Annual Financial Report

RNS Number : 5615H

JPMorgan Claverhouse IT PLC

13 March 2018

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2017

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 2017.

CHAIRMAN'S STATEMENT

Performance and Manager Review

I am pleased to report that the strong performance in the first half of 2017 continued into the second half and that for the year to 31st December 2017 the Company's net asset total return was +16.2%. This compares with a total return for the same period from the Company's benchmark, the FTSE All-Share Index, of +13.1%, reflecting a good year for equity markets and giving shareholders a welcome outperformance of +3.1%. The long-term performance continues to be strong and in the period from the change in investment process and strategy on 1st March 2012 to 28th February 2018 there has been a cumulative total return on net assets of +92.5%, an out-performance of +30.5% against the Company's benchmark total return over the same period.

The share price rose from 622.0p as at 31st December 2016 to 730.5p as at the year end, reflecting the rise in net asset value (NAV) and a narrowing of the discount. During the year, the shareholder total return for the period was +21.8% (2016: +7.2%). Since the year end the Company has not been immune from the volatility affecting global stockmarkets and, as at 28th February 2018, the share price was 722.0p.

The Investment Managers' report below reviews the market and provides more detail on performance.

Investment Manager

It was with sadness that in December we had to report the untimely death of Sarah Emly who had been co-manager of the Company's portfolio since 2006. Sarah had battled with ill health for a number of years with a courage, humour and determination that was truly inspirational. She was a key part of the team that manages the Company's investments and has provided shareholders with the investment returns mentioned above; and every shareholder owes her a debt of gratitude.

Callum Abbot has now been appointed as a co-investment manager on the portfolio. Callum joined JPMorgan's European Equity Behavioural Finance team in 2012 and has been working with William Meadon on the management of the portfolio since then.

Revenue and Dividends

Revenue for the year to 31st December 2017 increased to 29.32p per share (2016: 25.28p). The Directors have declared a fourth quarterly interim dividend of 9.5p per share for the year ended 31st December 2017 which will bring the total dividend per share for the year to 26.0p (2016 total: 23.0p). This represents the 45th successive year in which the dividend has been raised and is a significant increase of 13.0% over the previous year, following a 7.0% increase in respect of 2016. The dividend was more than covered by the Company's net income, after taking account of the special dividends received on the portfolio, and once again a transfer has been made to the Company's revenue reserves for the year ended 31st December 2017.

The Board's dividend policy remains to seek to increase the dividend each year and, taking a run of years together, to pay dividends that at least match 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 2018 from 5.5p per share to 6.0p per share, to even out dividend payments more through the year.

Discount and Share Repurchases

Discounts in the investment trust sector have narrowed generally over the year reflecting market demand. During the year the discount on the Company's shares (based on the capital-only NAV, with debt at par) ranged between 2.2% and 9.7%, averaging 7.0%. As at 31st December 2017 the share price discount was 5.4%, broadly in line with the peer group, and in absolute terms significantly lower on average than in 2016. The Board has continued to monitor the discount closely and during the year 145,000 shares (2016: 20,000) were repurchased for holding in Treasury.

Your Directors continue to be concerned that, notwithstanding the Company's good performance over the last few years, the share price discount has often been greater than that of many of its peer group. The Directors have therefore resolved to implement a more active discount and premium management policy, an aspect of which will be subject to shareholder approval at the Annual General Meeting.

In future, the Company intends in normal market conditions to repurchase shares offered on the market at prices representing discounts to NAV (capital only) 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 (including the existing 2.2 million shares currently held in Treasury) at a discount to NAV (cum income debt at par), subject to a maximum discount of 2%. Additionally, new shares will be available for issue at a premium to NAV (cum income debt at par), after the costs of issue.

Shareholder approval is required for a sale of shares out of Treasury by the Company at a discount to NAV and Resolution 13 in the Notice of Annual General Meeting in the Annual Report and Financial Statements sets out this authority. The Directors consider that the round trip of buying in Treasury shares at a discount to NAV per share, and then selling them at a lower discount, is, and will be, asset-accretive to shareholders, should improve liquidity in the Company's shares and is in the interests of the Company's shareholders.

Gearing/Long Term Borrowing

Taking into account borrowings, net of cash balances held, the Company ended the year approximately 11.3% geared. During the year gearing varied between 9.4% and 13.2%. Borrowing consisted of a combination of the £30 million 7% 2020 debenture and a revolving credit facility of £50 million, of which £35 million was drawn at the year end. Gearing is a key differentiator for investment companies compared to open-ended funds, and the Company's gearing contributed 0.9% to performance relative to its benchmark.

The Company's gearing policy is to operate within a range of 5% net cash to 20% geared in normal market conditions. However, in consultation with the Manager, the Board has reviewed the gearing guidelines that they give the Manager and has decided to increase the Manager's flexibility to change gearing levels depending on market conditions. As a result, the Board has agreed with the Investment Managers that they have discretion to vary the gearing level between 5% net cash and 17.5% geared.

The Company's existing £30 million 7% 2020 debenture matures in March 2020. On 2nd November 2017 the Board announced that it has agreed to issue in 2020 by way of private placement £30 million fixed rate 25 year unsecured notes (the 'Notes') at an annualised coupon of 3.22%. The Board agreed to issue the Notes at a future date in order to take advantage of the opportunity to lock in long term funding at rates which are low relative to historic levels, at a cost which is lower than the current yield on the Company's portfolio. The Notes will be unsecured which gives the Company increased flexibility to manage its borrowings in the future. The Notes are due to be repaid on 30th March 2045 and the funding date is expected to be 30th March 2020, the maturity date of the 7% debenture.

Board of Directors

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. Jon Dinnis's term will come to an end in April this year and we are in the process of interviewing candidates with the intention of appointing a replacement for Jon by the time of the Annual General Meeting. We hope that the new Board Apprentice will find the experience as valuable as Jon has found it and I look forward to introducing him or her at the Annual General Meeting.

PRIIPs/KID

You may be aware that an EU regulation, the Packaged Retail and Insurance-based Investment Products Regulation (the 'PRIIPs Regulation'), came into force on 1st January 2018. The PRIIPs Regulation requires the Investment Managers to prepare a Key Information Document (KID) in respect of the Company. The KID must be made available by the Investment Managers to retail investors prior to them making any investment decision and it is also available on the Company's website. However, the Company is not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the expected returns for the Company and anticipated performance returns cannot be guaranteed.

Annual General Meeting

This year's Annual General Meeting will be held at JPMorgan's offices at 60 Victoria Embankment, London EC4Y 0JP on Wednesday 18th April 2018 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 Annual General Meeting.

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 Annual General Meeting are encouraged to use their proxy votes.

Outlook

Notwithstanding the ongoing Brexit uncertainty and the political upheavals which the UK experienced during 2017, with the Government losing its absolute majority in the June general election, the UK stock market performed strongly in 2017, reaching an all-time high. Since the beginning of 2018 we have seen considerable volatility in stock markets but the global economic outlook remains fairly robust.

The consensus forecasts appear to be for lower UK GDP growth over the coming few years, compared with other developed markets. This is largely because of the disruption that is expected to be caused by Brexit, whatever the outcome of the negotiations prior to the UK's departure from the EU in March 2019. We should also expect some modest interest rate rises in the UK over the coming year or so.

However, in my view UK equities continue to be an attractive asset class in which to invest for the medium to long term. While we should be prepared for continuing volatility in share prices, many UK companies will benefit from the growth in the global economy. The Investment Managers will continue to look for opportunities to invest in well-managed companies that exhibit between them a mixture of good earnings growth and reasonable valuations.

Andrew Sutch

Chairman                                                                                                                                         13th March 2018

INVESTMENT MANAGERS' REPORT

Market Review

Politics dominated investors' thoughts for much of the year. In late Spring, in a remarkable six week period, the UK government went from being genuinely strong and stable to weak and divided.  By contrast, the resounding victory by Emmanuel Macron in the French Presidential Elections gave Europe a new-found confidence.

The same opinion polls which gave David Cameron the false confidence to call the EU referendum also led to the fateful decision of Prime Minister May to risk her parliamentary majority by calling a snap June Election. The campaign was shambolic and proved to be a humiliating experience for the Prime Minister, who not only failed to increase her majority but actually lost it altogether. It was only a hasty supply and confidence agreement with the Democratic Unionist Party that enabled Mrs May to form a government.

The uncertainty caused by both this and the ticking Brexit clock (which was started in March) hurt consumer confidence which was already suffering from a prolonged fall in real wages. However, continuing low unemployment levels and a low savings ratio, gave some support to consumer spending.

Despite UK GDP growth of only 1.7% during the year (the lowest in the G7), UK business confidence remained buoyant since the global economy continued to improve and the lower level of sterling provided an opportunity for UK exporters and a fillip for companies with overseas operations. US growth was sufficiently strong for the Fed to start to raise interest rates.

The UK stock market shrugged off many of the political and Brexit uncertainties and took heart from an accelerating global economy and the likelihood that both inflation and interest rates were likely to stay low for the foreseeable future. The UK stock market gave a total return for 2017 of 13.1% and finished the year at an all-time high.

Performance Review

In the year to 31st December 2017, your Company delivered a total return on net assets (capital plus dividends re-invested) of +16.2%, compared to the benchmark FTSE All-Share Index total return of +13.1%. A detailed breakdown of the performance is given in the accompanying table.

Top Contributors and Detractors to Performance vs FTSE All-Share Index

Top Five Contributors		Top Five Detractors
Fever-Tree	+1.35%	ITV	-0.37%
3i Group	+0.34%	Anglo American	-0.27%
Beazley	+0.31%	GKN	-0.22%
Synthomer	+0.29%	Royal Dutch Shell	-0.21%
Rentokil Initial	+0.28%	Unilever	-0.20%

Source: JPMAM, as at 31st December 2017.

Our most positive contributor to performance during 2017 was again our holding in the remarkable Fever-Tree, the leading player within the premium segment of the drinks mixer market, which we introduced to the portfolio in 2015. The shares doubled (again!) during the year. Whilst we remain very positive on the outlook for the company as it starts its international roll out, we thought it prudent to take some profits. Our top slicing of the position in August was in excess of £24.00 per share, which was exactly six times the level at which we had made our initial purchases just two years previously.

Another positive contributor was our long term holding in 3i Group. The company provides an attractive way of investing in a diversified portfolio of private equity, infrastructure and debt. The fund's largest holding Action, the Dutch-based discount, non-food retailer continues to expand rapidly with sales up 28% in 2017 with 244 new store openings bringing the total to 1,100. The non-life insurer Beazley also had an excellent year and provided us with another handsome dividend increase and another special dividend. The equipment hirer, Ashtead had another very good year as it benefited from a booming US economy and continued to make market share gains. We were pleased with the performance of all of our more recent purchases. The shares of Morgan Sindall the specialist construction group and the electronics distributor, Electrocomponents (bought at the end of 2016) were particularly strong. We continued to benefit from our overweight position in the mining sector with Rio Tinto our biggest holding performing very well again on the back of rising commodity prices.

By contrast, the biggest detractor from performance during 2017 was again our long term position in the television broadcaster ITV. We continue to believe that this company will play a role in the consolidating global broadcasting sector. While we wait, we are happy to collect the very attractive dividend which the stock pays. On the subject of bids it was interesting to see that GKN, which performed poorly for the portfolio in 2017 was, shortly after the year end, bid for by Melrose, another of our holdings.

Portfolio Review

The portfolio held 64 stocks at the year end.

New holdings introduced during the year included many industrial and engineering stocks as we increased the cyclical exposure of the portfolio in the light of improving global growth. Such new holdings included Renishaw, Fenner and Morgan Sindall.

We also increased our exposure to technology stocks. Computacenter and Softcat are both providers of IT infrastructure and offer attractive earnings growth and strong cash flow. The UK, however, has a very limited number of quoted technology stocks. We therefore started what we anticipate to be a long term holding in Scottish Mortgage, the very successful global investment trust with a high technology weighting. The trust has an excellent record and gives the Company exposure to stocks such as Amazon, Apple and Microsoft which we expect to add value to the portfolio over the medium to long term.

In terms of sales, we sold out of our final utility holdings through disposals of both Centrica and National Grid as we believed that the onset of tighter regulation would be damaging for their prospects. We also sold our holdings in Reckitt Benckiser, Smith and Nephew and Intercontinental Hotels Group. We took considerable profits on WS Atkins, the engineering consultancy group, which was subject to an agreed cash bid from a Canadian rival SNC-Lavalin.

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

Top Five Overweight Positions		Top Five Underweight Positions
Ashtead	+2.2%	Reckitt Benckiser	-1.8%
Synthomer	+2.0%	Vodafone	-1.6%
Fever-Tree	+1.9%	Barclays	-1.5%
Electrocomponents	+1.8%	National Grid	-1.2%
3i Group	+1.8%	AstraZeneca	-1.2%

Source: JPMAM, as at 31st December 2017.

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

We kept gearing at double digits for the whole year as we continued to find many attractive opportunities in which to invest.

FTSE 100 futures can be used to hedge the portfolio, but we did not employ any in 2017.

PERFORMANCE ATTRIBUTION

YEAR ENDED 31ST DECEMBER 2017

	%	%
Contributions to total returns
Benchmark return		13.1
Stock & Sector selection	3.1
Tactical Gearing	0.9
Cash	-0.5
Investment Managers' contribution		3.5
Structural gearing		0.5
Portfolio total return		17.1
Management fee/other expenses	-0.8
Residual	-0.1
Other effects		-0.9
Return on net assets		16.2
Return to shareholders		21.8

Source: B-one/Datastream/JPMAM/Morningstar.

All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark.

Market Outlook

The current bull market, which has been running since March 2009, is one of the longest on record. Moreover, the exceptional returns that equity investors have enjoyed recently have been delivered with very little volatility. For example, the MSCI World index rose in every month last year, which is without precedent. This benign backdrop will not last. Global inflation and growth are both picking up with long bond yields rising in response. After almost a decade of continuous monetary stimulus, central banks are pulling in their horns and starting to pass risk from themselves to investors. This will cause some degree of volatility in equity prices, which investors should be prepared for.

Moreover, the continuing Brexit negotiations and a fragile government at home are both likely to magnify the volatility in UK equities in the year ahead. We aim, however, to use such volatility to our advantage by picking up more of the shares we like at lower prices. The yield and growth in dividends on UK equities continues to appeal and the many UK companies which have international exposure will benefit from the improving global economic backdrop.

We are fortunate indeed to have many long-standing shareholders who are wise enough to look through short term price movements to the medium term opportunities that still exist in a well-diversified portfolio of strong, reasonably-priced UK equities.

At the time of writing we are approximately 10.1% geared.

William Meadon

Callum Abbot

Investment Managers                                                                                                                      13th March 2018

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:

•   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.

The Company invests in UK equities and as such market risk includes those relating to uncertainties in the 'Brexit' process. These risks are mitigated in part by the extensive overseas operations and earnings of many companies in which the Company invests.

•   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'). Details of the Company's approval are given in the Annual Report and Financial Statements. 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.

•   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 in the Annual report and Financial Statements.

•   Operational and Cybercrime

Loss of key staff by the Manager such as the Investment Managers, could affect the performance of the Company. 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 and Financial Statements.

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 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.

•   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 23 in the Annual Report and Financial Statements.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract are set out in the Directors' Report in the Annual Report and Financial Statements. The management fee payable to the Manager for the year was £2,324,000 (2016: £1,858,000) of which £nil (2016: £nil) was outstanding at the year end.

During the year £172,000 (2016: £289,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which £nil (2016: £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 (2016: £6,000) payable to JPMorgan Chase Bank N.A. of which £2,000 (2016: £1,000) 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 £142,000 (2016: £94,000) of which £nil (2016: £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 £17.9 million (2016: £11.3 million) and represented 3.8% (2016: 2.6%) of the Company's investment portfolio. During the year the Company made £2,519,000 (2016: £nil) purchases of this investment and sales with a total value of £nil (2016: £nil). Dividend income amounting to £380,000 (2016: £252,000) was receivable during the year of which £nil (2016: £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 £16.2 million (2016: £11.6 million). Interest amounting to £47,000 (2016: £70,000) was receivable during the year of which £7,000 (2016: £3,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £4,000 (2016: £4,000) were payable to JPMorgan Chase Bank N.A. during the year of which £1,000 (2016: £nil) was outstanding at the year end.

At the year end, total cash of £302,000 (2016: £159,000) was held with JPMorgan Chase Bank N.A. A net amount of interest of £nil (2016: £2,000) was receivable by the Company during the year from JPMorgan Chase Bank N.A. of which £nil (2016: £nil) was outstanding at the year end.

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

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 and Financial Statements., 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 strategy and business model of the Company.

For and on behalf of the Board

Andrew Sutch

Chairman

13th March 2018

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST DECEMBER 2017

	2017			2016
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair
value through profit or loss	-	47,672	47,672	-	24,029	24,029
Net foreign currency gains	-	17	17	-	6	6
Income from investments	18,484	-	18,484	16,236	-	16,236
Interest receivable and similar income	47	-	47	72	-	72
Gross return	18,531	47,689	66,220	16,308	24,035	40,343
Management fee	(813)	(1,511)	(2,324)	(650)	(1,208)	(1,858)
Performance fee write back	-	-	-	-	3,500	3,500
Other administrative expenses	(780)	-	(780)	(840)	-	(840)
Net return on ordinary activities
before finance costs and taxation	16,938	46,178	63,116	14,818	26,327	41,145
Finance costs	(921)	(1,711)	(2,632)	(919)	(1,706)	(2,625)
Net return on ordinary activities
before  taxation	16,017	44,467	60,484	13,899	24,621	38,520
Taxation	(20)	-	(20)	(66)	-	(66)
Net return on ordinary activities
after taxation	15,997	44,467	60,464	13,833	24,621	38,454
Return per share (note 3)	29.32p	81.50p	110.82p	25.28p	44.99p	70.27p
Dividends declared and payable in
respect of the year (note 2)	26.00p			23.00p
Dividends paid during the year (note 2)	24.50p			21.50p

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST DECEMBER 2017

	Called up		Capital
	share	Share	redemption	Capital	Revenue1
	capital	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2015	14,192	149,641	6,680	167,612	17,601	355,726
Repurchase of the Company's shares
into Treasury	-	-	-	(115)	-	(115)
Net return on ordinary activities	-	-	-	24,621	13,833	38,454
Dividends paid in the year (note 2)	-	-	-	-	(11,758)	(11,758)
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	-	-	-	-	(13,355)	(13,355)
At 31st December 2017	14,192	149,641	6,680	235,667	22,318	428,498

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

STATEMENT OF FINANCIAL POSITION

AT 31ST DECEMBER 2017

	2017	2016
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	476,819	428,242
Current assets
Debtors	877	882
Cash and cash equivalents	16,489	11,771
	17,366	12,653
Current liabilities
Creditors: amounts falling due within one year	(768)	(28,696)
Net current assets/(liabilities)	16,598	(16,043)
Total assets less current liabilities	493,417	412,199
Creditors: amounts falling due after more than one year	(64,919)	(29,892)
Net assets	428,498	382,307
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	235,667	192,118
Revenue reserve	22,318	19,676
Total shareholders' funds	428,498	382,307
Net asset value per share (note 4)	785.4p	698.9p

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST DECEMBER 2017

	2017	2016
	£'000	£'000
Net cash outflow from operations before dividends and interest	(3,055)	(4,437)
Dividends received	18,422	16,405
Interest received	43	69
Interest paid	(2,560)	(2,673)
Overseas tax recovered	37	2
Net cash inflow from operating activities	12,887	9,366
Purchases of investments	(135,101)	(162,447)
Sales of investments	134,197	163,025
Settlement of futures contracts	-	(1,999)
Settlement of foreign currency contracts	8	7
Net cash outflow from investing activities	(896)	(1,414)
Dividends paid	(13,355)	(11,758)
Repurchase of the Company's shares into Treasury	(918)	(115)
Repayment of bank loan	-	(25,000)
Drawdown of bank loan	7,000	8,000
Net cash outflow from financing activities	(7,273)	(28,873)
Increase/(decrease) in cash and cash equivalents	4,718	(20,921)
Cash and cash equivalents at start of year	11,771	32,691
Exchange movements	-	1
Cash and cash equivalents at end of year	16,489	11,771
Increase/(decrease) in cash and cash equivalents	4,718	(20,921)
Cash and cash equivalents consist of:
Cash and short term deposits	302	159
Cash held in JPMorgan Sterling Liquidity Fund	16,187	11,612
Total	16,489	11,771

NOTES TO THE FINANCIAL STATEMENTS

1.       Accounting policies

(a)     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 January 2017.

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 in the Annual Report and Financial Statements form part of these financial statements.

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

2.       Dividends

(a)     Dividends paid and proposed

	2017	2016
	£'000	£'000
Dividends paid
Unclaimed dividends refunded to the Company1	(13)	(7)
2016 fourth quarterly dividend of 8.00p (2015: 6.50p) paid in March 2017	4,365	3,557
First quarterly dividend of 5.50p (2016: 5.00p) paid in June 2017	3,001	2,736
Second quarterly dividend of 5.50p (2016: 5.00p) paid in September 2017	3,001	2,736
Third quarterly dividend of 5.50p (2016: 5.00p) paid in December 2017	3,001	2,736
Total dividends paid in the year of 24.50p (2016: 21.50p)	13,355	11,758
Dividend proposed
Fourth quarterly dividend proposed of 9.50p (2016: 8.00p) paid in March 2018	5,183	4,365

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 2017. This dividend will be reflected in the financial statements for the year ending 31st December 2018.

(b)    Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £15,997,000 (2016: £13,833,000). The minimum distribution required under Section 1158 is £13,220,000 (2016: £11,387,000). Brought forward revenue reserves amounting to £nil (2016: £nil) have been utilised in order to finance the dividend.

	2017	2016
	£'000	£'000
First quarterly dividend of 5.50p (2016: 5.00p) paid in June 2017	3,001	2,736
Second quarterly dividend of 5.50p (2016: 5.00p) paid in September 2017	3,001	2,736
Third quarterly dividend of 5.50p (2016: 5.00p) paid in December 2017	3,001	2,736
Fourth quarterly dividend of 9.50p (2016: 8.00p) paid on 1st March 2018	5,183	4,365
Total dividend declared in respect of the year of 26.00p (2016: 23.00p)	14,186	12,573

The revenue reserve after payment of the final dividend will amount to £17,135,000 (2016: £15,311,000).

3.       Return per share

	2017	2016
	£'000	£'000
Revenue return	15,997	13,833
Capital return	44,467	24,621
Total return	60,464	38,454
Weighted average number of shares in issue during the year	54,564,897	54,720,755
Revenue return per share	29.32p	25.28p
Capital return per share	81.50p	44.99p
Total return per share	110.82p	70.27p

4.       Net asset value per share

	2017	2016
Net assets (£'000)	428,498	382,307
Number of shares in issue (excluding shares held in Treasury)	54,558,979	54,703,979
Net asset value per share	785.4p	698.9p

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

13th March 2018

 

END

 

 

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