Final Results
JPMorgan Fleming Claverhouse IT PLC
08 March 2007
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN FLEMING CLAVERHOUSE INVESTMENT TRUST PLC
FINAL RESULTS
Performance
I am pleased to report that, in the year to 31st December 2006, the Company
produced a total return to shareholders of +18.9% and a total return on net
assets of +19.2%. This compares favourably with a total return on the FTSE
All-Share Index, the benchmark against which the Directors judge the Company's
performance, of +16.8% over the same period. This is the fourth consecutive
year that performance has outpaced the benchmark.
Underlying attribution data, which analyse the components of the out-performance
net of the fees and the expenses of running the Company, show that the
Investment Managers' asset allocation and stock selection during the year added
approximately 2.3% and that this was further enhanced by the positive impact of
the Company being geared in a rising market.
Revenue and Dividends
The Board's intention remains to increase the dividend annually by at least the
rate of inflation, thereby continuing the Company's record of increasing its
dividend every year since 1972. The Company's revenue was very strong in 2006
and the Board has decided that the total dividend for the year should be 13.50p
per share, representing an increase of 17.4% over 2005. Indeed, the level of
dividend has now doubled in the last ten years. This year's payment is once
again fully covered by earnings, as the dividend flow from our underlying
investments has remained healthy. However, as has been stated in previous
years, the Board remains prepared to use the revenue reserve to support its
dividend policy rather than constrain the Investment Managers' management of the
portfolio. Indeed, the ability to use the revenue reserve in this way, which is
not permitted to unit trusts and open ended investment companies, is viewed as
one of the advantages of the investment trust structure, together with the
ability to gear up by using borrowings to enhance shareholder returns over the
medium term.
The Company ended the year 12.2% geared. During the year the gearing varied
between 11% and 15%. It is the Board's intention to keep gearing within the
range of 0% to 15% under normal market conditions, whilst reserving the right to
allow gearing to increase in the event of a serious set-back in markets which
provides a buying opportunity. Even in such circumstances the Board would not
envisage gearing rising significantly above 20%. The Board reviews the Company's
level of gearing with the Investment Managers on a regular basis.
Share Repurchases
During the year the Company repurchased a total of 3,141,316 ordinary shares for
cancellation at an average discount to net asset value (with debt valued at par)
of 5.2%. This has added approximately 1.31 pence per share to net asset value
for continuing shareholders. The Board's objective remains to use the share
repurchase authority to manage any imbalance between the supply and demand of
the Company's shares, thereby minimising the volatility of the discount. To
date, the Board believes that it has been successful in achieving this aim; the
discount (with debt valued at par) at the year end was 5.1% and generally ranged
between 4.5% and 6.0% during the year. With the Company's debt at market value,
the discount at the year end was 4.0%.
Corporate Governance
The Company operates in accordance with corporate governance best practice. In
January this year, the Nomination Committee of the Board met to evaluate the
performance of the Manager and of the Board itself, its committees and the
individual Directors. It also considered whether to recommend to shareholders
the re-election of the Directors due to retire by rotation at this year's AGM.
In accordance with the Company's Articles of Association, Peter Lilley and I are
required to retire by rotation at this year's AGM. I am pleased to confirm that
Peter continues to be a very effective Director and demonstrates commitment to
his role. Absent myself, the Nomination Committee has also confirmed its
satisfaction with my own performance and therefore Peter and I will both stand
for re-election at the AGM. As we have both served as Directors for more than
nine years, we are now required to seek re-election on an annual basis.
Management
The Board has evaluated the performance of the Manager, JPMorgan Asset
Management, and confirms that it is satisfied that the continuing appointment of
the Managers is in the interests of shareholders as a whole. In arriving at this
view, the Board noted four consecutive years of performance ahead of the
benchmark, and considered the investment strategy and process of the Investment
Managers and the support that the Company receives from JPMorgan.
Fee arrangements remain unchanged from those negotiated a year ago and the
out-performance relative to the benchmark has earned the Managers a performance
fee of £1.5 million in 2006.
VAT Case
As many shareholders will be aware, investment trust companies currently incur
VAT on management fees. This is not the case for other collective investment
vehicles, such as authorised unit trusts and open ended investment companies.
Consequently, in 2004 the Association of Investment Companies ('AIC') brought a
case against HM Revenue and Customs on the basis that this differential
treatment was unlawful. The AIC approached the Board to request that the Company
should lead the action as it was seen as an ideal candidate for this purpose.
The Board agreed and although the action has been brought in the Company's name,
the costs of the case are being borne by the investment trust industry through
the AIC.
A tribunal hearing in May 2005 referred the case to the European Court of
Justice for a hearing on 13th December 2006. The Advocate General's opinion
issued on 1st March 2007 supports the position taken by the Company and the AIC.
Historically the European Court's formal rulings have followed the opinions of
Advocates General in the substantial majority of cases so we are optimistic that
the Court will rule that VAT should not be charged on management fees. However,
we will have to await the Court's decision, which is expected by 30th June 2007.
Company Name
When the Company was launched in 1963 its original name was 'Claverhouse
Investment Trust Limited' and it was managed by Robert Fleming & Co. In 1983 it
changed its name to The Fleming Claverhouse Investment Trust plc and in 2003
added JPMorgan to its name after Robert Fleming had become part of the JPMorgan
group.
In 2005, the Company's Manager changed its name from JPMorgan Fleming Asset
Management to JPMorgan Asset Management. The Board considers that there would
be merit now in the Company following its Manager's lead and shortening its very
long name. Whilst sorry to see the Fleming name disappear, the Board recognises
the value of aligning the Company's name with the Manager's brand so as to
benefit fully from the sales and marketing efforts undertaken by the Manager.
Consequently a Special Resolution to change the Company's name to JPMorgan
Claverhouse Investment Trust plc will be put at the AGM. I am confident, though,
that the Company will continue to be referred to in its short form as '
Claverhouse' and that its future conduct will continue to reflect the heritage
of the Robert Fleming group, which was so influential in the development of the
Investment Trust industry.
JPMorgan Savings Plans
The Board is keen to encourage all shareholders to vote at general meetings and
shareholders who hold their shares through the JPMAM managed savings plans
receive identical voting rights to main register holders as a matter of right.
Unfortunately, there remains significant inertia in voting and JPMAM has advised
the Board that the terms of its investment trust ISA, PEP and Share Plan have
been amended with effect from 1st January 2007 so that it is now entitled to
exercise the voting rights attached to the shares held in these savings plans if
the relevant plan participants do not do so. This entitlement is subject to
certain limitations agreed with the Takeover Panel to address any control issues
that might arise. For example, JPMAM will not vote shares held within the
savings plans on related party transactions involving JPMAM, certain matters
falling within the Takeover Code or the appointment or removal of Directors
unless recommended by the Board. The number of shares voted by all JPMAM parties
(including discretionary holdings and proprietary positions) will be limited to
no more than 29.99%.
All holders of the Company's shares through these savings plans have been
advised of this change.
Annual General Meeting
This year's AGM will be held in Cambridge at The Garden House Hotel on Thursday
19th April 2007 at 12.00 noon. Provided that there is sufficient support from
shareholders, the Board plans to continue its practice of alternating the AGM
venue between London and regional centres convenient for shareholders.
The Future
Last year I commented that, despite three years of very strong performance, UK
shares did not look expensive. I am delighted that the stock market remained as
strong as it did in 2006 and now after four excellent years, it might seem
reasonable to suggest that a pause would be likely. However, the fundamentals
continue to look favourable. The world has coped with the rise in energy prices
which, at least in the short term, appear to be behind us. The UK economy
continues to grow steadily, as it has done every quarter since mid 1992.
Corporate profits are strong and based on estimates of forward earnings, shares
are generally no more expensive than they were a year ago. Neither are they
expensive by historical standards or in relation to bonds. Companies are
returning cash to shareholders through dividends and other routes and take-over
activity remains ever present. All in all, on fundamental analysis shares are
still very much the preferred asset class for long term investors.
One thing that is certain is that there will be unforeseen events ahead that
will unsettle markets, such as happened in May last year and in recent days.
Equities are a volatile asset class and shareholders must expect to encounter '
rough water' from time to time. However, shareholders can be assured that,
through the discipline of the Managers' investment process, the Company will
deliver long term performance together with a rising dividend.
Sir Michael Bunbury Bt., KCVO, DL
Chairman 8th March 2007
For further information, please contact:
Jonathan Latter
For and on behalf of
JPMorgan Asset Management (UK) Limited - Secretary
020 7742 6000
JPMorgan Fleming Claverhouse Investment Trust plc
Unaudited figures for the year ended 31st December 2006
Income Statement
(Unaudited) (Audited)
Year ended 31st December 2006 Year ended 31st December 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains from investments held at
fair value through profit or
loss - 53,443 53,443 - 64,163 64,163
Income from investments 11,436 - 11,436 10,126 - 10,126
Other interest receivable and
similar income 102 - 102 227 - 227
_______ ________ _______ _______ _______ _______
Gross return 11,538 53,443 64,981 10,353 64,163 74,516
Management fee (669) (1,242) (1,911) (758) (1,409) (2,167)
Performance Fee - (1,777) (1,777) - (2,969) (2,969)
Other administrative expenses (602) - (602) (318) - (318)
_______ _______ _______ _______ _______ _______
Net return on ordinary
activities before finance
costs and taxation 10,267 50,424 60,691 9,277 59,785 69,062
Finance costs (1,010) (1,876) (2,886) (917) (1,703) (2,620)
_______ _______ _______ _______ _______ _______
Net return on ordinary
activities before taxation 9,257 48,548 57,805 8,360 58,082 66,442
Taxation (1) - (1) (1) - (1)
______ _______ _______ _______ _______ _______
Net return on ordinary
activities after taxation 9,256 48,548 57,804 8,359 58,082 66,441
===== ===== ===== ===== ===== =====
Return per share (note 3) 14.84p 77.81p 92.65p 12.76p 88.65p 101.41p
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. 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.
JPMorgan Fleming Claverhouse Investment Trust plc
Unaudited figures for the year ended 31st December 2006
Reconciliation of Movements in Shareholders' Funds (Unaudited)
Called up Capital
Share Share redemption Capital Revenue
capital premium reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31st December 2004 16,841 149,641 4,031 91,131 10,400 272,044
Repurchase and cancellation of shares (788) - 788 (12,836) - (12,836)
Total return from ordinary - - - 58,082 8,359 66,441
activities
Dividends appropriated in the year - - - - (7,195) (7,195)
_______ _______ ________ _______ _______ ________
At 31st December 2005 16,053 149,641 4,819 136,377 11,564 318,454
Repurchase and cancellation of shares (785) - 785 (15,838) - (15,838)
Total return from ordinary - - - 48,548 9,256 57,804
activities
Dividends appropriated in the year - - - - (7,677) (7,677)
_______ _______ ________ _______ _______ ________
At 31st December 2006 15,268 149,641 5,604 169,087 13,143 352,743
===== ===== ===== ===== ===== =====
JPMorgan Fleming Claverhouse Investment Trust plc
Unaudited figures for the year ended 31st December 2006
BALANCE SHEET (Unaudited) (Audited)
31st December 2006 31st December 2005
£'000 £'000
Non current assets
Investments at fair value through profit or loss 400,902 360,996
Current assets
Debtors 998 848
Cash and short term deposits 99 5,923
_______ _______
1,097 6,771
Creditors : amounts falling due within one year (17,494) (17,567)
_______ _______
Net current liabilities (16,397) (10,796)
_______ _______
Total assets less current liabilities 384,505 350,200
Creditors: amounts falling due after more than one year (29,624) (29,597)
Provision for liabilities and charges (2,138) (2,149)
_______ _______
Total net assets 352,743 318,454
===== =====
Capital and reserves
Called up share capital 15,268 16,053
Share premium 149,641 149,641
Capital redemption reserve 5,604 4,819
Capital reserve 169,087 136,377
Revenue reserve 13,143 11,564
_______ _______
Shareholders' funds 352,743 318,454
====
===== =
Net asset value per share (note 4) 577.6p 495.9p
CASH FLOW STATEMENT (Unaudited) (Audited)
2006 2005
£'000 £'000
Net cash inflow from operating activities 7,516 7,730
Net cash outflow from returns on investments and servicing of (2,838) (2,554)
finance
Overseas tax recovered 1 -
Net cash inflow from capital expenditure and financial
investment 13,681 9,829
Dividends paid (7,677) (7,195)
Net cash outflow from financing (16,507) (3,309)
_______ ______
(Decrease) / increase in cash for the year (5,824) 4,501
===== ====
Notes to the Accounts
1. Accounting policies
The accounts have been prepared in accordance with the Companies Act 1985,
United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' issued in December 2005.
All of the Company's operations are of a continuing nature.
2. Dividends
(Unaudited) (Audited)
Year ended Year ended
31st December 2006 31st December 2005
£'000 £'000
Fourth quarterly dividend of 3.70p (2005: 3.15p)
paid in March 2,347 2,111
First quarterly dividend of 2.80p (2005: 2.60p)
paid in June 1,752 1,714
Second quarterly dividend of 2.80p (2005: 2.60p)
paid in September 1,736 1,692
Third quarterly dividend of 3.00p (2005: 2.60p)
paid in December 1,842 1,678
_______ ______
Total dividends paid in the year 7,677 7,195
====== =====
A fourth quarterly dividend of 4.90p (2005: 3.70p) has been declared in respect
of the year ended 31st December 2006 costing £2,992,000 (2005: £2,347,000).
3. Return per share
(Unaudited) (Audited)
Year ended Year ended
31st December 2006 31st December 2005
£'000 £'000
Return per share is based on the following:
Revenue return 9,256 8,359
Capital return 48,548 58,082
_______ ______
Total return 57,804 66,441
====== ======
Weighted average number of shares in issue 62,389,503 65,517,675
Revenue return per share 14.84p 12.76p
Capital return per share 77.81p 88.65p
_______ ______
Total return per share 92.65p 101.41p
====== =====
Notes to the Accounts (continued)
4. Net asset value per share
Net asset value per share is calculated by dividing the funds attributable to
the ordinary shareholders by the number of ordinary shares in issue at 31st
December 2006 of 61,071,045 (31st December 2005: 64,212,361).
5. Status of preliminary announcement
The financial information set out in this preliminary announcement does not
constitute the Company's statutory accounts for the years ended 31st December
2005 or 2006. The preliminary announcement is prepared on the same basis as set
out in the previous year's accounts. The statutory accounts for the year ended
31st December 2006 have not been delivered to the Registrar of Companies, nor
have the auditors yet reported on them. The statutory accounts for the year
ended 31st December 2006 will be finalised on the basis of the information
presented by the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the approval of the accounts
by the Board of Directors. The statutory accounts for the year ended 31st
December 2005 have been delivered to the Registrar of Companies and the auditors
have reported on them.
JPMORGAN ASSET MANAGEMENT (UK) LIMITED
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