Final Results

RNS Number : 3257I

JPMorgan Claverhouse IT PLC

09 March 2010

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2009

Chairman's Statement

Performance and continuing appointment of the Manager

In many ways, 2009 was as extraordinary a year as 2008, albeit with a very different out-turn for equity investors. After losing 29.9% in 2008 our benchmark, the FTSE All- Share Index, recovered by 30.1% in 2009 as measured on a total return basis. It would, of course, have had to recover by 42.7% to end the year back where it started on 1st January 2008. Nevertheless all equity investors will have breathed a huge sigh of relief at the sight of significant positive returns after the traumas of 2008.

However, I do not have to remind shareholders what a volatile year 2009 was. As I wrote in my half year statement last August, I signed out last year's statement on 3rd March, the day the UK stock market had hit its low point for the year. A year ago I wrote that investors in equities could not risk being out of the market when it turned up, although I did not know when that would happen. Well, it transpires that it had started to do so on that very day. By 30th June the market had recovered 24.0% from its low on 3rd March. By 31st December it had powered further ahead, rising no less than 60.1% from the low point. It would have been very easy to lose one's nerve in the first two months of 2009 and history shows that had one done so, the long term returns from an equity portfolio would have been catastrophically reduced.

In the face of this volatility your Company turned in a respectable performance for the year to 31st December 2009. The total return on net assets was +29.7%. Performance was helped by the fact that the Company was geared during the year. Including the effect of gearing, the portfolio outperformed the benchmark by 0.9%. Looking at the change in the share price, and taking account of dividends, the total return was a satisfactory +32.5% as a result of a modest reduction in the discount to net asset value.

Your Board was marginally disappointed that the investment process did not deliver stronger underlying results in 2009, although it was, once again, an exceptionally difficult year for many managers. At Claverhouse both your Board and JPMorgan Asset Management (UK) Limited ('JPMAM') kept their nerve through the black days of the first quarter and shareholders have benefitted from the best stock market performance since 1989.

Your Board has once again had detailed discussions with JPMAM about the effectiveness of the investment process under which the Company's portfolio is managed. More detail on the process is set out in the Investment Managers' Report. Again JPMAM made a detailed submission to the Board which we considered with them and then subsequently in a private meeting. We acknowledge that a great deal of intellectual effort has been put in by JPMAM in designing their Behavioural Finance investment process and every indication from back-testing that process is that, despite the relative underperformance over 2007 to 2009, we can expect material out-performance over a ten-year horizon.

Although investment performance is extremely important the managers provide many other services to the Company, including marketing, accounting and company secretarial services. In every one of these functions the Board is well satisfied with JPMAM's performance. Thus, taking all factors into account, the Board concluded that the continuing appointment of JPMAM as manager for 2010 was in the interests of shareholders.

Revenue and Dividends

For several years past, the Board has indicated that it expected to continue to increase the total dividend ahead of the rate of inflation. I warned in my statement last year that for 2009 company profits were very uncertain and it seemed almost inevitable that your Company's earnings per share, arising as they do from dividends paid by companies that are held in the portfolio, would decline materially. However, I also reiterated that your Board was prepared, if necessary, to use part of the Company's revenue reserve to maintain its progressive dividend policy. In 2009 the revenue per share (excluding the impact of the VAT recovery on the 2008 figure), fell by 25.7%. However, despite that your Board decided that the total dividend for the year should be increased from 16.4p to 16.9p, a rise of 3.0%. Once again this was ahead of the rate of inflation for the 37th successive year. Over the last ten years the dividend per share has more than doubled, being a compound rate of increase of over 8.7% per annum.

As expected, the total dividend necessitated a transfer from the revenue reserve for the first year since 1998. Unlike unit trusts and other open-ended investment vehicles, an investment trust can build up a revenue reserve in good years to help with the lean years. Your Board is keenly aware of the importance of dividends to shareholders, especially in these unprecedented times of next to no return on money deposited in the bank. We are also strongly of the view that having built up a revenue reserve equivalent to 1.3 years' dividends, it is wholly appropriate to draw down on that reserve to support our policy of increasing the dividend by greater than the rate of inflation. Even after the transfer, the Company still has a revenue reserve of 20.8 pence per share.

Of course we cannot go on doing this indefinitely if our own earnings do not cover our own dividends. However, JPMAM's latest estimate indicates that there may be some modest dividend growth in 2010 and whilst this will not of itself ensure a covered dividend, it should go some way towards reducing the gap. To this, though, I must add a note of caution. Some 48% of our current dividend stream is either declared in, or effectively earned in, US dollars. Thus our sterling receipts would be reduced if sterling were to appreciate materially against the dollar. Both currencies have serious problems as a result of their governments' financial deficits. But my own view is that sterling has more serious problems than the dollar and consequently that a major appreciation of sterling is relatively unlikely. It remains your Board's intention for 2010 to maintain the total of the dividends payable at 16.9p per share and, if possible, to increase the total at least in line with the rate of inflation as long as inflation remains at or close to the Bank of England's target rate of 2%.

VAT Case

For some years now I have been writing about the VAT case where your Company was the plaintiff in a successful action against HMRC which resulted in a recovery of in excess of £4 million of VAT, including simple interest, that should never have been paid had HMRC correctly applied the relevant European Law. During 2009 there have been two further developments. A landmark case, VIC GLO, was decided in the High Court where the Court found that interest on incorrectly paid VAT should have been paid on a compound, rather than a simple basis, although in that particular case the taxpayer did not benefit owing to Limitation issues. Given that some of your Company's refunds stretch back to 1990, the effect of compounding over such a long period, if the principles in the VIC GLO case are confirmed by higher courts, will add materially to the sums already recovered.

The second development has been the launch of an action against HMRC to recover the VAT that should never have been paid for the years 1997 to 2000 but which, so far, HMRC has refused to repay. Together with a number of other investment trusts, we are party to and are helping fund the action, but are not otherwise directly involved. As with the earlier case, it could well be five years or more before the matter is finally decided. Our costs are capped at a relatively modest fee, whilst the possible recovery could materially exceed £1 million plus interest. Although there is no guarantee of success, your Board decided that the risk/reward ratio was such that it was in the interests of shareholders to participate.

Gearing

The Company ended the year 10% geared. During the year the gearing varied between 10% and 16%. 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 after a serious setback in markets.

Share Repurchases and Discount

During the year the Company repurchased 432,100 shares at an average discount to net asset value (with debt at par value) of 6.6%. Of this total 23,500 were cancelled and 408,600 are held in Treasury. 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 net asset value ('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 at or below 5% of the issued share capital.

The discount of the share price to NAV narrowed from 5.2%, as at the previous year end, to 4.9% and remained within a narrow range during the year, averaging 6.4% over the twelve months.

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 your 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 and a resolution to that effect will be put to the AGM. The Company's Articles require that each Director must retire by rotation at least every three years. As each of the other Directors has sought re-election at one of the past two AGMs, there is no requirement for them to seek re-election at the forthcoming AGM.

Annual General Meeting

The Board has decided that once again this year's AGM will be held at Trinity House, Tower Hill, London EC3N 4DH on Wednesday 14th April 2010 at 12.00 noon. The Investment Managers 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 buffet lunch, providing shareholders with the opportunity to meet the Directors and the Investment Managers. We look forward to seeing as many shareholders as possible at the AGM which we consider to be a very important annual event which allows the Board and the Manager to interact directly with shareholders and to receive their feed-back.

You will see in the Notice of the Meeting in the Annual Report & Accounts that the Company intends to adopt new Articles to conform with the provisions of the Companies Act 2006 which is now fully in force. Full details are given in the Notice and the Appendix and include a new Article on Directors' remuneration. The Company has hitherto retained the Article requiring shareholders to approve the detail of any changes in Directors' fees. A number of other investment trusts have an aggregate limit on fees and shareholders are being asked to approve similar provisions for the Company. The limit proposed is an aggregate total for all Directors of £175,000 per annum. The Directors' Remuneration Report will continue to be the subject of a specific advisory vote at each AGM.

The proposed aggregate limit compares with the present aggregate annual fees of £106,000, a total that includes a proposed increase in the Chairman's fee by £3,000 to £30,000. This increase was proposed in my absence by the rest of the Board who are of the opinion that the time commitment and responsibility of the Chairman continues to expand and should be recognised. Obviously it is difficult for me to comment further; but my fellow directors, led by the Senior Independent Director, will be happy to take questions at the AGM. No change is proposed in any other Director's fee.

Please would you submit in writing, or via the Company's website (www.jpmclaverhouse.co.uk) by clicking on the Investment Trust Information link, any detailed questions that you wish to raise at the AGM to the Company Secretary at Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ so we may have the answer ready. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are reminded that they are able to lodge their proxy votes electronically.

The Future

A year ago the economic future looked very bleak. But as so many times in the past, it is in the darkest of moments that stock markets begin to look forward and anticipate recovery. That certainly was the order of the day for ten months of 2009.

Today the world economy has begun to recover led by emerging markets and fuelled by the unprecedented stimulus provided by Quantitative Easing ('QE') in the United Kingdom and similar policy responses in other countries. One of the objectives of QE was to stabilise, and indeed increase, asset prices as a precursor to bringing to an end the deepest recession that the UK has experienced since the 1930s. In that QE has succeeded. But the recovery in the UK economy remains very fragile and the economic and political uncertainties are legion. How will the authorities manage monetary policy as the economy recovers? How will the Government deficit be financed and will that require materially higher interest rates? How hard and how quickly should Government expenditure be cut and, importantly for the future, will such cuts force more efficient use of money and resources in the public sector in the same way that the recession has brought about in the private sector? There are so many questions that could be asked and a range of answers that could be put forward. What is certain, though, is that the debt fuelled growth in many developed economies will have to be reined in to avoid further unsustainable expansion of both fiscal and trade deficits.

Fortunately for Claverhouse shareholders, many of the UK's largest companies have a global business and with growth prospects looking stronger in emerging markets and the USA, many companies' earnings should be able to progress forward in 2010. The UK stock market is no longer as obviously cheap as it was a year ago. But equally it is not over-expensive by many historical standards. It is almost impossible to believe that 2010 will prove as strong a year for markets as did 2009. But after the events of 2008 and 2009 I venture to suggest that many shareholders could live with a more boring year in markets. Meanwhile Claverhouse will continue to be positioned as a long-term savings vehicle for equity investors with the potential to continue to pay a rising dividend. As I have written before, if investors are to reap the benefits that history suggests will accrue to holders of equities, they need to keep faith with the asset class.

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

Michael Bunbury

Chairman

9th March 2010

Investment Managers' Report

Market review

After suffering its worst year since 1974 in 2008, the FTSE All-Share Index began 2009 on a similarly bleak note. A second consecutive quarter of negative GDP growth in the fourth quarter of 2008 meant that the UK was officially in recession, while concern for banks mounted on the news that many faced large losses. Equities fell through most of the first quarter of 2009 as credit conditions remained tight and economic data deteriorated rapidly. Persistent housing market weakness took its toll on consumer confidence, which was further undermined by rising unemployment.

A turning point finally came in early March, when investor sentiment was boosted by improvements in the financial sector, as well as by signs that global authorities would do whatever was necessary to shore up the global financial system and stimulate economic growth. Record-low interest rates around the world provided support, with the Bank of England lowering the base rate to just 0.5%, as did an announcement that it would begin a programme of Quantitative Easing (effectively printing money to buy Government bonds in an attempt to raise asset prices).

As a result, equities rallied sharply from their March lows, with investors also drawing comfort from possible 'green shoots' among economic data releases, notably signs that manufacturing and the housing market were possibly beginning to recover, albeit from very low levels. However, concerns mounted over the UK's growing national deficit as Standard & Poor's, the credit rating agency, cut its outlook for UK creditworthiness to 'negative' from 'stable.'

UK consumer confidence rose to a fourteen month high in June, while the pace of deterioration in employment data slowed. In August, Purchasing Managers' Indices suggested that both the manufacturing and services sectors had returned to growth. Nonetheless, despite expectations of a recovery, the UK economy continued to contract through the second and third quarters, marking the longest recession since records began in 1950. Meanwhile, many UK companies were reporting significant declines in revenues and profits, with some major quoted UK corporates also cutting their dividends and embarking on major cost cutting exercises to try to protect their earnings during this economic downturn.

Against this continued weak economic backdrop, the Bank of England announced a £50 billion extension to its Quantitative Easing programme in August and a further £25 billion in November, in addition to the £125 billion initially pledged.

Equities showed signs of exuberance over the third quarter, supported by evidence that the global recession was reaching the bottom. The return of high-profile merger and acquisition activity also provided support to the UK stock market, with the US's Kraft taking advantage of the weak pound to launch a takeover bid for UK chocolate maker Cadbury.

At the end of the year, concerns that Dubai could default on its debt sent a shiver of risk aversion through markets. However, this was quickly shrugged off as Abu Dhabi stepped in to support its neighbouring Emirate and positive economic data from around the globe suggested the recovery remained on track. The FTSE All-Share Index ended the year 30.1% higher.

Performance Review

In the year to 31st December 2009 the Company delivered a total return on net assets (capital plus dividends re-invested) of +29.7% against the total return of the benchmark, the FTSE All Share Index, of +30.1%. A detailed breakdown of the performance is given in an attribution table in the Company's Annual Report & Accounts, which shows that the portfolio total return was 31.0%. The Company's gearing was the main contributor to relative performance during 2009, as it benefited from being geared into a strongly rising equity market over the twelve months as a whole. Clearly, the UK equity market experienced significant volatility through 2009, with the first quarter seeing substantial declines in value up until early March, before recovering thereafter. For the first six months of the year, the market delivered a return of +0.8%, whilst in the second half of the year, the recovery was substantial, with the benchmark rising 29.1%.

In terms of the underlying performance of the equity portfolio, there were mixed returns from the two styles that we focus on to deliver out-performance (being overweight in both value and growth). In the 2008 annual report we wrote "Whilst the returns to value stocks have been poor for the last two years, history would indicate that value, as an investment style, will recover." In fact, since the market low on 3rd March, we have now seen the start of the recovery in cheaply rated value stocks. The value style contributed positively in 2009, however this was offset by the underperformance of the growth/momentum style.

At a stock level, the most significant contributor to performance over the year was the overweight position in Kazakhmys, the international copper mining group with its key operations in Kazakhstan and central Asia, which rose by over 450% during 2009. This mining stock was held predominantly for its very low valuation, having underperformed the market during the second half of 2008, but as 2009 progressed its momentum characteristics also improved, whilst its valuation remained attractive. Other mining stocks which contributed significantly to performance were the two more diversified global miners, Rio Tinto and BHP Billiton, both of which performed strongly during the year, rising by 175% and 54% respectively. The overweight position in Petrofac, the international oil equipment and services stock that provides facilities solutions to the oil and gas production and processing industries, also contributed strongly to performance, particularly during the first half of the year, its earnings forecasts enjoying upgrades as company newsflow remained positive. The Company benefited from its overweight position in Next which was initially held due to its attractive valuation, but as the year progressed this clothing retailer delivered results and trading updates which consistently beat the market's expectations, generating earnings upgrades and a favourable share price reaction.

By contrast, the Company's holdings in some of the less cyclical stocks such as the major pharmaceutical companies, AstraZeneca and GlaxoSmithKline, detracted from performance. Although the two share prices rose in absolute terms (+3.7% and +2.7% respectively), they underperformed the strongly rising UK equity market, particularly following the market's turning point in early March. These stocks were held due to their earnings resilience which generated favourable momentum attractions, with both their earnings and their dividend outlooks proving resilient through the earlier market turmoil. However, as the equity market began to rally strongly after the introduction of Quantitative Easing by the Bank of England, such stocks trailed the wider market as the rally was led by strong cyclical stocks. Hence, the pharmaceutical stocks and other more defensive stocks such as the major oil companies (for example, Royal Dutch Shell) were de-rated through the market rally, with their share prices rising significantly less than those of some of the recruitment companies, the indebted pub companies and selected retailers, despite having much more stable earnings profiles. Other negative stock contributors included the Company's overweight positions in the non-life insurers Hiscox and Amlin, both of which underperformed the rising market, initially due to fears over the financial sectors in general. They subsequently underperformed the rising market despite their lowly valuations. Overall in 2009, the Company benefited from remaining geared into the strong equity market rally.

Portfolio Review

As long term shareholders will be aware, the Company's portfolio continues to be a balance between attractive value stocks and those stocks with strong growth and momentum credentials. The investment philosophy we follow is summarised as:

On average, fast growing, cheap companies with good newsflow will outperform slow

growing expensive stocks with bad newsflow.

There is substantial academic evidence to support our investment style and in the Company's Annual Report we show two charts demonstrating the opportunities offered.

The value strategy chart shows that the cheapest 20% of UK companies have delivered an annualised return of 11.1% since 1990 against the market return of 7.8% per annum. In the growth strategy chart, the stocks with the best growth characteristics have delivered annualised return of 15.8% against the same market return of 7.8% per annum.

Against a backdrop in the first two months of the year of fears that large swathes of the UK banking sector would go bankrupt with forced nationalisations, it was perhaps difficult to believe that the global economy would recover. However, as the year progressed it became possible to discern that a recovery was starting to build, and as confidence grew, so those cheaply rated cyclical stocks that the Company held started to outperform after two difficult years for value. It is because it is so difficult to predict accurately the turning points in markets and returns to the style factors that we target, that we ensure the Company's portfolio is consistently overweight both in value and growth at all times.

Through the latter half of 2008 and into 2009 'defensive' stocks such as utilities, tobacco and spirits companies had performed well, as investors sought out their perceived safe haven status. In a number of cases this meant that valuations had become demanding and as evidence grew that the economy would recover, it meant that their earnings growth profile looked less appealing than more economically sensitive stocks and sectors. Significant sales were made of the coal fired electricity generator Drax, which had performed well for the Company. Looking forward however, rising coal costs will cause its profitability to be squeezed, as electricity prices have not risen sufficiently to offset this input cost pressure. Within the same sector Scottish & Southern Energy was sold as the valuation had become extended. Elsewhere within the utility sector, sales were made of the energy company Centrica and the electricity and water company, United Utilities. Other sales included the spirits company Diageo and the tobacco company British American Tobacco.

The house building sector started the year with extremely attractive valuations, with the majority of companies trading significantly below the value of their land and housing assets, despite the value of those assets being written down in the company balance sheets to reflect the difficult economic conditions. For the Company this sector represented one of the largest additions to the portfolio over the year with purchases of Bellway and Barratt Developments. The general retailing sector also traded at very depressed valuations and purchases were made of two leading clothing retailers, Next and Marks & Spencer, which both performed strongly as investor confidence grew over the course of the year.

Financial stocks, and banks in particular, had suffered dramatic falls in value through 2008, leaving valuations in many cases at extremely depressed levels. Barclays Bank managed to trade through the credit crunch without any recourse to UK tax payer funded support, yet still traded at a significant discount to its book value. During 2009 the Company rebuilt its position in Barclays in anticipation of that valuation discount being closed and profitability recovering. Elsewhere in the financial sector purchases were made of Standard Chartered Bank and the insurance companies Admiral and Old Mutual.

Market outlook

In 2010, one of the key drivers of investor sentiment will be positive or negative surprises to consensus growth forecasts. According to Bloomberg, the consensus for UK GDP growth is a lacklustre 1.2%, which seems cautious and makes very conservative assumptions for the recovery in global demand. It appears therefore that there is upside potential to this forecast.

The key risk is that UK firms see profits growth curbed due to a mixture of weak consumption, higher taxes and Government spending cuts at home. Solving the UK's budget deficit problems will be both urgent and painful and may curb the extent of a recovery in GDP growth in 2010 and 2011. So too will the consumer debt mountain, which has been estimated (including mortgages) at £30,450 per capita. This represents more than twelve months of aggregate wages, which will be a very significant headwind for retail sales over the coming months.

Offsetting these risks are that up to 70% of the UK stock market's revenues are sourced from overseas, so that the performance of the UK stock market is more exposed to recovering global growth than it is directly to the domestic UK economy, with overseas earnings being boosted further by the weakness of sterling. Secondly, the valuation of the UK market remains supportive, trading below the long term average price earnings ratio.

A key challenge for the UK stock market in 2010 will be the transition from a recovery driven by unprecedented monetary and fiscal stimulus, to an environment where Quantitative Easing is gradually reduced and eventually withdrawn. It is likely that investors will at times be unsettled as this transition process unfolds, but it is our expectation that as the underlying economic recovery develops, the UK stock market should deliver attractive returns, given the valuation opportunities on offer. Whilst there are always uncertainties, for the patient investor it is worth remembering that equities have delivered long term real returns through previous crises and economic turmoil.

James Illsley

Sarah Emly

Investment Managers

9th March 2010

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 Underperformance: An inappropriate investment strategy, for example asset allocation, the level of gearing or the degree of portfolio risk, could 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 and through a set of investment restrictions and guidelines which are monitored and reported on by the Manager. JPMorgan Asset Management (UK) Limited ('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 Manager, who attends all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Board holds a separate meeting devoted to strategy each year.

• Loss of Investment Team or Investment Manager: A sudden departure of several members of the investment management team could result in a short-term deterioration in investment performance. 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, as well as special efforts to retain key personnel.

• Discount: A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders. In order to manage the Company's discount, which can be volatile, the Company operates a share issuance and repurchase programme.

• 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 842 of the Income and Corporation Taxes Act 1988 ('Section 842'). Details of the Company's approval are given under "Business of the Company" above. Were the Company to breach Section 842, it might lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 842 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 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules. A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing which in turn would breach Section 842. The Board relies on the services of its Company Secretary, JPMAM, and its professional advisers to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules.

• 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 faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Bank counterparties are subject to daily credit analysis by the Manager and regular consideration at meetings of the Board.

• Political and Economic: Changes in financial or tax legislation, including in the European Union, may adversely effect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies, and seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital.

Directors' Responsibilities

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

(a) the accounts, prepared in accordance with applicable accounting standards, 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

9th March 2010

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmclaverhouse.co.uk.

For further information please contact:

Jonathan Latter

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Income Statement

for the year ended 31st December 2009

			2009			2008
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held
at fair value through profit or loss		-	50,088	50,088	-	(113,890)	(113,890)
Income from investments		10,228	-	10,228	13,335	-	13,335
Other interest receivable and similar income		97	-	97	772	-	772
Gross return/(loss)		10,325	50,088	60,413	14,107	(113,890)	(99,783)
Management fee		(369)	(685)	(1,054)	(475)	(881)	(1,356)
VAT recoverable		-	-	-	1,267	2,067	3,334
Other administrative expenses		(759)	-	(759)	(658)	-	(658)
Net return/(loss) on ordinary
activities before  finance costs and taxation		9,197	49,403	58,600	14,241	(112,704)	(98,463)
Finance costs		(776)	(1,441)	(2,217)	(766)	(1,423)	(2,189)
Net return/(loss) on ordinary
activities before  taxation		8,421	47,962	56,383	13,475	(114,127)	(100,652)
Taxation		(44)	-	(44)	(49)	-	(49)
Net return/(loss) on ordinary
activities after taxation		8,377	47,962	56,339	13,426	(114,127)	(100,701)
Return/(loss) per share (note 2)		14.77p	84.54p	99.31p	23.38p	(198.70)p	(175.32)p
Dividend per share (note 3)				16.9p			16.40p
Special dividend per share (note 3)				-			3.60p

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 2007	14,585	149,641	6,287	143,517	13,882	327,912
Repurchase and cancellation of
the Company's own shares	(387)	-	387	(7,099)	-	(7,099)
Net (loss)/return on ordinary activities	-	-	-	(114,127)	13,426	(100,701)
Dividends appropriated in the year	-	-	-	-	(9,025)	(9,025)
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	14,192	149,641	6,680	68,504	15,313	254,330

Balance Sheet

at 31st December 2009

		2009	2008
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		280,531	231,599
Investments in liquidity funds held at fair value through profit or loss		3,571	8,924
Total investments		284,102	240,523
Current assets
Debtors		932	1,034
Cash and short term deposits		174	86
		1,106	1,120
Creditors: amounts falling due within one year		(1,174)	(879)
Net current (liabilities)/assets		(68)	241
Total assets less current liabilities		284,034	240,764
Creditors: amounts falling due after more than one year		(29,704)	(29,677)
Total net assets		254,330	211,087
Capital and reserves
Called up share capital		14,192	14,198
Share premium		149,641	149,641
Capital redemption reserve		6,680	6,674
Capital reserves		68,504	22,291
Revenue reserve		15,313	18,283
Shareholders' funds		254,330	211,087
Net asset value per share (note 4)		451.3p	371.7p

The Company's registration number is 754577.

Cash Flow Statement

for the year ended 31st December 2009

		2009	2008
		£'000	£'000
Net cash inflow from operating activities		8,390	14,934
Returns on investments and servicing of finance
Interest paid		(2,189)	(2,208)
Taxation
Overseas tax recovered		-	1
Capital expenditure and financial investment
Purchases of investments		(174,548)	(211,554)
Sales of investments		181,158	221,060
Other capital (charges)/income		(19)	3
Net cash inflow from capital expenditure and financial investment		6,591	9,509
Dividends paid		(11,347)	(9,025)
Net cash inflow before financing		1,445	13,211
Financing
Repurchase of shares		(1,357)	(7,149)
Net repayment of short term loan		-	(6,000)
Net cash outflow from financing activity		(1,357)	(13,149)
Increase in cash and cash equivalents		88	62

Notes to the Accounts

for the year ended 31st December 2009

1. Accounting policies

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' (the 'SORP') issued by the AIC in January 2009. All of the Company's operations are of a continuing nature.

2. Return/(loss) per share

The revenue return per ordinary share is based on the earnings attributable to the ordinary shares of £8,377,000 (2008: £13,426,000) and on the weighted average number of shares in issue during the year of 56,730,311 (2008: 57,437,139).

The capital return per ordinary share is based on the capital return attributable to the ordinary shares of £47,962,000 (2008: £114,127,000 loss) and on the weighted average number of shares in issue during the year of 56,730,311 (2008: 57,437,139).

The total return per ordinary share is based on the total return attributable to the ordinary shares of £56,339,000 (2008: £100,701,000 loss) and on the weighted average number of shares in issue during the year of 56,730,311 (2008: 57,437,139).

3. Dividends

 Dividends paid and declared

	2009	2008
	£'000	£'000
Unclaimed dividends refunded to the Company	(2)	(3)
2008 fourth quarterly dividend of 5.9p (2007: 5.2p) paid in March 2009	3,351	3,020
2008 Special dividend of 3.6p paid in March 2009 in respect of the VAT recovery	2,044	-
First quarterly dividend of 3.5p (2008: 3.5p) paid in June 2009	1,986	2,023
Second quarterly dividend of 3.5p (2008: 3.5p) paid in September 2009	1,986	1,995
Third quarterly dividend of 3.5p (2008: 3.5p) paid in December 2009	1,982	1,990
Total dividends paid in the year	11,347	9,025

	2009	2008
	£'000	£'000
Fourth quarterly dividend of 6.4p (2008: 5.9p) payable in March 2010	3,607	3,351
Special dividend of 3.6p paid in March 2009 in respect of the VAT recovery	-	2,044

The fourth quarterly dividend has been declared in respect of the year ended 31st December 2009. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2010.

4.  Net asset value per share

Net asset value per share is based on the net assets attributable to the ordinary shareholders of £254,330,000 (2008: £211,087,000) and on the 56,357,053 (2008: 56,789,153) shares in issue at the year end, excluding shares held in Treasury.

5. Status of announcement

2008 Financial Information

The figures and financial information for 2008 are extracted from the published Annual Report and Accounts for the year ended 31st December 2008 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 237(2) or section 237(3) of the Companies Act 1985.

2009 Financial Information

         The figures and financial information for 2009 are extracted from the Annual Report and Accounts for the year ended 31st December 2009 and do not constitute the statutory accounts for the year.  The Annual Report and Financial 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.

Annual Report and Accounts

The Annual Report and Accounts will be posted to shareholders on or around 11th March 2010 and will shortly be available on the Company's website (www.jpmclaverhouse.co.uk) or in hard copy format from the Company's Registered Office, Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. 

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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