Directors of the JP Morgan Claverhouse investment trust announced a "disappointing result" after the trust returned 5.4 percentage points less than its benchmark index.
The group blamed volatility caused by the Brexit vote and the election of Donald Trump. events that it said had "wrong footed markets and experts alike".
"The market volatility that these events generated proved challenging for equity investors and this was no different for your Company's Investment Managers," chairman Andrew Sutch said..
The company returned 11.3 per cent for the year to 31 December. However, the FTSE All-Share index, which is the company's benchmark, returned 16.7 per cent.
"The Company's underperformance against its benchmark of -5.4% is a disappointing result after many years of very good returns," the trust stated in a market update.
The company said that it will use its reserves if necessary to maintain its progressive dividend policy. The trust has the longest record of any UK-only focused investment trust for growing its dividend and has raised it every year for the past 44 years.
JP Morgan Claverhouse's share price rose from 602.5p to 622.0p over the year. However, the discount of the share price to net asset value widened, so the shareholder total return for the year was +7.2 per cent, against 3.6 per cent the previous year.
Mr Sutch said that since the year end the discount to NAV had narrowed and the share price risen.
The company announced in June that it was scrapping its performance fee but raising its management charge, which it hoped would attract more retail investors.
Manager William Meaden said that he is is still positive that the current bull market has further to run and that the Trust currently has gearing of 12 per cent.
"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," he said.
" 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. "
