8 Aug 2019 17:07
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN BRAZIL INVESTMENT TRUST PLC
(the 'Company')
FINAL RESULTS FOR THE YEAR ENDED30TH APRIL 2019
Legal Entity Identifier: 5493002T5BE3YCTKTE20
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Introduction and Performance
Over the financial year to 30th April 2019, equity markets in Brazil experienced another highly volatile period dominated by politics, fears about rising inflation and negative sentiment towards the country's economic outlook. For the year to 30th April 2019, the Company's total return on net assets was +3.4%, compared with +6.8% returned by the benchmark, the MSCI Brazil 10/40 Index (in sterling terms with net dividends re-invested). The share price return to shareholders was -0.9% reflecting a widening in the share price discount to net asset value over the year from 14.0% to 17.7%.
The investment managers provide a detailed commentary on the markets and portfolio activity in their report.
Since its flotation in 2010 to 31st July 2019, the Company's NAV has risen by 5.2%, compared with a rise of 25.6% in the benchmark index and a fall of 72.6% in the Sterling/Brazilian Real exchange rate.
Since the financial year-end, the Company's net asset value has risen by 21.0%, against an increase of 19.5% in the benchmark index and a rise of 9.65% in the Brazilian currency against sterling at 31st July 2019. These increases reflect rising expectations following the approval at a congressional committee of Social Security reforms by a wider voting margin than expected and in an amount greater than expected in terms of the resulting reduction in government expenditure over a ten year period.
Revenue and Dividends
Gross revenue for the year amounted to £889,000 (2018: £919,000) and net total revenue after administrative expenses and taxation amounted to £333,000 (2018: £321,000).
The Company's dividend policy has been to distribute all, or substantially all, of the available income each year. The Board recommends a dividend of 0.8p per Ordinary share. Subject to shareholders' approval at the forthcoming Annual General Meeting on 10th September 2019, the dividend will be payable on 20th September 2019 to shareholders on the register at 23rd August 2019.
Asset Allocation
In accordance with the Company's investment policy, the investment managers have continued to be substantially invested in equities. As at 30th April 2019, the Company had 1.8% net cash.
Share Repurchases
At last year's Annual General Meeting ('AGM'), shareholders granted Directors authority to repurchase the Company's shares. During the financial year, the Company did not repurchase any shares. Whilst the Company's share price has been trading at a discount to NAV this has been volatile and based on very small trading volumes. The Company's size discouraged the board from utilising the repurchase authority which was unlikely to have stabilised the discount in the face of wider sector volatility and may have resulted in unnecessarily shrinking the Company.
The Board's objective remains to use the share repurchase authority to manage significant imbalances between the supply and demand of the Company's shares, thereby reducing the volatility of the discount. The Board believes that the availability of this mechanism is important and therefore proposes and recommends that powers to repurchase up to 14.99% of the Company's issued share capital be renewed for a further period.
Annual General Meeting ('AGM')
The Company's ninth AGM will be held on 10th September 2019 at 2.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. The meeting will include a presentation from the investment managers on investment policy and performance. There will also be an opportunity for shareholders to meet the Board and representatives of JPMorgan after the meeting.
If you wish to raise any detailed or technical questions at the Meeting, it would be helpful if you could mention them in advance by writing to the Company Secretary. Shareholders who are unable to attend the Meeting in person are encouraged to use their proxy votes.
Outlook and Continuation
GDP growth in Brazil over the medium and longer term is mainly dependent on the extent of reforms to social security, taxation, labour markets and education, as well as continuation of the privatisation programme. The initial votes in the lower house of Congress on the Social Security Reforms, as noted above, in a greater amount and by a much wider margin than expected, augur well for their final approval in both houses of Congress, which is currently expected before the year end. If the Social Security Reforms obtain this final approval, the momentum will exist for the government to move on to the other reforms mentioned above with tax reform likely to be the priority. If passed, these additional reforms will raise the long-run sustainable rate of growth of the Brazilian economy substantially. In addition, the recent conclusion of negotiations for a free trade agreement between MERCOSUL, of which Brazil is the leading member, and the European Union augurs well for the future as this is expected to have a positive impact on many of the key sectors in the Brazilian economy.
The Company's Articles of Association require that shareholders vote on the continuation of the Company at every third AGM. The third of these votes falls this year. The Board is fully aware of the relative performance of the Company, its small size and the level of its expenses. However, in view of the potential upside if the government's reform programme proceeds as currently envisaged, the Board believes it would not be in shareholders' interests to liquidate the Company's assets at this time. It therefore recommends that shareholders vote in favour of continuation at the forthcoming AGM, The resolution to be proposed will, in order to comply with the Articles, be a resolution that the Company continues for a further three year period. However, if this continuation vote is passed, the Board will voluntarily propose another such continuation vote at a general meeting no later than the AGM in September 2020, at which point shareholders will have a further opportunity to consider the future of the Company in the light of circumstances at that time.
If the continuation resolution is not passed at the forthcoming AGM, then as required by the Articles, the Directors shall within four months of that date convene a general meeting of the Company at which a special resolution will be proposed, designed either to result in the holders of shares in the Company receiving, in lieu of their shares, units in a unit trust scheme (or equivalent) or which shall be a resolution requiring the Company to be wound up voluntarily.
The Board
All three Directors have now been members of the Board for nine years. Assuming a further continuation vote, to be held no later than September 2020, is passed, I will retire from the Board following the vote, with further changes being made over the ensuing year, with a view to refreshing the Board completely by 2021. All the current Directors consider themselves to be independent, but all will seek annual re-election at every AGM for the rest of their term of office.
Howard Myles
Chairman
8th August 2019
investment managers' report
Market background: before and after the 'Bolsonaro Bounce'
Brazil's presidential election at the end of October was the pivotal political event of the period under review, coming half-way through the Company's financial year and impacting both business sentiment and equity markets' performance before and after. Trepidation in the run-up to the election was followed by euphoria and then, latterly, reality. The remarkable political rise of right-wing congressman Jair Bolsonaro of the Social Liberal Party resulted in his landmark victory over left-wing Fernando Haddad of the Workers' Party, with Bolsonaro winning 55% of the vote in the process.
The first half of the Company's financial year - before the Bolsonaro victory - was a period of considerable volatility, with politics, inflation worries and market sentiment at home and abroad all weighing heavily on the country's economic prospects. As well as a general increase in concerns over emerging markets, Brazil's own economy was further burdened by election fears as well as by the much-publicised truckers' strike, which brought the country to its knees; it triggered supply shortages, stalled production and a fall in household spending. Industrial production in Brazil plummeted by 10.9% in May 2018, one of the biggest monthly declines in recent decades. Both economic growth and inflation forecasts were revised downwards and expectations for company earnings were lowered. Away from Brazil, fears of slowing global growth and the ongoing tit-for-tat trade dispute between the United States and China created fears for the global economy and precipitated worsening market conditions around the world.
Brazilian markets stabilised in September when the clouds of uncertainty about the likely election outcome lifted. Indeed, post-election, and as your Company entered the second half of its financial year, there was an extremely positive market reaction to Bolsonaro's victory which shielded Brazilian stocks from the global market sell-off in October. Markets rallied in comparison with other emerging markets, reflecting high hopes and investor confidence in the Bolsonaro government's commitment towards fiscal and structural reform, particularly its highly anticipated plans for a major pensions system overhaul.
The reform plans are ambitious, requiring considerable political cooperation not yet in evidence. Getting the plans through Congress will be an uphill battle and a sense of realism has replaced the post-election euphoria. By April, equities were struggling as the pension reforms moved forward at a snail's pace and economic data disappointed. The lack of discernible progress spooked investors and weakened both consumer confidence and economic activity.
Portfolio review and spotlight on stocks
Investing in Brazil can involve a higher element of risk than more mature markets, with short-term performance prone to political and economic headwinds. The year to 30th April 2019 has been a testing period in this respect, with both global and local factors affecting the investment landscape, as explained earlier.
The Company's net asset value rose by 3.4% over the year, whilst its share price fell by 0.9%. NAV performance lagged the benchmark index, MSCI Brazil 10/40 which rose by 6.8%, with this underperformance largely resulting from the positive performance of some stocks that we have avoided because we consider them lower quality names, but which rallied on the back of broader market optimism. The Company's strategy remains focused on investing for the long term and in stocks with domestic themes, although these have been hit hard by the market conditions referenced earlier.
In this section we highlight how our investment choices have impacted overall portfolio performance, as well as our key portfolio shifts made over the year.
By sector, Financials is the Company's largest by some distance and we are overweight relative to the benchmark index. Our investment in IRB Brasil RE, the largest reinsurance company in Latin America, was the best overall performer in the portfolio over the review period. IRB recently celebrated its 80th anniversary although it became a publicly held company only in July 2017. We view this as a really well managed business and one that has benefitted from more recent stability in interest rates. It has successfully increased its market share, whilst maintaining its profitability and efficiency, as well as mitigating risk.
We sold our investment in BB Seguridades, a subsidiary of Banco do Brasil which acts as its main distribution channel. Although the stock is trading at relatively inexpensive valuations, we believe the financial penetration trend which has provided such a tailwind to the stock's fortunes has now matured.
In terms of other positive contributors, our exposure to Lojas Renner, Brazil's largest fashion retailer - and one of our top 10 holdings - was key. The stock delivered robust performance that exceeded market expectations, despite the volatile economic backdrop and logistical challenges resulting from the truckers' strike. We took advantage of market weakness to add to our investment in September, seeing potential in the business's digital transformation goals and its plans to expand its footprint in Argentina whilst also noting its strong and stable corporate governance structure.
As noted in the Company's half year report, our lack of exposure to Cielo, Brazil's largest credit and debit card operator, was beneficial to relative performance; a year ago we had already become more cautious on the short to medium outlook for the company and our decision to sell our holding has proven to be a wise one: Cielo reported an earnings miss, driven by the changing regulatory environment, higher-than-expected marketing costs and heightened competition, which hit profitability.
Our lack of exposure to Embraer, a Brazilian aerospace conglomerate - and the third largest producer of civil aircraft after Boeing and Airbus - was beneficial overall. The stock performed poorly on the back of a filed lawsuit which aimed to block the move by Boeing to acquire an 80% stake in Embraer.
Argentina underperformed other Latin American regions over the year but our sole exposure to Argentina was positive: MercadoLibre was founded in Buenos Aires in 1999 and is Latin America's most popular e-commerce site and payments company, with over 200 million users. The market was encouraged by MercadoLibre's proposed shift away from relying on the country's national postal service for its deliveries to be replaced by an internal network, which should improve customers' experience as well as potentially reducing shipping costs. There has also been sustained growth in its payment transactions business, MercadoPago.
We sold our holding in medical laboratory services provider Fleury following a change of view on the resilience of the high-end Fleury brand. The stock had been under pressure for the last year or so, against a backdrop of industry uncertainty and rising healthcare costs, and our expectations for the business's prospects over the short to medium-term shifted accordingly. We used the proceeds of the Fleury sale to add to our investment in SulAmérica, Brazil's second largest insurance company with more than 6.3 million customers. As well as healthcare, SulAmérica operates in multiple insurance segments such as life and personal accident insurance.
The prospect of a recovering economy plus positive operational results drove our decision to invest in SulAmérica. These factors also influenced our investment in Atacadao, a food retailer and subsidiary of the Carrefour group. The company has been transforming its business through store openings and e-commerce initiatives. It has delivered productivity and competitiveness gains despite the prevailing economic environment.
We increased our exposure to Localiza, the largest car rental network in South America, which posted impressive results for 2018. The stock has demonstrated growth resilience by focusing on quality, productivity and diversification.
We reduced our exposure to Communication Services, by selling out of Telefônica Brasil and Smile, rotating the sale proceeds into the Utilities sector. Smile is a loyalty programme administrator for GOL Airlines which ran into headwinds with certain shareholders last autumn, following its announcement of a major corporate reorganisation. Within Utilities, we invested in CEMIG, one of Brazil's leading players in the electric energy sector as well as Equatorial Energia.
In December, we sold our investment in Suzano, a pulp and paper producer with sustainable growth at its heart. We have become increasingly pessimistic on the direction of travel for pulp prices and the expected return is insufficient to justify staying invested.
Negative market sentiment in early 2019 created a buying opportunity for us, as we increased our investment in Ambev, Latin America's largest brewing company. Our research suggests that Ambev is well positioned to benefit from Brazil's improving, if unpredictable, investment cycle. The company has recently emphasised its sustainability credentials by signing contracts to build solar plants to supply clean energy to all of its distribution centres.
Outlook: uncertainty brings opportunity
As the only closed-ended fund that specifically targets Brazilian focused companies, the Company is well placed to tap into the country's strong domestic growth potential. This is not without its challenges and, at least in the short term, market uncertainty and fragile business sentiment are likely to prevail.
Globally, economic momentum has faltered, and the US-China trade spat that has dominated the business and economic news continues to linger. In Brazil itself, projections for economic growth have been reduced to 1.7% and the road to economic recovery will depend very much on the progress of fiscal reforms, so badly needed to alleviate the government's structural expenses and plug the gaping budget deficit. The scale and success of these reforms will determine the country's future economic growth trajectory. Although we believe the government is resolute on delivering these reforms, the administration's progress has been laboured so far and confidence in its ability to do so has plummeted. Opposition to the reform process remains formidable and future battles could seriously jeopardise the ability of the reforms to tackle the budget deficit. Failure could have harsh consequences for the Brazilian economy, pushing it back into recession.
There are positives: privatisations are planned for several state-owned entities and the Bolsonaro government's more pro-business stance should fuel growth. The Brazilian currency is cheaper than it was in effective terms and we expect it to strengthen from here, increasing the sterling value of Brazilian company earnings and valuations. Historically low interest rates (and a benign outlook for rates), low inflation, high earnings growth expectations and a recent marginal improvement in unemployment figures also provide cause for cautious optimism.
We believe the financial and operational leverage of the economy will come through in due course and that, this time, the domestic names that we favour should outshine those in the materials and energy sectors that benefitted from currency rates and commodities strength last year.
Credit growth to both individuals and companies turned positive in 2018 and we expect this trend to continue, supporting future economic activity. However, in the short term, all eyes will remain fixed on the progress of pensions reform; this will be the key determinant of economic growth which we expect to remain muted until tangible progress is evident.
Our own focus remains unchanged: investing in fundamentally sound businesses with good long-term prospects to deliver solid shareholder returns. We are confident in the quality of the Company's portfolio and mindful that with uncertainty comes opportunity: we view sentiment shifts and market setbacks as opportunities to buy into high quality businesses with good prospects that are resilient in uncertain times. We will continue to adhere to this approach whilst maintaining a balanced risk profile. Our portfolio is positioned for a recovery in the domestic economy once the current challenges have been overcome, poised to tap into a more positive long-term outlook for Brazil.
Luis Carrillo
Sophie Bosch De Hood
Investment Managers
8th August 2019
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. These key risks fall broadly into 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. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analysis, 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 are free to employ the Company's gearing to the extent that they can or hold cash, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year. In addition to the regular Board meetings, the Board visits Brazil from time to time to discuss strategy and consider all relevant aspects of investment in Brazil.
• Financial: The financial risks faced by the Company include foreign currency risk, interest rate risk, other price risk, liquidity risk and credit risk. Further details are disclosed in note 20 on pages 52 to 56 of the Annual Report.
• Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158. Details of the Company's approval are given under 'Business of the Company' above. 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 reviewed by the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules, Disclosure and Transparency Rules ('DTRs') and, as an investment trust, the Alternative Investment Fund Managers Directive ('AIFMD'). 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, the Manager and its professional advisers to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules, DTRs and AIFMD.
• 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 on pages 21 to 24 of the Annual Report.
• Operational: Disruption to, or failure of the Manager's accounting, dealing or payments systems or the depositary's or the custodian's records may prevent accurate reporting and monitoring of the Company's financial position. On 1st July 2014, the Company appointed the Bank of New York Mellon (International) Limited to act as its depositary, responsible for overseeing the operation of the custodian, JPMorgan Chase Bank, N.A., and the Company's cash flow. 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 22 and 23 Annual Report.
• Political and Economic: Changes in financial or tax legislation, including in Brazil, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital. The Board monitors the impact of any changes in such restrictions on the Company.
Transactions with the Manager and related parties
Full details of Directors' remuneration and shareholdings can be found on pages 28 and 29 and in note 6 on page 46 of the Annual Report.
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) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' 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 preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting 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 adequate 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 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.jpmbrazil.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 auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditor accepts 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 Strategic Report, a Directors' Report and a Directors' Remuneration Report that comply with that law. The Strategic Report and the Directors' report include a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
Each of the Directors, whose names and functions are listed on page 18 of the Annual Report confirms 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 BoardVictor Bulmer-ThomasDirector
8th August 2019
Statement of Comprehensive income
for the year ended 30th april 2019
2019 | 2018 | ||||||
Revenue | Capital | Total | Revenue | Capital | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Gains on investments held at fair | |||||||
value through profit or loss | - | 495 | 495 | - | 718 | 718 | |
Net foreign currency losses | - | (40) | (40) | - | (51) | (51) | |
Income from investments | 883 | - | 883 | 914 | - | 914 | |
Interest receivable and similar income | 6 | - | 6 | 5 | - | 5 | |
Gross return | 889 | 455 | 1,344 | 919 | 667 | 1,586 | |
Management fee | (155) | - | (155) | (226) | - | (226) | |
Other administrative expenses | (331) | - | (331) | (304) | - | (304) | |
Net return on ordinary activities | |||||||
before taxation | 403 | 455 | 858 | 389 | 667 | 1,056 | |
Taxation | (70) | - | (70) | (68) | - | (68) | |
Net return on ordinary activities | |||||||
after taxation | 333 | 455 | 788 | 321 | 667 | 988 | |
Return per share (note 2) | 0.99p | 1.36p | 2.35p | 0.95p | 1.99p | 2.94p | |
Statement of CHANGES IN EQUITY
for the year ended 30th april 2019
Called up | Capital | ||||||
share | Share | redemption | Other | Capital | Revenue | ||
capital | premium | reserve | reserve1 | reserves | reserve1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 30th April 2017 | 617 | 16,149 | 13 | 26,879 | (19,253) | 924 | 25,329 |
Repurchase of shares into Treasury | - | - | - | (397) | - | - | (397) |
Net return from ordinary activities | - | - | - | - | 667 | 321 | 988 |
Dividend paid in the year(note 3) | - | - | - | - | - | (270) | (270) |
At 30th April 2018 | 617 | 16,149 | 13 | 26,482 | (18,586) | 975 | 25,650 |
Net return from ordinary activities | - | - | - | - | 455 | 333 | 788 |
Dividend paid in the year(note 3) | - | - | - | - | - | (268) | (268) |
At 30th April 2019 | 617 | 16,149 | 13 | 26,482 | (18,131) | 1,040 | 26,170 |
1 This forms the distributable reserve of the Company and may be used to fund distributions to investors via dividend payments.
STATEMENT OF FINANCIAL POSITION
at 30th april 2019 | |||
2019 | 2018 | ||
£'000 | £'000 | ||
Fixed assets | |||
Investments held at fair value through profit or loss | 25,686 | 25,295 | |
Current assets | |||
Debtors | 249 | 134 | |
Cash and cash equivalents | 346 | 316 | |
595 | 450 | ||
Creditors: amounts falling due within one year | |||
Creditors | (111) | (95) | |
Net current assets | 484 | 355 | |
Total assets less current liabilities | 26,170 | 25,650 | |
Net assets | 26,170 | 25,650 | |
Capital and reserves | |||
Called up share capital | 617 | 617 | |
Share premium | 16,149 | 16,149 | |
Capital redemption reserve | 13 | 13 | |
Other reserve | 26,482 | 26,482 | |
Capital reserves | (18,131) | (18,586) | |
Revenue reserve | 1,040 | 975 | |
Shareholders' funds | 26,170 | 25,650 | |
Net asset value per share | 78.1p | 76.5p |
STATEMENT OF CASH FLOWS
for the year ended 30th april 2019
2019 | 2018 | ||
£'000 | £'000 | ||
Net cash outflow from operations before dividends and interest | (546) | (539) | |
Dividends received | 749 | 816 | |
Interest received | 6 | 6 | |
Net cash inflow from operating activities | 209 | 283 | |
Purchases of investments | (10,421) | (10,829) | |
Sales of investments | 10,525 | 10,852 | |
Settlement of foreign currency contracts | (15) | (28) | |
Net cash inflow/(outflow) from investing activities | 89 | (5) | |
Dividend paid | (268) | (270) | |
Repurchase of shares into Treasury | - | (397) | |
Net cash outflow from financing activities | (268) | (667) | |
Increase/(decrease) in cash and cash equivalents | 30 | (389) | |
Cash and cash equivalents at start of year | 316 | 705 | |
Cash and cash equivalents at end of year | 346 | 316 | |
Increase/(decrease) in cash and cash equivalents | 30 | (389) | |
Cash and cash equivalents consist of: | |||
Cash and short term deposits | 64 | 75 | |
Cash held in JPMorgan US Dollar Liquidity Fund | 282 | 241 | |
Total | 346 | 316 |
Notes to the financial statements
for the year ended 30th april 2019
1. Accounting policies
Basis of accounting
The financial statements are prepared under the 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 November 2014, and updated in February 2018.
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 on page 23 of the Directors' Report in the Annual Report form part of these financial statements. The Directors consider that it is more likely than not that the continuation vote will be passed at the 2019 AGM and thus the Company will continue. The Directors therefore consider that it is appropriate for the financial statements to be prepared on the going concern basis of accounting. Nevertheless, because the outcome of the 2019 continuation vote and a 2020 continuation vote if it were to occur, are uncertain there remains a material uncertainty which may cast significant doubt as to the likelihood of the Company continuing as going concern notwithstanding the current strong liquidity and solvency positions. While there is no reason to believe that the Company will not be able to realise its assets and discharge its liabilities, if the continuation vote is not passed it may not be able to do so in the normal course of business.
In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The financial statements do not reflect any adjustments that would be required to be made, if they were prepared on a basis other than the going concern basis.
The Board recommends that shareholders vote in favour of the continuance resolution in view of the Company's future prospects as set out elsewhere in the document.
The policies applied in these financial statements are consistent with those applied in the preceding year.
2. Return per share
2019 | 2018 | |
£'000 | £'000 | |
Revenue return | 333 | 321 |
Capital return | 455 | 667 |
Total return | 788 | 988 |
Weighted average number of shares in issue during the period | 33,524,854 | 33,601,224 |
Revenue return per share | 0.99p | 0.95p |
Capital return per share | 1.36p | 1.99p |
Total return per share | 2.35p | 2.94p |
3. Dividends
(a) Dividends paid and proposed
2019 | 2018 | |
£'000 | £'000 | |
2018 dividend paid of 0.8p (2017: 0.8p) per share | 268 | 270 |
Dividend proposed of 0.8p (2018: 0.8p) per share | 268 | 268 |
All dividends paid and declared in the period have been funded from the Revenue Reserve.
The final dividend proposed in respect of the year ended 30th April 2019 is subject to shareholder approval at the forthcoming Annual General Meeting.
This dividend will be reflected in the financial statements for the year ending 30th April 2020.
(b) Dividend for the purposes of Section 1158 of the Income and Corporation Tax Act 2010 ('Section 1158')
The requirement of Section 1158 of the Income and Corporation Tax Act 2010 are considered on the basis of dividends proposed in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £333,000 (2018: £321,000). The revenue reserve after payment of the final dividend will amount to £772,000 (2018: £707,000).
2019 | 2018 | |
£'000 | £'000 | |
Final dividend of 0.8p (2018: 0.8p) per share | 268 | 268 |
Minimum dividend required for s1158 purposes | 200 | 183 |
4. Net asset value per share
2019 | 2018 | |
Net assets (£'000) | 26,170 | 25,650 |
Number of shares in issue | 33,524,854 | 33,524,854 |
Net asset value per share | 78.1p | 76.5p |
5. Status of results announcement
2018 Financial Information
The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 31st March 2018 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.
2019 Financial Information
The figures and financial information for 2019 are extracted from the Annual Report and Accounts for the year ended 31st March 2019 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.
JPMORGAN FUNDS LIMITED
8th August 2019
For further information, please contact:
Divya Amin
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service this inside information is now considered to be in the public domain.
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 also shortly be available on the Company's website at www.jpmbrazil.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.