to deliver strong profit growth. Such themes were the predominant drivers of the outperformance of the growth style during 2010.

 

At a stock level, the most significant contributor to performance was the overweight position in Aggreko, the global leader in providing temporary specialist power and temperature control services, which rose by over 59% over the year. This stock consistently delivered strong results, with consequent upgrades to its earnings expectations, benefiting from the winning of new contracts and the strengthening global economic recovery. Other strong stock performers included the industrial engineering groups, IMI and Weir Group, which rose in value by 82% and 148% respectively, as their profit forecasts were strongly upgraded during the course of 2010. These two industrial cyclicals, alongside others such as the industrial metals group Ferrexpo, and the oil services group Petrofac, generate a substantial proportion of their revenues and earnings overseas. Indeed, a feature of the winning stocks in 2010 was their international nature - some 70% of revenues of the UK stock market are generated outside the UK. The Company's positions in our two in-house UK smaller companies funds were positive contributors to performance during 2010, both in terms of our allocation to the outperforming small-cap index and the funds' strong outperformance of their own benchmarks.

 

By contrast, despite managing our position in BP actively, this stock was a detractor to performance during 2010, although its share price recovered to some extent in the second half of the year. Other value stocks also delivered negative returns, including the house builders Barratt Developments and Bellway, which fell by 29% and 18% respectively despite trading at very low valuations in comparison to their book values. As we mentioned earlier, it was the value stocks that underperformed the rising UK equity market during 2010, with the major pharmaceutical stock GlaxoSmithKline, also underperforming the wider market. Some of the largest UK companies are now trading at such low valuations, having failed to keep up with the market's progress during 2010, that they now offer the opportunity to deliver very strong returns in the future.

 

Portfolio Review

The Company's portfolio continues to be a balance between two attractive investment styles; on one side we seek to invest in attractive value stocks and, on the other side, stocks with strong earnings and growth momentum. This approach is summarised in our investment philosophy:

 

On average, fast growing, cheap stocks with good newsflow will outperform slow growing, expensive stocks with bad newsflow.

 

The most significant stock event of 2010 was the explosion of the BP operated Deepwater Horizon drilling platform in the Gulf of Mexico. At the time of the initial explosion we had a substantial position in BP as the stock was attractively valued and the company had been trading well leading to increased profit forecasts. In April, soon after the explosion, we lowered our exposure to BP and subsequently cut our position further through May and June. By the end of June the market value of BP had fallen by over £60 billion and, in our view, the fall in the value of the company more than reflected even worst case scenarios for the costs of damages and clean up operations. We therefore began to rebuild our position in late June and July. At their peak BP's shares were priced at 655p. They subsequently fell to 303p, but by the end of the year had recovered to 465p.

 

2010 saw the global recovery continue to gather pace. UK industrials were a particular beneficiary, with the underlying recovery being helped by the boost to competitiveness coming from the devaluation of sterling. We increased our holdings in a number of high quality manufacturing companies. Weir Group is a global leader in building pumps and valves for highly demanding applications in power stations, oil production and other industrial uses. Throughout 2010 Weir saw its earnings forecasts nearly double, driving its share price from 717p to 1780p. To exploit the same themes of global recovery and sterling weakness, we also bought Smiths Group, Spirax Sarco and IMI. By contrast, some of our most significant sales were companies that were disappointing in terms of earnings momentum, such as the consumer goods companies Unilever and Reckitt Benckiser.

 

The seemingly insatiable demand from China for commodities has been a recurring theme for a number of years. Across many different classes of commodity, rising demand has driven prices higher, whether it be cotton, wheat or energy. The UK stock market allows investors to buy into this growth through numerous resource companies. Copper is a commodity that is in tight supply with demand being driven by the rapid industrialisation of China. Since 2000 the price of copper has risen five fold, outpacing even the rise in the gold price. We have had a consistent overweight position in mining stocks, including the copper plays Antofagasta and Kazakhmys which have performed very well. Through 2010, we re-orientated our holdings away from copper to focus more on cheaper iron ore companies with further purchases of Rio Tinto and BHP Billiton to add to our existing holdings in these companies, and Ferrexpo. Through the latter half of 2010 we have continued to see further strength in the iron ore price which rose by over 30% during the year as a whole.

 

The UK stock market is currently one of the lowest rated markets in the world. For 2011, the UK market trades on a 10.8x price to forecast earnings ratio compared to 13.4x for the US, 11.9x for emerging markets and 12.9x for the Pacific basin. At the same time, forecast earnings growth in the UK outstrips the forecasts for all of these regions in 2011. Allied to these value and growth attractions, the yield available from UK equities is a particular feature at a time when cash deposits earn very little and the outlook for bonds is clouded by rising inflation worries.

 

Like the Company's own shares, equities generally see rising dividend payments over time, whereas gilts pay a fixed amount. At a point when equity dividend yields are similar to those on ten year gilts but offer the prospect of growth, the valuation attractions of equities are clear. Within the UK stock market there are many examples of global 'blue-chip' companies that offer a premium yield to investors whilst satisfying our investment criteria for value stocks. Our portfolio is well positioned in stocks such as Vodafone that pays out a growing 5% yield and is well covered by earnings. Other high yielding stocks that also meet our criteria and are held in the portfolio include Aviva, AstraZeneca and Royal Dutch Shell.

 

Market Outlook

So far the UK economy is on course to rebalance in a positive fashion, with manufacturing activity and exports leading the recovery rather than domestic household consumption. Given that sterling remains competitively valued in comparison with the other main trading currencies and Government spending retrenchment will begin to bite in earnest in the spring, it is likely that the private corporate sector will remain the main driver of economic growth in 2011.

 

However, with the economy seeming to have stalled in the fourth quarter, the Bank of England is facing an awkward situation. The targeted inflation measure of CPI has been at or above 3% in every month since January 2010 and is not expected to fall below 3% again until 2012. This is putting the Bank's anti-inflation credentials under some strain. Mervyn King, the Governor, would prefer to keep the base rate at its current low of 0.5% to aid the economic recovery, but the MPC must ensure that higher inflation in the short term does not create higher long-term inflation expectations.

 

UK quoted companies will have reported earnings growth in excess of 40% for 2010 once the reporting season draws to a close in March, a significantly better outcome than was expected twelve months ago. With the market appreciating by 14.5%, 2010 saw company valuations become steadily cheaper, as measured by price to earnings ratios. The current consensus expectation for 2011 earnings growth is around 15%. We think this growth assumption will again prove to be too conservative at what is still an early stage of the global economic upswing.

 

The UK equity market currently trades well below its long term average, even after the 14.5% return delivered in 2010.

 

UK equity market

We are at an early stage of both the economic and stock market recoveries. Economic growth in 2011 is still likely to be positive, while interest rates are likely to remain low by historic standards. This environment is supportive for equities.

 

James Illsley

Sarah Emly

Investment Managers                                                                                                  4th March 2011

 

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

 

•     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 by the Manager. JPMAM 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 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 JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

 

•     Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158') (formerly Section 842 of the Income and Corporation Taxes Act 1988). 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 JPMAM 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 and Disclosure & 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, JPMAM, and its professional advisers to ensure compliance with The Companies Act and the UKLA Listing Rules and DTRs.

 

•     Corporate Governance and Shareholder Relations: 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 within the Annual Report.

 

•     Operational: Disruption to, or failure of, JPMAM's accounting, dealing or payments systems or the 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 JPMAM and its associates and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report within the Annual Report.

 

•     Financial: 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 note 22 within the Annual Report.

 

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

 

(a) the financial statements, 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 profit or loss of the Company; and

 

(b) the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it face.

 

Michael Bunbury

Chairman

 

4th March 2011



Income Statement

for the year ended 31st December 2010

 



2010



2009




(unaudited)






Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

Gains on investments held at fair value







  through profit or loss

-

35,257

35,257

-

50,088

50,088

Income from investments

9,374

-

9,374

10,228

-

10,228

Other interest receivable and similar income

63

-

63

97

-

97

Gross return

9,437

35,257

44,694

10,325

50,088

60,413

Management fee

(431)

(802)

(1,233)

(369)

(685)

(1,054)

Other administrative expenses

(610)

-

(610)

(759)

-

(759)

Net return on ordinary activities







  before  finance costs and taxation

8,396

34,455

42,851

9,197

49,403

58,600

Finance costs

(770)

(1,430)

(2,200)

(776)

(1,441)

(2,217)

Net return on ordinary activities







  before taxation

7,626

33,025

40,651

8,421

47,962

56,383

Taxation

(15)

-

(15)

(44)

-

(44)

Net return on ordinary activities







  after taxation

7,611

33,025

40,636

8,377

47,962

56,339

Return per share (note 2)

13.63p

59.12p

72.75p

14.77p

84.54p

99.31p

Dividend per share (note 3)



17.5p



16.9p

 

           

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.

 



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 2008

14,198

149,641

6,674

22,291

18,283

211,087

Repurchase and cancellation of the Company's







  own shares

(6)

-

6

(83)

-

(83)

Repurchase of shares into Treasury

-

-

-

(1,666)

-

(1,666)

Net return on ordinary activities

-

-

-

47,962

8,377

56,339

Dividends appropriated in the year

-

-

-

-

(11,347)

(11,347)

At 31st December 2009 (unaudited)

14,192

149,641

6,680

68,504

15,313

254,330

Repurchase of shares into Treasury

-

-

-

(4,334)

-

(4,334)

Net return on ordinary activities

-

-

-

33,025

7,611

40,636

Dividends appropriated in the year

-

-

-

-

(9,460)

(9,460)

At 31st December 2010

14,192

149,641

6,680

97,195

13,464

281,172

           



Balance Sheet

at 31st December 2010

 


2010

2009


(unaudited)



£'000

£'000

Fixed assets



Investments held at fair value through profit or loss

305,450

280,531

Investments in liquidity funds held at fair value through profit or loss

5,046

3,571

Total investments

310,496

284,102

Current assets



Debtors

1,334

932

Cash and short term deposits

207

174


1,541

1,106

Creditors: amounts falling due within one year

(1,134)

(1,174)

Net current assets/(liabilities)

407

(68)

Total assets less current liabilities

310,903

284,034

Creditors: amounts falling due after more than one year

(29,731)

(29,704)

Total net assets

281,172

254,330

Capital and reserves



Called up share capital

14,192

14,192

Share premium

149,641

149,641

Capital redemption reserve

6,680

6,680

Capital reserves

97,195

68,504

Revenue reserve

13,464

15,313

Shareholders' funds

281,172

254,330

Net asset value per share (note 4)

507.8p

451.3p

 

           

The Company's registration number is 754577.

 



Cash Flow Statement

for the year ended 31st December 2010

 


2010

2009


(unaudited)



£'000

£'000

Net cash inflow from operating activities

7,143

8,390

Returns on investments and servicing of finance



Interest paid

(2,180)

(2,189)

Taxation



Overseas tax recovered

7

-

Capital expenditure and financial investment



Purchases of investments

(156,528)

(174,548)

Sales of investments

165,456

181,158

Other capital charges

(13)

(19)

Net cash inflow from capital expenditure and financial investment

8,915

6,591

Dividends paid

(9,460)

(11,347)

Net cash inflow before financing

4,425

1,445

Financing



Repurchase of shares into Treasury

(4,392)

(1,241)

Repurchase and cancellation of the Company's own shares

-

(116)

Net cash outflow from financing activity

(4,392)

(1,357)

Increase in cash and cash equivalents

33

88

 

 



Notes to the Accounts

for the year ended 31st December 2010 (unaudited)

 

1.    Accounting policies

      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 AIC in January 2009. All of the Company's operations are of a continuing nature.

 

      The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments at fair value.

 

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

 

2.   Return per share

      The revenue return per ordinary share is based on the earnings attributable to the ordinary shares of £7,611,000 (2009: £8,377,000) and on the weighted average number of shares in issue during the year of 55,860,096 (2009: 56,730,311).

      The capital return per ordinary share is based on the capital return attributable to the ordinary shares of £33,025,000 (2009: £47,962,000) and on the weighted average number of shares in issue during the year of 55,860,096 (2009: 56,730,311).

      The total return per ordinary share is based on the total return attributable to the ordinary shares of £40,636,000 (2009: £56,339,000) and on the weighted average number of shares in issue during the year of 55,860,096 (2009: 56,730,311).

 

3.   Dividends

      Dividends paid and declared


2010

2009


£'000

£'000

Unclaimed dividends refunded to the Company1

(1)

(2)

2009 fourth quarterly dividend of 6.4p (2008: 5.9p) paid in March 2010

3,607

3,351

2008 special dividend of 3.6p paid in March 2009 in respect of the VAT recovery

-

2,044

First quarterly dividend of 3.5p (2009: 3.5p) paid in June 2010

1,959

1,986

Second quarterly dividend of 3.5p (2009: 3.5p) paid in September 2010

1,951

1,986

Third quarterly dividend of 3.5p (2009: 3.5p) paid in December 2010

1,944

1,982

Total dividends paid in the year

9,460

11,347


2010

2009


£'000

£'000

Fourth quarterly dividend of 7.0p (2009: 6.4p) payable on 1st March 2011

3,876

3,607

           

1 Represents dividends which remain unclaimed after a period of 6 years and thereby become the property of the Company.

 

The fourth quarterly dividend has been declared in respect of the year ended 31st December 2010. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2011.

 

4.   Net asset value per share

      Net asset value per share is based on the net assets attributable to the ordinary shareholders of £281,172,000 (2009: £254,330,000) and on the 55,369,483 (2009: 56,357,053) shares in issue at the year end, excluding shares held in Treasury.

 

5. Status of announcement

 

2009 Financial Information

The figures and financial information for 2009 are extracted from the published Annual Report and Accounts for the year ended 31st December 2009 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

 

2010 Financial Information

 

         The figures and financial information for 2010 are extracted from the Annual Report and Accounts for the year ended 31st December 2010 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

 

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 ASSET MANAGEMENT (UK) 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.hemscott.com/nsm.do

 

The annual report will also 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 ASSET MANAGEMENT (UK) LIMITED

 


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