Last checked at 13 Mar 2017 07:00
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN CLAVERHOUSE INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2016
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 2016.
Chairman's Statement
Performance and Manager Review
2016 will be seen as a year of unpredicted, but momentous, political outcomes which wrong-footed markets and experts alike, notably the UK's vote to leave the EU and the election of Donald Trump as US President. The market volatility that these events generated proved challenging for equity investors and this was no different for your Company's Investment Managers.
For the year to 31st December 2016 the Company's net asset total return was +11.3%. For the same period the return from the Company's benchmark, the FTSE All-Share Index, was +16.7%, reflecting a good period for UK investors. The Company's underperformance against its benchmark of -5.4% is a disappointing result after many years of very good returns. However, the Company performed better than many of its peer group in the UK Equity Income sector over the year. I would also emphasise the long term performance of our Investment Managers. Since the change in investment process and manager on 1st March 2012 there has been cumulative outperformance over the five year period to 28th February 2017 of over +21.0%, against the Company's benchmark total return.
The share price rose from 602.5p to 622.0p over the year to 31st December 2016, reflecting the rise in NAV. However, the discount of the share price to NAV widened during the year, in common with most of the Company's peer group, and the shareholder total return for the year was +7.2% (2015: +3.6%).
The Board remains confident in the Investment Managers' ability to provide outperformance over the longer term, notwithstanding the current challenging investment environment.
I am pleased to report that since the year end NAV has increased by 3.8% as at 28th February 2017, compared to the benchmark index increase of 2.8% over the same period, and the share price has risen by 6.3%, reflecting a narrowing of the discount.
The Investment Managers' Report set out below reviews the market and provides more detail on performance.
Revenue and Dividends
Revenue for the year to 31st December 2016 declined marginally to 25.3p per share (2015: 25.9p). The Board has decided to increase the total dividend for the year from 21.5p to 23.0p, a rise of 7.0%, significantly above inflation and growing the total dividend for the 44th successive year. The dividend was more than covered by the revenue generated by the Company's portfolio and this once again allowed us to make a modest transfer to the Company's revenue reserves, which remain strong, at approximately 28.0p per share, after the payment of the recent dividend. It remains the Board's aim to increase the dividend each year and, taking a run of years together, it is our intention to deliver increases in dividends that will at least match the rate of inflation.
Discount and Share Repurchases
Discounts in the investment trust sector widened generally over the year, a trend which was exacerbated by the result of the EU referendum. During the year the discount on the Company's shares (based on the capital-only NAV, with debt at par) ranged between 1.8% and 13.2%, averaging 9.3%. As at 31st December 2016 the share price discount was 9.7%. The Board has continued to monitor the discount closely and authorises the Manager to repurchase shares when appropriate. There is a balance to be struck between seeking to narrow or eliminate the discount to NAV and not wanting to materially reduce the size of the Company's market capitalisation such that it adversely affects cost ratios and liquidity in the Company's shares. On 3rd November 2016 the Company repurchased 20,000 shares for holding in Treasury. This was the first share repurchase since January 2012. In 2017 the Company has to date repurchased a further 145,000 shares.
Gearing
Taking into account borrowings, net of cash balances held, the Company ended the year 12.0% geared. During the year gearing varied between 6.9% and 12.2%. Borrowing consisted of a combination of the £30 million 7% 2020 debenture and a revolving credit facility of £50 million, of which £28 million was drawn at the year end. The Board regularly considers whether it would be beneficial to shareholders to repay the 2020 debenture; this involves a careful comparison of the cost of doing so with the long term interest rates available to the Company for an equivalent amount of borrowing. At present there would be a considerable premium to be paid to repay the debenture early.
The Board has agreed with the Investment Managers that gearing of 10% is considered as 'normal' and that they have the discretion to vary the tactical level of gearing in the range of +/- 7.5% around that normal level with maximum total gearing under normal market conditions of 20%.
Investment Management Fees
The level of investment management fees is increasingly in the spotlight and, as reported in my half year statement, following constructive discussions with the Manager a new fee arrangement was agreed and this has been effective since 1st July 2016. The investment management fee is charged on a tiered basis at an annual rate of 0.60% of the Company's net assets on the first £500 million and 0.50% of net assets above that amount. Also with effect from 1st July 2016, the performance fee was terminated at no cost to shareholders.
Board of Directors
John Scott will retire as a Director at the AGM in April 2017, as previously indicated. I would like to thank him for his contribution to the Board's deliberations and his wise words over the 13 years that he has been a member of the Board. He will be very much missed.
The Board engaged an independent consultant, Trust Associates, to assist with the recruitment of a new Director and Jill May was appointed to the Board on 1st February 2017, following the end of the financial year. I would like to take the opportunity of welcoming her to the Board. Jill has 25 years' experience in investment banking, 13 years in M&A with S.G Warburg and 12 at UBS, focused on strategy and organisational change. She has broad knowledge of investment banking, asset management and private banking in the UK and EMEA. She is a Panel Member of the Competition and Markets Authority ('CMA') and was a member of the recent CMA Enquiry into Retail Banking and SME Lending. She is also a non-executive Director of the Institute of Chartered Accountants. Jill will stand for reappointment at the AGM and I look forward to introducing her to shareholders then.
With the exception of John Scott, all Directors will stand for reappointment at the AGM.
Board Apprentice
The Board has continued to support the Board Apprentice initiative that it joined in 2015. Sharon Mavin's term came to an end in November 2016 and, after interviews of a number of candidates, Jon Dinnis was invited to be her replacement on an unpaid basis. Jon joins us for an initial 12 month period. He is head of Professional Services and Company Secretary at Torstone Technology, a financial technology company based in the UK.
We hope that he will find the experience as valuable as Sharon has found it and I look forward to introducing him at the AGM.
Annual General Meeting
This year's AGM will be held at JPMorgan's offices at 60 Victoria Embankment, London EC4Y 0JP on Friday 21st April 2017 at 12.00 noon. William Meadon and Sarah Emly will give a presentation to shareholders, reviewing the past year and commenting on the outlook for the current year. The meeting will be followed by a sandwich lunch, thus providing shareholders with the opportunity to meet the Directors and representatives of the Manager.
If you have any detailed or technical questions, it would be helpful if you could raise them in advance with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's website. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.
Outlook
Notwithstanding the political uncertainties of the last year, the UK stock market has held up remarkably well. Since the year end the FTSE All-Share Index has held on to its gains of 2016 and, at the time of writing, has risen by 2.8% in the current year. The Bank of England has recently revised upwards its forecast of UK GDP growth for 2017 and interest rates remain low. A rise in inflation is to be expected, caused partly by the fall in sterling, but some limited inflation can often be favourable to equities and equity markets.
The Company is fortunate that it continues to hold accumulated revenue reserves greater than the amount of last year's total dividend. This will help the Board in its aim to maintain progressive dividend increases each year and it remains prepared to utilise the revenue reserve to support the dividend should it be necessary.
As the Investment Managers comment, caution remains the watchword given the uncertainty surrounding so many political developments around the world, not least the impact on UK companies and markets from the Brexit negotiations. The Investment Managers' job will be to continue to identify well-managed and reasonably valued companies which outperform against others in their sectors and contribute to the Company's performance target, which is to outperform the benchmark index by 2% per annum averaged over a three year period.
My fellow Directors and I look forward to meeting shareholders at the AGM and to discussing the Company, its performance and prospects at that time
Andrew Sutch
Chairman
10th March 2017
Investment Managers' Report
Market Review
2016 was an extraordinary year. A strong wave of populism, which caught the pollsters off guard, led to unexpected results in many major elections. There were two major shocks, the first being the EU referendum where the UK voted to leave the EU despite all major political parties campaigning to remain. Prime Minister Cameron resigned shortly after the result and, after the most dramatic of political dramas, was succeeded by Theresa May. The 'vox populi' movement then swept across the Atlantic to the US Presidential elections where the rank outsider and ex TV show host, Donald Trump, defeated the heavy favourite and political veteran Hillary Clinton. The common themes throughout such events were political fragmentation, rejection of globalisation/immigration, anti-establishment sentiment and a lack of trust in institutions and elites.
Despite these political shocks and after a poor start to the year, global stock markets performed well. In the year to 31st December 2016, the FTSE All-Share Index posted a total return of +16.7% and ended the year at an all-time high. This was its best performance in three years. Large stocks were the clear winners (FTSE 100 index up 19.1%) whilst mid caps lagged (FTSE 250 Index up 6.7%). After a number of disappointing years, commodity stocks performed well with the mining sector more than doubling over the year. Oil & gas stocks also performed well. The weakening of sterling over the year (-16% versus the dollar and -14% versus the Euro) led to both the travel & leisure and general retail sectors performing poorly.
The UK economy defied many gloomsters' predictions and continued to grow by 2.0% over the year, making it the fastest growing economy in the G8. Growth accelerated in the second half of the year. Inflation remained low and shortly after the Brexit vote the Bank of England cut base rates further to 0.25%, where they stayed until the year end.
Performance Review
In the year to 31st December 2016, your Company delivered a total return on net assets (capital plus dividends re-invested) of +11.3%, compared to the benchmark FTSE All-Share Index return of +16.7%. A detailed breakdown of the performance is given in the accompanying table. Although the absolute positive return was encouraging, the underperformance relative to the benchmark was disappointing. However, having delivered outperformance in each of the previous four calendar years, this was the first year of underperformance since the new investment management team came together in March 2012.
All of the underperformance came in the first half of the year, principally around the Brexit vote when share prices were particularly volatile. The Company performed much better in the second half of the year but not sufficiently well to make up all the lost ground of the first six months. Overall, 2016 was a difficult year for many UK equity managers, but it was pleasing to see your Company performed better than many of its peer group in the UK Equity Income sector. Moreover, the new year has started well for your Company.
Our most positive contributor to performance during 2016 was the overweight position in Fever-Tree, the leading player within the premium segment of the mixer drinks market, which we introduced to the portfolio in 2015. As hoped, this growth company has continued to deliver exceptionally strong growth as its portfolio of premium mixers capitalises on the global trend towards premium spirits. Selling its products in 55 countries the company was a beneficiary from the fall in sterling during the year. Despite its success the company has maintained a very lean cost base, only employing 50 people. This ensures that most of the firm's sales success is also reflected in its profit growth. Fever-Tree's share price rose 90% during the year and we remain very positive on the company's prospects for the coming year. Another positive contributor was our long term holding in Rio Tinto, the lowest cost global iron ore producer. The mining sector recovered strongly during the course of 2016 and our overweight position in Rio Tinto and other mining stocks was very beneficial for the portfolio. Another strong performer was our overweight position in Micro Focus, the acquisitive software company.
By contrast, the biggest detractor from performance during 2016 was our long term position in the television broadcaster ITV. This cash generative media group, which has consistently delivered both strong underlying dividend growth and special dividends to its shareholders, was a very poor share price performer in the aftermath of the Brexit vote. Its share price fell significantly as sentiment turned against such domestic, economically sensitive stocks, with particular concerns over the television advertising cycle were the UK to fall into recession as a result of the Brexit vote. ITV's operational performance proved to be resilient and the share price recovered towards the end of the year, but not enough to offset its earlier underperformance. This company remains one of our favoured stocks, particularly on valuation grounds.
The deteriorating sentiment post Brexit towards retailers badly affected the share price of Dixons Carphone which we subsequently sold. Frustratingly, we sold our holding in ARM just a few months before it was bid for by the Japanese technology company, Softbank. It was, nonetheless, a profitable investment.
Five years ago (1st March 2012), your Company radically changed its approach to investing in UK equities for you, its shareholders. Since those changes were made the investment team has run a much more focused portfolio (around 65 investments) and it is pleasing to report that since those changes were made, over the five year period 1st March 2012 to 28th February 2017 your Company has delivered a cumulative total return outperformance against the benchmark total return of over +2.8% per annum, ahead of our target outperformance of +2.0% per annum.
We continue to manage the risk in the portfolio by limiting its exposure to any one stock, sector or theme. This balanced approach has delivered and will, we believe, continue to deliver more consistent returns for our shareholders.
Portfolio Review
The portfolio held 62 stocks at the year end.
New holdings introduced during the year included several mining stocks (Glencore, BHP Billiton). Having performed very poorly for several years these stocks were completely unloved. In the good times management had been profligate with shareholders' money often embarking on shareholder value-destructive acquisitions and putting on new capacity at just the wrong time. Profitability suffered and balance sheets became strained. However, at the start of 2016 there were signs of some financial discipline returning to the sector. Dividends were cut, new excess capacity mothballed and new finance raised. This coincided with a pick up in commodity prices as world growth proved stronger than expected. Share prices responded accordingly with the shareholder returns in the sector doubling over the year. Although we did not call the exact bottom, the significant purchases we made in the sector ensured that we captured most of that performance.
Melrose was another new holding. The company has an excellent track record of generating strong shareholder returns from buying, improving and selling-on previously underperforming businesses. Its latest acquisition of the US company, Nortek, looks another good addition and we have high hopes for the value that the Melrose management team can add for its shareholders. Our new holding in Electrocomponents reflects a similar confidence that the new management team there will deliver, too.
Although we did not anticipate the result of the Brexit vote we did view it as an unpredictable event and therefore reduced the risk in the portfolio ahead of 23rd June. We significantly reduced the gearing of the portfolio through the sale of several domestically orientated stocks, many of them mid caps stocks. These included Restaurant Group, Dixons Carphone, Berkeley Group, Savills and Shaftesbury. Post the referendum result we increased the gearing of the portfolio again but did it through the addition of many large stocks (Ashtead, Compass and HSBC) as we anticipated them being amongst the main beneficiaries of a weaker sterling. At the end of the year the portfolio therefore had a much higher exposure to large FTSE 100 stocks than it did at the start of the year.
Top Over and Under-weight positions vs FTSE All-Share Index
Top Five Overweight Positions Top Five Underweight Positions
Fever-Tree | +1.9% | Vodafone Group | -1.6% |
Micro Focus International | +1.7% | Standard Chartered | -0.8% |
JD Sports Fashion | +1.6% | Tesco | -0.8% |
3i Group | +1.6% | SSE | -0.7% |
Direct Line Insurance | +1.6% | Anglo American | -0.7% |
Source: JPMAM, as at 31st December 2016.
The portfolio is constructed principally from bottom-up stock selection; our sector and macro views have a lesser influence. We aim to run a stock-focused but sector-diversified portfolio.
We kept gearing levels in the low teens for most of the year but reduced it to single digits going into the Brexit vote. We increased it again shortly after the 'Leave' result as we anticipated that the stimulatory effect of weaker sterling would result in a stronger stock market.
We occasionally use FTSE 100 futures to hedge the portfolio, but do not use futures to gear it.
Market Outlook
The remarkable events of 2016 have made forecasting the future even more difficult than usual.
Taking the United Kingdom out of the EU will provide the toughest of challenges for the new May administration. Unwinding 40 years of EU legislation and negotiating new agreements with EU countries and around the world will be complex, exhausting and leave little time for other matters. However, as we saw in 2016, despite the uncertainly that comes with such a new era, the immediate consequences of Brexit (a cheap currency, lower interest rates and fiscal loosening) have been taken well by the UK stock market.
Similarly in the US, whilst President Trump is clearly a maverick who seems to thrive on confrontation and doing the unconventional, much of his mooted macro and micro economic policies are likely to be equity-friendly. Cutting red tape, reducing taxes and increasing expenditure on infrastructure may all stimulate both the US economy and stock market. Accelerating US growth may lead to a couple of small interest rate rises in America this year, but monetary policy generally shows no sign of tightening significantly in the near term. This, too, is a good backdrop for equities, the effect of which may be felt globally.
However, President Trump is also promising to increase tariffs and trade barriers and his confrontational style communicated via Twitter may not be fully appreciated in the more diplomatic halls of geo-politics. A wrong move by him here could be globally destabilising and outweigh the benefit of any equity-friendly policies at home.
Such an unprecedented political and economic backdrop on both sides of the Atlantic leads us to tread carefully in the portfolio. Moreover, the looming elections in France, Germany and the Netherlands have the potential to cause more turmoil and unsettle investors further. The established global order feels under threat. However, such a tumultuous political backdrop will inevitably throw up investment opportunities which we will be looking to exploit for our shareholders.
On a medium term view, there are many clouds forming on the investment horizon and, should they darken further, we will not hesitate to reduce gearing and move the portfolio onto a much more defensive footing in order to protect our shareholders as much as possible from any storms that may be coming our way. However, in the short term, radically stimulatory measures in both the UK and US coupled with continuing low interest rates may lead this nine year old bull market to have a further leg up. Consequently, we are currently running with a gearing level of around 12%.
William Meadon
Sarah Emly
Investment Managers
10th March 2017
Principal Risks
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.
With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. In assessing the risks and how they can be mitigated, the Board has given particular attention to those risks that might threaten the viability of the Company. These key risks fall broadly under the following categories:
• Investment and Strategy: an inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on by the Manager. JPMF provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.
• Market: market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Company may use Index Futures to manage the effective level of gearing. Such instruments are also subject to fluctuations in value and may therefore result in gains or losses. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager. The Board monitors the implementation and results of the investment process with the Manager.
• Legal and Regulatory: in order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given on page 15. Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules, Market Abuse Regulation and Disclosure Guidance & Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary and its professional advisers to ensure compliance with The Companies Act and the UKLA Listing Rules and DTRs.
• Corporate Governance and Shareholder Relations: details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report in the Annual Report and Accounts.
• Operational and Cyber Crime: Loss of key staff by the Manager such as the Investment Managers, could affect the performance of the Company. Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position.
Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Corporate Governance report in the Annual Report and Accounts.
The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by independent reporting accountants and reported on every six months against the AAF Standard.
• Financial: the financial risks arising from the Company's financial instruments include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 23 in the Annual Report and Accounts.
statement of directors' responsibilities
The Directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. Under Company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the www.jpmclaverhouse.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report and Directors' Remuneration Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed in the Annual Report and Accounts, confirm that, to the best of their knowledge, the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return or loss of the Company.
The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.
For and on behalf of the BoardAndrew SutchChairman
10th March 2017
statement of comprehensive income
for the year ended 31st December 2016
2016 | 2015 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Gains on investments held at fair value through profit or loss | - | 24,029 | 24,029 | - | 13,352 | 13,352 |
Net foreign currency gains/(losses) | - | 6 | 6 | - | (10) | (10) |
Income from investments | 16,236 | - | 16,236 | 16,592 | - | 16,592 |
Interest receivable and similar income | 72 | - | 72 | 98 | - | 98 |
Gross return | 16,308 | 24,035 | 40,343 | 16,690 | 13,342 | 30,032 |
Management fee | (650) | (1,208) | (1,858) | (616) | (1,145) | (1,761) |
Performance fee write back/(charged) | - | 3,500 | 3,500 | - | (3,660) | (3,660) |
Other administrative expenses | (840) | - | (840) | (884) | - | (884) |
Net return on ordinary activities before finance costs and taxation | 14,818 | 26,327 | 41,145 | 15,190 | 8,537 | 23,727 |
Finance costs | (919) | (1,706) | (2,625) | (1,014) | (1,882) | (2,896) |
Net return on ordinary activities before taxation | 13,899 | 24,621 | 38,520 | 14,176 | 6,655 | 20,831 |
Taxation | (66) | - | (66) | (8) | - | (8) |
Net return on ordinary activities after taxation | 13,833 | 24,621 | 38,454 | 14,168 | 6,655 | 20,823 |
Return per share (note 2) | 25.28p | 44.99p | 70.27p | 25.89p | 12.16p | 38.05p |
Dividends declared and payable in respect of the year | 23.00p | 21.50p | ||||
Dividends paid during the year | 21.50p | 21.50p | ||||
Statement of Changes in equity
for the year ended 31st December 2016
Called up | Capital | |||||
share | Share | redemption | Capital | Revenue | ||
capital | premium | reserve | reserves | reserve1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 31st December 2014 | 14,192 | 149,641 | 6,680 | 160,957 | 15,193 | 346,663 |
Net return on ordinary activities | - | - | - | 6,655 | 14,168 | 20,823 |
Dividends paid in the year | - | - | - | - | (11,760) | (11,760) |
At 31st December 2015 | 14,192 | 149,641 | 6,680 | 167,612 | 17,601 | 355,726 |
Repurchase of the Company's shares into | ||||||
Treasury | - | - | - | (115) | - | (115) |
Net return on ordinary activities | - | - | - | 24,621 | 13,833 | 38,454 |
Dividends paid in the year | - | - | - | - | (11,758) | (11,758) |
At 31st December 2016 | 14,192 | 149,641 | 6,680 | 192,118 | 19,676 | 382,307 |
1 This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.
statement of financial position
at 31st December 2016
2016 | 2015 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 428,242 | 402,792 |
Current assets | ||
Debtors | 882 | 1,117 |
Cash and cash equivalents1 | 11,771 | 32,691 |
12,653 | 33,808 | |
Current liabilities | ||
Creditors: amounts falling due within one year | (28,696) | (2,509) |
Net current (liabilities)/assets | (16,043) | 31,299 |
Total assets less current liabilities | 412,199 | 434,091 |
Creditors: amounts falling due after more than one year | (29,892) | (74,865) |
Provision for liabilities and charges | - | (3,500) |
Net assets | 382,307 | 355,726 |
Capital and reserves | ||
Called up share capital | 14,192 | 14,192 |
Share premium | 149,641 | 149,641 |
Capital redemption reserve | 6,680 | 6,680 |
Capital reserves | 192,118 | 167,612 |
Revenue reserve | 19,676 | 17,601 |
Total shareholders' funds | 382,307 | 355,726 |
Net asset value per share (note 4) | 698.9p | 650.0p |
1 This line item combines the two lines of 'Investment in liquidity fund held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the year ended 31st December 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.
statement of cash flows
for the year ended 31st December 2016
2016 | 2015 | |
£'000 | £'000 | |
Net cash outflow from operations before dividends and interest | (4,437) | (4,137) |
Dividends received | 16,405 | 16,488 |
Interest received | 69 | 98 |
Interest paid | (2,673) | (2,856) |
Overseas tax recovered | 2 | 1 |
Net cash inflow from operating activities | 9,366 | 9,594 |
Purchases of investments | (162,447) | (104,473) |
Sales of investments | 163,025 | 117,697 |
Settlement of futures contracts | (1,999) | (353) |
Settlement of foreign currency contracts | 7 | - |
Net cash (outflow)/inflow from investing activities | (1,414) | 12,871 |
Dividends paid | (11,758) | (11,760) |
Repurchase of the Company's shares into Treasury | (115) | - |
Repayment of bank loans | (25,000) | (5,000) |
Drawdown of bank loans | 8,000 | - |
Net cash outflow from financing activities | (28,873) | (16,760) |
(Decrease)/increase in cash and cash equivalents | (20,921) | 5,705 |
Cash and cash equivalents at start of year | 32,691 | 26,986 |
Unrealised gain on foreign currency cash | 1 | - |
Cash and cash equivalents at end of year | 11,771 | 32,691 |
(Decrease)/increase in cash and cash equivalents | (20,921) | 5,705 |
Cash and cash equivalents consist of: | ||
Cash and short term deposits | 159 | 1,989 |
Cash held in JPMorgan Sterling Liquidity Fund | 11,612 | 30,702 |
Total | 11,771 | 32,691 |
Notes to the financial statements
for the year ended 31st December 2016
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The disclosures on going concern in the Directors' Report in the Annual Report and Accounts form part of these financial statements.
The policies applied in these financial statements are consistent with those applied in the preceding year, except for the following matters:
The investment in liquidity fund has been presented as a cash and cash equivalent in the current year to better reflect the fact that the position is held as an alternative to cash. It was previously held as a non-current asset, and the comparative figures in the relevant primary financial statements and notes have been similarly amended.
In March 2016, the FRC published amendments to FRS 102 concerning the fair value hierarchy disclosures. These amendments are effective for accounting periods beginning on or after 1st January 2017. Full disclosure is given in note 22 to the Financial Statements.
2. Return per share
2016 | 2015 | ||
£'000 | £'000 | ||
Revenue return | 13,833 | 14,168 | |
Capital return | 24,621 | 6,655 | |
Total return | 38,454 | 20,823 | |
Weighted average number of shares in issue during the year | 54,720,755 | 54,723,979 | |
Revenue return per share | 25.28p | 25.89p | |
Capital return per share | 44.99p | 12.16p | |
Total return per share | 70.27p | 38.05p |
3. Dividends
(a) Dividends paid and proposed
2016 | 2015 | ||
£'000 | £'000 | ||
Dividends paid | |||
Unclaimed dividends refunded to the Company1 | (7) | (5) | |
2015 fourth quarterly dividend of 6.50p (2014: 6.50p) paid in March 2016 | 3,557 | 3,557 | |
First quarterly dividend of 5.00p (2015: 5.00p) paid in June 2016 | 2,736 | 2,736 | |
Second quarterly dividend of 5.00p (2015: 5.00p) paid in September 2016 | 2,736 | 2,736 | |
Third quarterly dividend of 5.00p (2015: 5.00p) paid in December 2016 | 2,736 | 2,736 | |
Total dividends paid in the year | 11,758 | 11,760 | |
Dividend proposed | |||
Fourth quarterly dividend proposed of 8.00p (2015: 6.50p) paid in March 2017 | 4,365 | 3,557 |
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 2016. This dividend will be reflected in the financial statements for the year ending 31st December 2017.
4. Net asset value per share
2016 | 2015 | ||
Net assets (£'000) | 382,307 | 355,726 | |
Number of shares in issue (excluding shares held inTreasury) | 54,703,979 | 54,723,979 | |
Net asset value per share | 698.9p | 650.0p |
5. Status of results announcement
2015 Financial Information
The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 30th December 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include 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 Register of Companies in due course.
2016 Financial Information
The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 30th December 2016 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
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.
10th March 2017
For further information:
Jonathan Latter,
JPMorgan Funds Limited 020 7742 4000
ENDS
A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM
The annual report will shortly be available on the Company's website at www.jpmclaverhouse.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.
JPMORGAN FUNDS LIMITED