Jpmorgan Clav Regulatory News (JCH)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2020

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 2020.

CHAIRMAN'S STATEMENT

Performance and Manager Review

The year to the end of December 2020 was dominated by the continued global Covid-19 pandemic. At the time of my interim Chairman's statement in August 2020, the UK was in the midst of a brief reprieve from the lockdown restrictions introduced by the UK Government in March 2020. The Chancellor, Rishi Sunak, had introduced the month long 'Eat Out to Help Out' scheme and non-essential retail was permitted to re-open together with the easing of some restrictions. However, many restrictions continued to impact our daily lives and the Bank of England predicted the UK economy would take longer than anticipated to recover from the economic effects of the virus.

Since the summer of 2020, the UK has re-introduced lockdown restrictions which have remained in place for much of the winter, although the Government has recently announced plans for the gradual relaxation of many of the restrictions. Covid-19 has had a significant impact both on global financial markets and economies, and 2021 will continue to remain challenging. The introduction of the vaccination programme offers considerable hope that significant protection will be afforded against the virus and that the UK economy will grow significantly in the second half of 2021.

For the year to 31st December 2020 the Company's net asset total return (based on debt being valued at par) was -10.8%. This compares with a total return for the same period from the Company's benchmark, the FTSE All-Share Index, of -9.8%. While the return for the full year was disappointing, caused principally by being geared at the time of the steep market fall in the early part of the year, the Investment Managers' stock selection contributed to much better performance in the second half of the year. The Investment Managers' report on pages 10 to 18 of the Annual Report and Financial Statements provides more detail on performance during 2020, as well as reviewing the market and the Company's portfolio.

As at 15th March 2021 the Company's NAV per share (with debt at par) was 705.28p and the share price was 674.00p.

Revenue and Dividends

The Directors have declared a fourth quarterly interim dividend of 10.00p per share for the year ended 31st December 2020 which will bring the total dividend per share for the year to 29.5p (2019 total: 29.0p). This represents the 48th successive year in which the dividend has been raised and is an increase of 1.7% over the previous year. Given the cutting or suspension of dividends by many portfolio companies in 2020, revenue for the year to 31st December 2020 fell to 23.2p per share (2019: 31.10p). Accordingly, the Company utilised the benefit of its revenue reserves to cover the recent dividend.

The Board's dividend policy remains to seek to increase the total dividend each year and, taking a run of years together, to increase dividends at a rate close to or above the rate of inflation. Given the Company's revenue reserves, the Board currently expects future dividend increases to continue to exceed the rate of inflation. The Board will continue to carefully monitor the outlook for dividend income and intends to increase the first three quarterly interim dividends in 2021 from 6.50p per share to 7.00p per share.

Premium/Discount and Share Issuance/Repurchases

During the year the discount to net asset value ('NAV') at which the shares traded ranged from a premium of 1.6% to a discount of 9.3%. As a result, in the year to 31st December 2020 the Company has re-sold 105,322 shares from Treasury and issued 1,730,000 new shares at a time when the shares were trading at a premium. In the second half of the year 151,290 shares were repurchased into Treasury. 362,000 shares have been repurchased since the year end.

At this year's AGM in April the Company will be seeking renewed authority from shareholders to sell shares from Treasury at a discount, to issue new shares and to repurchase shares.

Historically the net asset value used to calculate the discount or premium, as appropriate, in determining whether to buy back shares, sell shares out of Treasury or issue new shares has been calculated on different bases. The net asset value used in calculating the discount to determine whether to repurchase shares was on a capital only net asset value basis, with debt at par. The net asset value used to determine whether the parameters had been met to sell shares out of Treasury was calculated using a cum income net asset value, with debt at par; and the net asset value used to calculate an issue price for new shares was cum income, debt at fair.

To ensure greater transparency the Board has agreed, going forward, that the net asset value to be used for all three corporate actions will be calculated on the same basis as that announced daily to the market, namely cum income NAV, with debt at fair value. All other parameters will remain the same.

The comparison between the debt at par and fair value net asset value reflects the difference between the interest paid on the Company's long-term debt (the 3.22% £30m private placement loan) and current interest rates. The two calculations of NAV will therefore vary in accordance with prevailing interest rates and will change over the life of the long-term debt. At present the difference between the two methods of calculation is approximately 2%. The Investment Managers' contribution to net asset value performance should be looked at without regard to the long-term debt interest rate, over which they have no control; the cum income NAV with debt at par will therefore continue to be reported in the annual and interim reports. However, as mentioned above, the cum income NAV, with debt at fair value, will be used for the purposes of decisions on share buybacks and issues, as being the basis on which the NAV is announced to the market.

Gearing/Long Term Borrowing

The Company's gearing policy is to operate within a range of 5% net cash and 20% geared and the Investment Managers have discretion to vary the gearing level between 5% net cash and 17.5% geared.

Taking into account borrowings, net of cash balances held, the Company ended the year approximately 13.8% geared. During the year gearing varied between 3.9% cash and 16.3% geared. The gearing is currently 12.6%. The Company's £30 million 7% debenture was repaid in March 2020 and replaced by a £30 million 3.22% private placement loan, maturing in March 2045. The Company also has a revolving credit facility of £50 million, which was fully drawn down as at 31st December 2020. See Note 13 on page 71 of the Annual Report and Financial Statements.

Environmental, Social and Governance issues

The Manager considers ESG issues in its investment decisions; these have been progressively integrated into its investment process over recent years, so that ESG issues are increasingly considered at every stage along the decision making process. The Board is aware of the ever increasing focus on sustainable investing by shareholders; therefore this annual report includes a separate Environmental, Social and Governance Report from the Manager on page 19 of the Annual Report and Financial Statements which provides comprehensive information on these issues and how they have been developed and integrated into the Manager's investment process. Reference to climate change is also included in that Report and also in the Board's review of Principal and Emerging Risks as detailed on page 29 of the Annual Report and Financial Statements.

Investment Management Fees and Manager Evaluation

Following discussions with the Manager, a reduction in management fees was agreed in December 2019 and has been effective from 1st January 2020. The investment management fee is now charged on a tiered basis at an annual rate of 0.55% of the Company's net assets on the first £400 million and at 0.40% of net assets above that amount. Previously the management fee was charged at 0.60% of net assets on the first £500 million and at 0.50% of net assets above that amount.

During the year, the Management Engagement Committee undertook a formal review of the Manager, covering the investment management, company secretarial, administrative and marketing services provided to the Company. The review took into account the Manager's investment performance record, management processes, investment style, resources and risk control mechanisms. I am pleased to report that the Board agreed with the Committee's recommendation that the continued appointment of the Manager is in the interests of shareholders.

Adoption of new Articles of Association

Resolution 16, which will be proposed as a special resolution at the Annual General Meeting in April, seeks shareholder approval to adopt new Articles of Association (the 'New Articles') in order to update the Company's current Articles of Association (the 'Existing Articles'). The proposed amendments being introduced in the New Articles primarily relate to changes in law and regulation and developments in market practice since the Existing Articles were adopted. The proposed amendments, if approved, include the possibility of the Company holding shareholder meetings whereby shareholders are not required to attend the meeting in person at a physical location. Shareholders should note that the Directors have no present intention of holding 'virtual-only' meetings. However, this amendment to the Existing Articles will facilitate shareholder attendance in situations where they are prevented, through laws or regulations, from attending at a physical location.

Proposed amendments also include changes in response to the introduction of international tax regimes (notably to take into account the broader obligations under the Common Reporting Standard) requiring the exchange of information.

The Board is also seeking approval from shareholders to permit the payment of dividends out of capital. The Board has no current intention to enhance dividend payments through the utilisation of capital reserves; however, it views it as prudent to provide the Company with the flexibility to do so. This will also bring the Company into line with many of its competitors.

A summary of the principal amendments being introduced in the New Articles is set out in the appendix to the AGM Notice (on pages 88 to 89 of the Annual Report and Financial Statements). Other amendments, which are of a minor, technical or clarifying nature, have not been summarised in the appendix.

Annual General Meeting

The Company's AGM will be held on Thursday 22nd April 2021 at 12.00 noon, at 60 Victoria Embankment, London EC4Y 0JP.

Due to the ongoing situation surrounding the Covid-19 and Government advice, we have unfortunately had to revise the format of this year's AGM. The Government has, for the time being, again placed restrictions on public gatherings and therefore, apart from the quorum necessary to hold the AGM, shareholders will not be allowed to attend the AGM in person and will be refused entry.

The Board is aware that many shareholders look forward to hearing the views of the Investment Managers and Directors and asking them questions at the AGM. Accordingly, at the time of the AGM a webinar will be organised, which will involve a presentation from the Chairman of the Board and the Investment Managers, followed by a live question and answer session, all of which may be viewed at the time by registered participants. Shareholders are invited to register as participants to join the webinar and address any questions they have either by submitting questions during the webinar or in advance of the AGM via the 'Ask a Question' link on the Company's website www.jpmclaverhouse.co.uk or via email to invtrusts.cosec@jpmorgan.com. Details on how to register as a participant for this event will be posted on the Company's website, or by requesting the details via the email address above.

As shareholders will not be able to attend the Annual General Meeting, the Board strongly encourages all shareholders to exercise their votes by completing and returning their proxy forms. This will ensure that the votes are registered.

If there are any changes to the arrangements for the Annual General Meeting, the Company will update shareholders through the Company's website and, if appropriate, through an announcement on the London Stock Exchange. The Board would like to thank shareholders for their understanding and co-operation at this difficult time. We very much hope that you and your families remain safe and well and look forward to meeting you at a future Annual General Meeting.

Outlook

At the turn of the year many expressed the hope that 2021 will be a year of significant improvement after the damage caused by Covid-19 to lives and livelihoods during 2020. While there are indeed grounds for optimism, particularly with the successful implementation of the UK's vaccination programme, the ability for businesses to return to pre-pandemic levels of operation and profitability will depend on reduced infection rates and a greater opening-up of the economy, which will only happen gradually.

The UK equity market has been undervalued for some time compared to other major markets. There are expectations that the UK economy will grow significantly this year and next, albeit not yet back to pre-Covid levels, and a number of commentators have said that the UK market should outperform many other markets this year. The Company is well positioned to benefit from such growth and to participate in any such outperformance.

The Company has provided a regular, and over the last 48 years a rising, source of income for shareholders and the Company's revenue reserves remain amongst the strongest in its sector. With these attributes, and the Manager's risk-controlled approach to stock selection, I believe that the Company should continue to outperform its benchmark index on a total return basis over the medium and long term.

Andrew Sutch

Chairman 16th March 2021

INVESTMENT MANAGERS' REPORT

Investment Approach

Claverhouse is a diversified portfolio of our best UK ideas, comprising both quality growth and value stocks.

For the patient investor, we believe that this approach will produce outperformance of the Benchmark in a steady, consistent manner, irrespective of market conditions.

We aim to maintain Claverhouse's multi-decade dividend growth record.

Market Review

2020 was a year like no other, with investors enduring a roller coaster ride, the likes of which few had experienced before.

The year started well with the market taking heart from a newly elected, majority government which had not only committed to a firm date for the UK to leave the European Union, but also promised large amounts of fiscal stimulus, especially in the north of the country. The economic prospects for the UK were looking up.

But the euphoria was short lived. In the second half of January, the mood soured as a hitherto unknown virus, Covid-19, began spreading from its origins in China. On 31st January (but hardly reported, probably because it was Brexit Day), the UK suffered its first reported case. The World Health Organization soon declared Covid-19 to be a global public health emergency although the UK government remained fairly relaxed, seemingly adopting a policy of herd immunity.

As governments around the world started to impose a range of restrictive measures to counter the spread of the virus, stock markets imploded with travel, leisure and retail stocks being the very worst hit. In just 21 trading days in March, the MSCI World index fell 34%, the fastest bear market in history.

As economies globally were put into varying degrees of lockdown, the market maelstrom was intensified further by a 30% drop in the oil price. Fear swept across markets and companies soon started to postpone or cancel dividends to help conserve cash. Share prices swung wildly.

Thankfully, monetary authorities and governments around the world moved rapidly and significantly. Markets took heart from their bold co-ordinated actions, buoyed by plummeting interest rates, huge volumes of central bank asset purchasing and the promise of yet further amounts of government support (see the chart below).

The roll out of a number of Covid-19 vaccines and the long-awaited signing of the Brexit trade deal on Christmas Eve provided a further fillip for the market up to the year end. However, the rally was not strong enough to make up for the heavy losses incurred in the Spring. The FTSE All-Share Index (on a total return basis) finished the year down a disappointing -9.8% from the beginning of the year, with investors worried that the virus was still not under control and concerned by a global economy still suppressed by continuing lockdown. As companies rushed to conserve cash, UK dividends from the UK stock market fell more than 40% year on year.

PERFORMANCE ATTRIBUTION

YEAR ENDED 31ST DECEMBER 2020

Source: JPMAM/Morningstar. All figures are on a total return basis.

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

A Alternative Performance Measure ('APM').

A list of APMs, with explanations and calculations, and a glossary of terms are provided on pages 90 to 92 of the Annual Report and Financial Statements.

Performance Review

The portfolio benefitted from stock selection during the year but this was out-weighed by the detrimental effect of being geared into a falling market as detailed in the Performance Attribution schedule above.

In the year to 31st December 2020, Claverhouse delivered a total return on net assets (capital plus dividends re-invested with debt at par) of -10.8% compared to the benchmark FTSE All-Share Index return of -9.8%. The total annual return for shareholders was -12.2%. A detailed breakdown of the performance is given in the accompanying table.

Claverhouse's risk-controlled approach to sizing positions at both a stock and sector level helped the portfolio navigate its way through these unprecedented times and also deliver a dividend increase for the 48th consecutive year.

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

Source: JPMAM, as at 31st December 2020

The JPM Smaller Companies Investment Trust, run by our in-house small companies' team, performed extremely well over the period, returning +50%. Over the years, this fund has not only contributed materially to the performance of Claverhouse, but as stocks have grown out of the smaller companies' index and into the FTSE 350, it has also provided a rich source of many new ideas for us to invest in directly. The designer and manufacturer of protective equipment Avon Rubber is a rewarding example of this.

Intermediate Capital Group is an alternative asset manager that specialises in various types of niche credit and equity financing through private equity style funds. Fund performance has been consistently strong across its range, generating substantial performance fees and leading to considerable demand for new funds, which are charged at premium fees.

The fund's technology stocks performed well: Scottish Mortgage Investment Trust, a long standing holding, gives Claverhouse shareholders exposure to US technology stocks. Its shares had another very good year rising +117% over the year reflecting the very strong performance of companies such as Amazon and Tesla which are significant holdings in its portfolio. Softcat, the IT reseller, also performed well rising 31% over the year as the company continued to gain share in a fast growing market.

The largest detractors for the fund were all cyclical stocks which were losers from the Covid-19 lockdown. The pub company, Mitchells and Butlers, was hard hit by the government's decree to close all its outlets for much of the year. The casino operator, Rank, and coach operator, National Express were both similarly challenged by such restrictions on their operations. Soon after the breakout of the pandemic in the spring we sold all these shares as we thought the business models would remain challenged until the economy could be permanently re-opened up. The share prices of many of them had already fallen quite sharply but the companies did not meet our criteria for being able to withstand a prolonged period of social distancing and lockdown. The housebuilder, Taylor Wimpey was also severely challenged due to economic inactivity.

We featured Games Workshop last year, but as one of our largest active holdings, we wanted to discuss why we still find it such an attractive holding. It is the global leader for table top miniature gaming due to its hugely successful Warhammer franchise. The pandemic has been a double edged sword for the company. On the one hand consumers have had time to fill during lockdowns with hobbies like Warhammer, on the other hand, it has meant its shops, which function as meeting points for playing the game, have faced closures. Games Workshop generates over 75% of its revenue overseas and the opportunity for further growth in North America and China is significant. The company's key intellectual property is the rich universe that is the backdrop for the table top game. Not only is it growing the customer base in new markets but it is finding new revenue streams to monetise its intellectual property. Royalty streams from video games and TV/animated series are high margin and the pipeline has the potential to drive significant profit contribution. If successful, this content can act as advertising for the hobby, reaching new customers and driving further revenue opportunities.

Intermediate Capital Group, is an alternative fund manager running closed-ended, private debt and mezzanine finance funds. The company has successfully re-orientated its business away from using its own balance sheet and towards running third party assets. It stands out in fund management as being able to attract large flows whilst raising fees due to its dominant position in niche markets. The company has consistently beaten its €6bn per annum asset raise target since announcing it in 2018. The company now has good visibility on future fees from existing assets and strong fund raising momentum continues to build a bigger base for the future.

Portfolio Review

The portfolio held 60 stocks at the year-end and was geared for most of the year. The devastating arrival of Covid-19 in the first quarter of the year led to a very volatile market and turnover in the portfolio being higher than usual. Our decisive switch in the first quarter from cyclical stocks into the shares of companies which were more able to cope with a global economy going into lockdown, mitigated the effect of the market fallout on the portfolio. Our switch back towards the end of the year into stocks benefitting from the potential opening up of the economy was also beneficial.

We are primarily bottom-up stock pickers; sector and macro views generally have less influence on the portfolio. However, the arrival of an unprecedented global pandemic at the start of the year meant that our thematic and strategic views had more of an influence than usual.

We run a stock-focused but sector-diversified portfolio.

Your fund benefited from good stock selection during the year but this was out-weighed by being geared in a falling market. To help dampen volatility, we used FTSE 100 futures at times to manage gearing.

At the year-end your fund was 13.8% geared.

ESG Considerations

The Company holds stocks based on their fundamentals. We do not have an exclusion list of stocks or sectors. Rather we consider what ESG issues a company faces, whether they can be engaged on and addressed by the company and the risk the issues pose to the company's fundamentals. This analysis helps determine whether we own a stock and the size of our position.

For sectors which face significant ESG issues, for example the mining and oil & gas producer sectors, we do not exclude them entirely; in fact, some of our largest positions are in these sectors. As owners of these companies we are in a strong position to influence how they address these issues and to enforce accountability to targets that are set.

The mining stocks we own are fundamentally attractive due to their significant cash generation, world class assets and the income they pay to shareholders. The commodities they produce have no scalable alternatives. These mining companies will continue to generate significant cashflows as their products are essential building materials of economic growth and some will play a key part in electrification of the global economy. We want to see companies set ambitious targets when addressing ESG issues, particularly carbon intensity. For example, in a recent meeting with Anglo American we discussed their goal of being carbon neutral across their operations before 2040 and their strategy for exiting thermal coal. We do not currently hold Glencore. It has set the most ambitious targets for carbon intensity reduction, however, we still have concerns about outstanding regulatory investigations for possible corrupt practices and so have avoided the company.

The oil companies we own, Royal Dutch Shell and BP, had an incredibly challenging 2020. They rebased their dividends, cut costs and capital expenditure, and fleshed out how they will address energy transition over the next thirty years. We acknowledge the challenges this sector faces, but do not think they pose an existential threat as both companies have announced credible strategies for achieving net zero by 2050. Their valuation implies the market does not believe in the transition and arguably underestimates the cash generation potential as oil prices recover from very subdued demand. We believe they are undervalued and have the potential to return significant cash to shareholders.

As part of our investment process, our team meets companies to scrutinise their strategy and operational performance. In the UK we conducted over 400 company meetings in 2020. These meetings are also an opportunity to engage with companies on ESG issues.

Often we discuss companies' policies and what they are doing to become more sustainable companies. For example our engagement with Unilever looked at the targets it had set, such as engaging with one billion people on health and wellbeing initiatives, and how sustainability targets will impact 25% of management's compensation.

Other times we engage on specific topics. The most significant engagement last year was with mining company Rio Tinto. We had been consistently speaking to the company over several years as we encouraged them to focus the portfolio away from coal. However, the catastrophic destruction of an indigenous site at the Juukan Gorge led to urgent engagement with the company to understand how such an event could have happened. Ultimately, driven by shareholder pressure, the CEO and other senior management left the company. Rio Tinto has hired additional management with increased accountability and we believe there is now a framework in place that means operations are more mindful of the impact it has on society. We continue to own Rio Tinto due to its attractive fundamentals and we believe it has made progress in addressing the failings brought to light by the Juukan Gorge catastrophe. We will continue to engage with the company on this and other issues, such as carbon intensity, in the future.

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

Source: JPMAM, as at 31st December 2020

Major stock transactions

With a new majority government in place and a firm date agreed for the UK's departure of the EU, we were positive on the prospects for UK equities at the start of the year. The portfolio was quite cyclical in nature and our optimism about the prospects for the UK economy led us to purchase a number of cyclically oriented stocks such as Breedon, Ferguson, Greggs, Rank and CRH. This led to an uptick in gearing from 9% at the start of the year to a peak of 14% in mid-February.

However, by the end of February we had become very concerned about the rapid global spread of a new virus, Covid-19, and this led us to marked change in strategy for the fund. We quickly reduced gearing through the sale of a number of stocks which were not well placed to cope with reduced economic activity and social mobility. Auto- Trader, Compass, National Express, Rank, Mitchells & Butlers, Savills were all sold from the portfolio. In some cases this involved selling stocks that we had only recently purchased under our previous more optimistic strategy (for example IWG and Ibstock). Greggs has been a long-term, stellar performer for the portfolio. There is a compelling growth story which has seen the company taking market share from higher-priced peers and growing organically through store roll-outs. However, the ongoing limitations around travel and people returning to offices has drastically reduced the footfall through its sites. Short term trading is likely to remain challenging and so we sold the shares.

We used the proceeds to significantly increase the fund's exposure to companies which were likely to prove more resilient in the new extremely challenging environment: Tesco, Unilever, Shell, National Grid and United Utilities all met our more demanding criteria for a place in the portfolio. Importantly, we also believed that these stocks were more likely to pay at least some level of dividend during the year.

Gold has historically performed relatively well at times of crisis and we thought that would be true in this crisis, too. As an efficient, low cost gold producer, Polymetal was bought to provide the portfolio with some attractive exposure to the rare metal.

The airline industry was always a likely loser from enforced restrictions on travel. Nevertheless, we thought that the strength of Wizz Air's balance sheet would enable it to emerge a relative winner by taking market share as weaker players scaled back operations. Wizz operates mainly in Eastern Europe which as a region has the potential to grow the number of flights per person per year. This should provide structural growth for Wizz in years to come.

Lockdown hit the retail sector very hard. Those companies with solely a high street presence suffered enormously and the year saw many well-known brands disappear. However, those operators with a strong online offering found themselves well placed to benefit from the pronounced shift to shopping from home. Next, B&M and Dunelm all prospered relatively while the online grocer, Ocado also flourished. Some traditional supermarkets find online grocery to be uneconomic as its picking process is extremely labour intensive. By contrast, Ocado's high-tech, automated picking process has given them a huge competitive advantage and the licensing of this intellectual property around the world is potentially very profitable.

Online card games such as poker have boomed during lockdown as sporting events have been side-lined. During the period Flutter Entertainment completed the acquisition of The Stars Group which gives them significant exposure to the United States and in particular online poker. This acquisition was particularly prescient as more liberal legislation regarding such activities has subsequently been introduced in many parts of the US. A similar pan-European online-only gaming company, 888, stands to benefit from comparable trends across Europe.

The UK housebuilders continue to look attractive as structural growth combines with cheap valuations. We retained significant positions in many of them, believing that their strong balance sheets make them resilient enough to withstand the economic downturn. Indeed, we would expect their strong balance sheets and cash flow will put them in a position to return significant capital to shareholders over the coming years.

Towards the end of the year we increased our exposure to domestic banks. Lloyds, Barclays and NatWest Group are well capitalised (Tier 1 ratios of more than 15%) and trade at significant discounts to book value. In the past, we have argued that this is warranted but the prospect of some increase in economic activity following a rapid roll out of the vaccine, should improve their prospects. One Savings Bank is a specialist lender focused on underserved sub-sectors of the mortgage market and it has a strong retail savings franchise. It looks attractively valued given it is well capitalised and it is a potential beneficiary from increased housing transactions in the UK.

As confidence grew about economies opening up we increased our exposure to the oil sector through purchases of both BP and Shell. These purchases were funded by sales of many of our utility holdings which had performed well at the beginning of the Covid-19 outbreak but as valuations reached the upper ends of normal trading range we exited our holdings in National Grid, Pennon, Severn Trent and United Utilities.

In what has been an extraordinarily tough year for many traditional retailers, Next has once again proven its enduring quality. When Next stores and warehouses were forced to close in March 2020, management acted quickly to preserve cash and to pivot the business towards online sales. Next's cash preservation allowed them to reduce debt through the crisis and leaves them well placed to capitalise on growth opportunities coming out of this. As we noted last year, in addition to offering own label products, Next is also becoming a platform to retail other brands through its 'Label' offering. This process was accelerated in 2020 and its phenomenal online sales growth is testament to its excellent progress in this space.

Cash has always been king at Next and their ability to consistently grow cash through the cycle (despite consumer trends) is truly impressive. We added to our holding during the year.

AVEVA is a developer and distributor of software for industrial companies. Its offerings are a relatively small portion of their customers' cost base but are essential to their users. Their suite of products allow industrial companies to maximise efficiency of their assets and supply chains which can lead to significant cost savings. AVEVA's fundamentals are extremely attractive as the substantial operating leverage in the business should allow them to grow earnings well ahead of revenues and it has a strong track record in converting earnings into cash. Their recent acquisition of OSIsoft has allowed them to expand their total addressable market as well as creating significant opportunities for cross selling of products among their customer bases.

Growth at AVEVA has been impressive. However, the digitalisation of the industrial world has a long way to go yet and we believe AVEVA is well positioned in this fascinating and rapidly expanding market.

Market Outlook

More than a year after its outbreak, the Covid-19 virus continues to take a dreadful global toll on both lives and livelihoods. Economic activity has plummeted, government debts have ballooned, and interest rates are nil or, in many cases, negative. This a global challenge like no other.

There are, however, grounds for cautious optimism: a number of seemingly effective vaccines are being rolled out, health services are now coping and, at the time of writing, infection rates are generally falling across the world. Some companies have not survived but others have found themselves well placed for this new world. Encouragingly, we are starting to identify an increasing number of strong, agile companies which are not only surviving the current storm but are well placed to thrive in a post-Covid-19 world.

The Brexit deal was a landmark for the UK. Although the transition is likely to be far from seamless for companies trading with Europe, the end of years of negotiation and uncertainty has led to both sterling and the UK equity market rising in recent months*. The US election result also cleared another geopolitical risk and although a Biden presidency will not be without its challenges for the UK, any de-escalation of the trade wars which characterised the previous administration should provide a much- needed fillip to corporate confidence.

After a disappointing 2020, UK equities now look very good value compared to both their own history and to most overseas markets. As the roll out of the UK vaccination programme continues apace and confidence about an opening of the economy builds, we believe that this value will soon be realised. Our optimism on the outlook for UK equities is reflected in a gearing level at the time of writing of 12.6%.

William Meadon

Callum Abbot

Investment Managers 16th March 2021

\* The potential legislative impact of Brexit on the Company is discussed further under Structure and Objective of the Company on page 25 of the Annual Report and Financial Statements.

PRINCIPAL AND EMERGING RISKS

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including emerging risks, including those that would threaten its business model, future performance, solvency or liquidity and reputation.

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company, as well as emerging risks. The risk matrix, including emerging risks, are reviewed formally by the Board every six months or more regularly as appropriate. 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 and remain unchanged from the previous year:

• Cybercrime

The threat of cyber attack, in all its guises including threats from the work from home processes during the Covid-19 pandemic, 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 Board reviews the cyber security precautions taken by its third party suppliers on a regular basis. 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.

• External factors

The Board has considered, and continues to keep under review, the political, economic and regulatory risks to the Company associated with the UK's decision to leave the European Union and the trade negotiations completed in December 2020, including the effect on the business and economic environment in which the companies in the portfolio operate; the effect of volatility in sterling on the portfolio companies and the dividends received from them; possible changes in regulation affecting the listing and promotion of shares in UK companies, including the Company itself; and possible changes in direct and indirect taxes which may affect the Company's returns. In addition the Board continues to review the geo-political and economic impact of Covid-19.

• Share price discount

If the Company's share price lags the NAV by a significant level, this may result in lower returns to shareholders. The Board seeks to manage the volatility and absolute level of the discount by judicious use of its share repurchase authority taking account of market conditions and having established explicit guidelines.

• 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.

• Operational

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 on pages 39 and 41 of the Annual Report and Financial Statements.

The risk of fraud or other control failures or weaknesses within the Manager or other service providers could result in losses to the Company. The Audit Committee receives independently audited reports on the Manager's and other service providers' internal controls, as well as report from the Manager's Compliance function. The Company's management agreement obliges the Manager to report on the detection of fraud relating to the Company's investments and the Company is afforded protection through its various contracts with suppliers, of which one of the key protections is the Depositary's indemnification for loss or misappropriation of the Company's assets held in custody.

• Loss of Investment Team

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

• Legal and Regulatory/Corporate Governance

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 on page 25 of 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 FCA 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 FCA 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 FCA Listing Rules and DTRs.

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 on pages 36 to 41 of the Annual Report and Financial Statements.

• Financial

Poor control of expenses can lead to an escalation of costs and high ongoing charges. The Board monitors the expenses of the Company and is provided with detailed information.

The financial risks arising from the Company's financial instruments include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 22 on pages 74 to 78 of the Annual Report and Financial Statements.

• Emerging Risks

The Board has considered and kept under review emerging risks, including but not limited to the impact of climate change, natural disasters and social dislocation and conflict. Climate change has become one of the most critical issues confronting companies and their investors. Climate change can have a significant impact on the business models, sustainability and even viability of individual companies, whole sectors and even asset classes. The Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making, so as to mitigate risk at the level of stock selection and portfolio construction.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract are set out in the Directors' Report on page 33 of the Annual Report and Financial Statements. The management fee payable to the Manager for the year was £1,878,000 (2019: £2,357,000) of which £nil (2019: £nil) was outstanding at the year end.

During the year £95,000 (2019: £126,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which £nil (2019: £nil) was outstanding at the year end.

Included in administration expenses in note 6 on page 67 of the Annual Report and Financial Statements are safe custody fees amounting to £6,000 (2019: £7,000) payable to JPMorgan Chase Bank N.A. of which £1,000 (2019: £2,000) 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 £2,000 (2019: £nil) of which £nil (2019: £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 £26.8 million (2019: £24.1 million) and represented 6.0% (2019: 4.9%) of the Company's investment portfolio. During the year the Company made £nil (2019: £nil) purchases of this investment and sales with a total value of £517,000 (2019: £nil). Dividend income amounting to £410,000 (2019: £420,000) was receivable during the year of which £nil (2019: £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 £25.0 million (2019: £18.8 million). Interest amounting to £32,000 (2019: £78,000) was receivable during the year of which £nil (2019: £nil) was outstanding at the year end.

Handling charges on dealing transactions amounting to £6,000 (2019: £5,000) were payable to JPMorgan Chase Bank N.A. during the year of which £1,000 (2019: £3,000) was outstanding at the year end.

At the year end, total cash of £250,000 (2019: £614,000) was held with JPMorgan Chase Bank N.A.. A net amount of interest of £24,000 (2019: £1,000) was receivable by the Company during the year from JPMorgan Chase Bank N.A. of which £nil (2019: £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found on page 46 and in note 6 on page 67 of 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.

The Strategic Report and Directors' Report include 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 the Company faces.

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 on page 32 of 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 performance, business model and strategy of the Company.

For and on behalf of the Board

Andrew Sutch

Chairman

16th March 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST DECEMBER 2020

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST DECEMBER 2020

1 This reserve is distributable. The amount that is distributable is not necessarily the full amount as disclosed in these financial statements of £21,667,000 as at 31st December 2020. This reserve may be used to fund distributions to shareholders.

STATEMENT OF FINANCIAL POSITION

AT 31ST DECEMBER 2020

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST DECEMBER 2020

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 October 2019.

All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis. In forming this opinion, the Directors have considered any potential impact of the Covid-19 pandemic on the going concern and viability of the Company. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of Covid-19. The disclosures on going concern on page 42 of the Annual Report and Financial Statements of the Directors' Report form part of these financial statements.

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

2. (Loss)/return per share

3. Dividends

(a) Dividends paid and declared

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 2020. This dividend will be reflected in the financial statements for the year ending 31st December 2021.

(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 £13,465,000 (2019: £17,619,000). Brought forward revenue reserves amounting to £3,750,000 (2019: £nil) have been utilised in order to finance the dividend.

The revenue reserve after payment of the final dividend will amount to £15,822,000 (2019: £19,588,000).

4. Net asset value per share

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.

For further information please contact:

Nira Mistry

For and on behalf of

JPMorgan Funds Limited, Secretary - 020 7742 4000

16th March 2021

ENDS

Annual Report and Financial Statements

The Annual Report and Financial Statements will be posted to shareholders on or around 19th March 2021 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, 60 Victoria Embankment London EC4Y 0JP.

A copy of the annual report will be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The annual report is also 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.