TIDMJRS
RNS Number : 1222U
JPMorgan Russian Securities PLC
28 July 2022
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN RUSSIAN SECURITIES PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED
30TH APRIL 2022
Legal Entity Identifier: 549300II3MHI98ZLVH37
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Overview and Performance
Performance in the period can be divided into two parts.
Performance from 1st November 2021 to 23rd February 2022 was
satisfactory, but that all changes thereafter and it saddens me to
report that the tragic events in Ukraine since Russia's military
invasion commenced on 24th February 2022 and imposition of strict
economic sanctions on Russia and Belarus that followed have
drastically reduced the valuation of the Company's assets in this
six-month reporting period to 30th April 2022.
The sanctions and restrictions that followed the invasion were
wide ranging and had a very sharp negative effect on the Company
and international markets. We have detailed the main changes that
have happened since the invasion in a schedule of Frequently Asked
Questions, which can be found on page 25 of the Company's Half Year
Report and Financial Statements. In summary, the changes have
included the closure of the Moscow Exchange (MOEX) to trading by
overseas investors, unavailability of prices on RDXUSD (Russian
Depositary Index USD) and prices of American Depositary Receipts
(ADR) and Global Depositary Receipts (GDR), the prohibition of
dividend payments by Russian companies to western shareholders and
cessation of reporting of the Company's benchmark data by western
registered news services.
These restrictions have had a severe negative impact on the
value of the Company's portfolio because as required under the
terms of the Company's Investment Objective, almost all of the
Company's portfolio consisted of Russian equities. Notwithstanding
the values at which stocks are traded on the local market without
access to the Russian equity market following the invasion of
Ukraine, it has been necessary to fair value Russian company stocks
in the Company's portfolio, resulting in a massive reduction in the
Company's net asset value. The Company's net asset value has
continued to be published daily and as at 30th April 2022, it was
47.1 pence per share, a decline of 95.2% in this six month
reporting period. Since the period end the value has fallen further
and as at 26th July 2022, was 45.4 pence per share. The impact of
Russia's invasion of Ukraine have resulted in some events included
in the Company's list of Principal Risks becoming realities. In
light of this the Board has reviewed its Principal Risks and
further details can be seen on page 21 of the Company's Half Year
Report and Financial Statements.
The Company's shares have continued to trade on the London Stock
Exchange throughout the reporting period, although the precipitous
fall in its share value led it to leaving the FTSE All Share Index
on 17th June 2022. The Company's share price as at 30th April 2022
was 107.5 pence, a decline of 87.6% in the six month period to 30th
April 2022. As at 26th July 2022 the share price was 69.5 pence. We
have also seen significant changes in our share register. As some
institutions reduced their holdings following the invasion there
was significant demand from individuals to buy shares and
consequently institutional holdings have fallen from approximately
70% to 36% as at 30th April 2022.
Proposal to Amend the Company's Investment Objective and
Policies
In response to the current closure of the Russian market, the
Directors have considered options to preserve value for
shareholders. Therefore, the Board is in the process of requesting
authorisation from the Financial Conduct Authority (FCA) to amend
the Company's investment objective and policies to permit
investments in Emerging Europe (including Russia), the Middle East
and Africa. If FCA approval is provided, the Board will propose a
resolution at a forthcoming General Meeting of shareholders.
Details of the General Meeting will be detailed in a notice
included in a document that will be sent to shareholders, assuming
receipt of FCA approval. The Board will recommend that shareholders
vote in favour of the resolution. The change in the Company's
investment objective and policies will be detailed in the document
referred to above that will be sent to shareholders. Subject to
approval of the resolution by shareholders, the intention is that
the proposed change in the Company's investment objective and
policies to permit such investments will take effect following the
General Meeting expected to be held as soon as possible in the
autumn of 2022.
Revenue, Earnings and Dividend
The prohibition on receipt by foreign investors of dividends
from Russian companies, introduced soon after the invasion, will
understandably reduce the Company's revenue for the year
significantly. However, revenue for the six month period to 30th
April 2021 after taxation was GBP4,277,000 (30th April 2021:
GBP2,399,000) and the return per share, calculated on the basis of
the average number of shares in issue was 10.56 pence (30th April
2021: 5.58 pence) per share, reflecting the healthy dividend
receipts before Russia's invasion of Ukraine.
The Company paid its first interim dividend of 15 pence per
share for the current financial year, which had been declared
before Russia's invasion of Ukraine. No further dividends will be
paid in the current circumstances. See above details of the reasons
for the dramatic reduction in the Company's revenues.
Directors
During this six-month reporting period two of the Company's
directors, Tamara Sakovska and Ashley Dunster resigned, following
Russia's occupation of Ukraine. Tamara Sakovska is a Ukrainian
citizen and felt she could no longer serve on the Board of a
company investing in Russia. Ashley Dunster had a conflict of
interest that meant he too felt he must step down. In line with the
Company's succession plan, as announced on 4th October 2021, Gill
Nott, the Company's former Chairman did not stand for reappointment
at the Company's AGM on 4th March 2022. Prior to the date of Gill's
departure, the Board had unanimously agreed that I would be
appointed as the Company's Chairman immediately following the AGM.
Dan Burgess became the Audit Committee Chair immediately following
the Company's AGM on 4th March 2022. Dan Burgess was appointed as a
Director of the Company on 4th January 2022 after a thorough
selection process using the services of an independent third-party
search agent.
The current intention is for the Board to continue with a
complement of three directors during the current difficult period
with no current plans for recruitment of additional directors.
Investment Management
Oleg Biryulyov and Habib Saikaly continue to be the Company's
Investment Managers supported by JPMorgan Asset Management's
Emerging Markets and Asia Pacific equities team (EMAP), which
consists of 100+ investment professionals based in both the UK and
overseas. The Company benefits greatly from the extensive
experience of the investment management team that have many years
of experience of investing in Russia and emerging markets through
previous severe global market disruptions. The Board receives
regular reports on the service levels of the Manager and its key
service providers and the Board is satisfied with the current
levels of service.
Outlook
If current levels of public concern in much of the West about
the humanitarian crisis unfolding in Ukraine continues, many
Western governments will be under pressure to permanently and
significantly reduce their reliance on Russian energy supplies.
This, together with the continuing exclusion of Russia from Western
financial systems may destabilise and isolate Russia to such an
extent that holding investments in the country becomes prohibited
and/or unviable.
Although the outlook for the Company is uncertain, it is capable
of continuing as a going concern for at least several years and it
is the Board's hope that it will be possible to amend the Company's
investment objective and policies as referred to above and help
steer the Company through this difficult period and preserve as
much value in the Company for shareholders as possible.
With much of the Company's portfolio effectively 'frozen' for
the foreseeable future, this half year report will not include the
usual report from the Investment Managers. It is intended that the
schedule of Frequently Asked Questions included on page 25 of
Company's Half Year Report and Financial Statements, as referred to
above, will address many of the questions that shareholders may
have. Updates on the Company's portfolio can be viewed via RNSs'
released on the London stock Exchange and via the Company's website
www.jpmrussian.com
Eric Sanderson
Chairman
27th July 2022
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its
half year report.
Principal Risks and Uncertainties
The Company is exposed to a variety of risks and uncertainties.
The Board has undertaken an assessment and review of the principal
risks facing the Company, together with a review of any new risks
which may have arisen during the year. The Directors have
considered the impact of the continued uncertainty on the Company's
financial position and based on the information available to them
at the date of this Report, have fair-value adjusted Russian
securities in response to exchange closures and sanction activities
as a result of the conflict in Ukraine. The Directors have
concluded that no further adjustments are required to the accounts
as at 30th April 2022. The principal risks and uncertainties faced
by the Company fall into the following broad categories: investing
in Russia; share price discount and Net Asset Value per share;
investment underperformance and strategy; failure of investment
process; loss of investment team and Manager; operational and cyber
crime; board relationship and shareholders; political and
economic regulatory and legal market and financial. Information
on each of these areas is given in the Business Review within the
Annual Report and Financial Statements for the year ended 31st
October 2021. A review of risks conducted for this report concluded
additional risks included unviable size of the Company, discount to
share price, sanctions, Broker counter-parties, inability to trade
stocks and inappropriate investment strategy. The Board is aware
that due to the current situation in Russia and Ukraine, sanctions
imposed by a number of jurisdictions have resulted in a downgrade
in the country's credit rating, an immediate freeze of Russian
assets, a decline in the value and liquidity of Russian securities,
property or interests, and/or other adverse consequences. Sanctions
could also result in Russia taking counter measures or other
actions in response, which may further impair the value and
liquidity of Russian securities.
Related Parties Transactions
During the first six months of the current financial year,
except for the waiver of the management fee as referred to on page
26 of the Company's Half Year Report and Financial Statements, no
transactions with related parties have taken place which have
materially affected the financial position or the performance of
the Company during the period.
Going Concern
The Directors believe, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, that the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future and, more specifically, that there are no
material uncertainties pertaining to the Company that would prevent
its ability to continue in such operation existence for at least 12
months from the date of the approval of this half yearly financial
report. In reaching that view, the Directors have considered the
impact of the current sanctions regime introduced following
Russia's invasion of Ukraine in February 2022 on the Company's
financial and operational position. Absent the imposition of
stricter sanctions and or regulatory restrictions that would
prohibit the Company from holding investments in Russian stocks,
the Board consider there is reasonable evidence to continue to
adopt the going concern basis in preparing the accounts.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its
knowledge:
(i) the condensed set of financial statements contained within
the half yearly financial report has been prepared in accordance
with FRS 104 'Interim Financial Reporting' and gives a true and
fair view of the state of affairs of the Company and of the
assets/liabilities, financial position and net return/loss of the
Company, as at 30th April 2021 as required by the UK Listing
Authority Disclosure and Transparency Rule 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the UK Listing
Authority Disclosure and Transparency Rules.
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 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 the 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.
For and on behalf of the Board
Eric Sanderson
Chairman
27th July 2022
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30TH APRIL 2022
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th April 2022 30th April 2021 31st October 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
(Losses)/gains on
investments
held at fair value
through
profit or loss - (359,285) (359,285) - 63,689 63,689 - 141,540 141,540
Net foreign
currency
gains/(losses) - 605 605 - (273) (273) - (444) (444)
Income from
investments 5,927 - 5,927 3,708 - 3,708 19,691 - 19,691
Interest receivable
and
similar income 2 - 2 4 - 4 10 - 10
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
Gross return/(loss) 5,929 (358,680) (352,751) 3,712 63,416 67,128 19,701 141,096 160,797
Management fee (420) (630) (1,050) (599) (898) (1,497) (1,302) (1,952) (3,254)
Other
administrative
expenses (346) - (346) (365) - (365) (815) - (815)
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
Net return/(loss)
before
finance costs and
taxation 5,163 (359,310) (354,147) 2,748 62,518 65,266 17,584 139,144 156,728
Finance costs - - - (2) - (2) (2) - (2)
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
Net return/(loss)
before
taxation 5,163 (359,310) (354,147) 2,746 62,518 65,264 17,582 139,144 156,726
Taxation (886) - (886) (347) - (347) (2,552) - (2,552)
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
Net return/(loss)
after
taxation 4,277 (359,310) (355,033) 2,399 62,518 64,917 15,030 139,144 154,174
-------------------- -------- ----------- ----------- -------- -------- --------- -------- -------- ---------
Return/(loss) per
share (note 3) 10.56p (886.70)p (876.14)p 5.58p 145.55p 151.13p 35.53p 328.95p 364.48p
STATEMENT OF CHANGES IN EQUITY
Called Capital
up
share redemption Capital Revenue
capital reserve reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ----------- ------------ ----------- -----------
Six months ended 30th April 2022
(Unaudited)
At 31st October 2021 408 193 372,107 24,307 397,015
Repurchase and cancellation of the
Company's own shares (3) 3 (2,530) - (2,530)
Net (loss)/return - - (359,310) 4,277 (355,033)
Dividend paid in the period (note
4) - - - (20,420) (20,420)
---------------------------------------- -------- ----------- ------------ ----------- -----------
At 30th April 2022 405 196 10,267 8,164 19,032
---------------------------------------- -------- ----------- ------------ ----------- -----------
Six months ended 30th April 2021
(Unaudited)
At 31st October 2020 434 167 251,927 13,571 266,099
Repurchase and cancellation of the
Company's own shares (11) 11 (7,139) - (7,139)
Net return - - 62,518 2,399 64,917
Dividend paid in the period (note
4) - - - (4,299) (4,299)
---------------------------------------- -------- ----------- ------------ ----------- -----------
At 30th April 2021 423 178 307,306 11,671 319,578
---------------------------------------- -------- ----------- ------------ ----------- -----------
Year ended 31st October 2021 (Audited)
At 31st October 2020 434 167 251,927 13,571 266,099
Repurchase and cancellation of the
Company's own shares (26) 26 (18,964) - (18,964)
Net return - - 139,144 15,030 154,174
Dividends paid in the year (note
4) - - - (4,294) (4,294)
---------------------------------------- -------- ----------- ------------ ----------- -----------
At 31st October 2021 408 193 372,107 24,307 397,015
---------------------------------------- -------- ----------- ------------ ----------- -----------
1 These reserves form the distributable reserves of the Company
and may be used to fund distributions of profits to investors.
STATEMENT OF FINANCIAL POSITION
AT 30TH APRIL 2022
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2022 2021 2021
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ -------------
Fixed assets
Investments held at fair value through
profit or loss 15,897 311,668 385,822
---------------------------------------- ------------ ------------ -------------
Current assets
Debtors 38 5,734 716
Cash and cash equivalents 3,254 2,521 10,951
---------------------------------------- ------------ ------------ -------------
3,292 8,255 11,667
Current liabilities
Creditors: amounts falling due within
one year (157) (344) (414)
Derivative financial liabilities - (1) (60)
---------------------------------------- ------------ ------------ -------------
Net current assets 3,135 7,910 11,193
---------------------------------------- ------------ ------------ -------------
Total assets less current liabilities 19,032 319,578 397,015
---------------------------------------- ------------ ------------ -------------
Net assets 19,032 319,578 397,015
---------------------------------------- ------------ ------------ -------------
Capital and reserves
Called up share capital 405 423 408
Capital redemption reserve 196 178 193
Capital reserves 10,267 307,306 372,107
Revenue reserve 8,164 11,671 24,307
---------------------------------------- ------------ ------------ -------------
Total shareholders' funds 19,032 319,578 397,015
---------------------------------------- ------------ ------------ -------------
Net asset value per share (note 5) 47.1p 756.0p 973.6p
---------------------------------------- ------------ ------------ -------------
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30TH APRIL 2022
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2022 2021 2021
GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------------ ------------ -------------
Net cash outflow from operations before
dividends
and interest (1,008) (2,130) (4,543)
Dividends received 5,740 3,142 16,955
Interest received 2 6 11
Overseas tax recovered - 16 66
Interest paid - (2) (2)
--------------------------------------------------- ------------ ------------ -------------
Net cash inflow from operating activities 4,734 1,032 12,487
--------------------------------------------------- ------------ ------------ -------------
Purchases of investments (17,449) (86,518) (151,554)
Sales of investments 28,039 95,315 168,990
Settlement of forward currency contracts (164) 46 29
--------------------------------------------------- ------------ ------------ -------------
Net cash inflow from investing activities 10,426 8,843 17,465
--------------------------------------------------- ------------ ------------ -------------
Repurchase and cancellation of the Company's
own shares (2,678) (7,130) (18,986)
Dividends paid (20,420) (4,299) (4,294)
--------------------------------------------------- ------------ ------------ -------------
Net cash outflow from financing activities (23,098) (11,429) (23,280)
--------------------------------------------------- ------------ ------------ -------------
(Decrease)/increase in cash and cash equivalents (7,938) (1,554) 6,672
--------------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at start of period/year 10,951 4,129 4,129
Unrealised gains/(loss) on foreign currency
cash and
cash equivalents 241 (54) 150
Cash and cash equivalents at end of period/year 3,254 2,521 10,951
--------------------------------------------------- ------------ ------------ -------------
(Decrease)/increase in cash and cash equivalents (7,938) (1,554) 6,672
--------------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents consist of:
Cash and short term deposits 1,583 2,268 313
Cash held in JPMorgan US Dollar Liquidity
Fund 1,671 253 10,638
--------------------------------------------------- ------------ ------------ -------------
Total 3,254 2,521 10,951
--------------------------------------------------- ------------ ------------ -------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30TH APRIL 2022
1. Financial statements
The information contained within the financial statements in
this half year report has not been audited or reviewed by the
Company's auditors.
The figures and financial information for the year ended 31st
October 2021 are extracted from the latest published financial
statements of the Company and do not constitute statutory accounts
for that year. Those financial statements have been delivered to
the Registrar of Companies and including the report of the auditors
which was unqualified and did not contain a statement under either
section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The financial statements have been prepared in accordance with
the Companies Act 2006, FRS 102 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland' of the United Kingdom
Generally Accepted Accounting Practice ('UK GAAP') 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.
FRS 104, 'Interim Financial Reporting', issued by the Financial
Reporting Council ('FRC') in March 2015 has been applied in
preparing this condensed set of financial statements for the six
months ended 30th April 2022.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of
financial statements are consistent with those applied in the
financial statements for the year ended 31st October 2021.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2022 2021 2021
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ -------------
Return/(loss) per share is based
on the following:
Revenue return 4,277 2,399 15,030
Capital (loss)/return (359,310) 62,518 139,144
----------------------------------- ------------ ------------ -------------
Total (loss)/return (355,033) 64,917 154,174
----------------------------------- ------------ ------------ -------------
Weighted average number of shares
in issue 40,522,060 42,953,385 42,299,516
Revenue return per share 10.56p 5.58p 34.01p
Capital (loss)/return per share (886.70)p 145.55p 328.95p
----------------------------------- ------------ ------------ -------------
Total (loss)/return per share (876.14)p 151.13p 364.48p
----------------------------------- ------------ ------------ -------------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2022 2021 2021
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ -------------
2021 interim dividend paid of 10,311 - -
25.0p
2021 final dividend of 10.0p
(2021: 10.0p) 4,044 4,299 4,294
2022 interim dividend of 15.0p 6,065 - -
-------------------------------- ------------ ------------ -------------
Total dividends paid in the
period/year 20,420 4,299 4,294
-------------------------------- ------------ ------------ -------------
All dividends paid in the period/year have been funded from the
revenue reserve.
The 2022 interim dividend was paid on 11th March 2022.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2022 2021 2021
GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------ -------------
Net assets (GBP'000) 19,032 319,578 397,015
Number of shares in issue 40,436,176 42,273,400 40,776,176
--------------------------- ------------ ------------ -------------
Net asset value per share 47.1p 756.0p 973.6p
--------------------------- ------------ ------------ -------------
FREQUENTLY ASKED QUESTIONS
Please see below an explanation of how Russian markets are
currently operating for overseas parties and a list of some of the
frequently asked questions about issues effecting JPMorgan Russian
Securities plc (the Company/JRS) following Russia's invasion of
Ukraine on 24th February 2022 and the sanctions and restrictions
that followed.
1. Russian Markets
2. JRS Operations
1. Russian Markets
Effective February 28, 2022, the Central Bank of Russia (CBR)
introduced a ban on local Russian brokers from executing
non-residents orders to sell Russian securities.
As of March 8, the Moscow Stock Exchange (MOEX) remains closed
to foreign investors and since March 1 trading in depositary
receipts has not been possible due to the lack of counterparties
and limited liquidity. On March 3, trading in Global Depositary
Receipts (GDR) was formally suspended on the London Stock
Exchange.
-- Sanctions
JPMorgan Asset Management ('JPMAM') is obliged to comply with
sanctions, including but not limited to those relating to the
trading of certain securities which have recently become subject to
sanctions.
When sanctions are imposed, JPMAM will assess the changes to our
legal and regulatory obligations and take all steps necessary to
comply with those obligations. JPMAM continues to monitor and
assess the impact of sanctions in relation to a broad variety of
risks: investment, convertibility, liquidity, custody, counterparty
and settlement risk.
We are committed to meeting our obligations under US sanctions
(Executive Order 14024) and any other applicable sanctions
directives, including with respect to the execution of transactions
for our clients, and have implemented, and will periodically
review, controls reasonably designed to comply with the Executive
Order, including the identification of Targeted Securities. Our
transactions are consistent with US regulatory requirements and to
the extent authorized and permissible by OFAC sanctions regulations
and general licenses.
The Company currently owns three securities that have been
sanctioned by OFAC; Sberbank, VTB and Severstal. Due to the
restrictions put in place by the Russian authorities, that prohibit
all trading on the Moscow Stock Exchange, the Company, in line with
all other investors holding Russian stocks in similar
circumstances, is currently unable to sell these securities.
Additionally, Russia required that stocks held through American
Depositary Receipts (ADR) and GDR programmes should be transferred
to the local market although some companies have successfully
appealed this decision in relation to their ADR/GDR programmes.
However, the sanctions against Russia from the USA and EU have
complicated the conversion process of ADR/GDRs. This is because
many ADR/GDR structures involve numerous parties based in different
jurisdictions. Some of these parties in the ADR/GDR structures have
recently introduced restrictions in dealing with Russian based
assets, so achieving the coordination of processes required for the
conversion of the ADR/GDRs to take place is taking time to
implement. The latest information available suggests that the
transfer process has reopened for a limited period until 29th July
2022 and so the Company's manager together with other managers of
ADR/GDRs in Russian stock, are working with authorities/parties to
process the transfers as far as possible. A list of the Company's
full portfolio of investments, including ADR and GDR holdings can
be located from the Company's website at
https://am.jpmorgan.com/gb/en/asset-management/per/products/jpmorgan-russian-securities-plc-ordinary-shares-gb0032164732#/portfolio
-- Settlement
Settlement processing for foreign investors, including Delivery
vs Payments (DVP) versus USD which is our standard practice, has
also been banned as has the payment of income events.
Our focus is on monitoring settlement for trades, particularly
local market sales where settlement for foreign investors is still
subject to restrictions by the CBR. Depositary Receipt (DR) sales
are settling and we do not see systemic issues in the offshore
market, although there are ongoing delays.
-- Dividends (due from investee companies)
Investee companies continue to pay dividends to their
shareholders and such dividends are held in a custodians 'suspense
account' and cannot at present be paid to overseas holders.
Although these dividends are not recognised as revenue by the
Company, we hope that sometime in the future we will be able to
access these funds and distribute them to shareholders.
2. JRS Operations
-- Are the Company's shares still trading?
Yes, the shares of the Company have continued to be traded
uninterrupted on the London Stock Exchange.
-- How is the Net Asset Value currently calculated?
The Company considers that the reopening of the Moscow Exchange
(MOEX) for limited trading hours on 24th March 2022 has not
materially affected the value of its investments, given the
continued inability for non-Russian nationals to trade locally and
repatriate proceeds. Therefore, the Company has applied an
alternative valuation method and for securities traded on MOEX a
fair value adjustment has been applied to the last trade price on
25th February 2022. For American Depositary Receipts and Global
Depositary Receipts a fair value adjustment has been applied to the
last trade price on 2nd March 2022.
The Company has continued to announce the NAV on a daily
basis.
-- Will the Company continue to pay dividends?
The current sanctions and restrictions in Russia are expected to
limit the Company's ability to pay any further dividends following
the payment of the 11th March 2022. It remains the Company's
intention to resume the payment of dividends when circumstances
permit.
-- Have the Portfolio Managers changed their investment approach?
Due to the sanctions and other restrictions on the Company since
Russia's invasion of Ukraine, the valuation of the Company's
portfolio has changed completely, with cash and cash equivalents
now comprising approximately 93% of the value of the portfolio as
at 26th July 2022.
We continued to run JRS in accordance with the investment
objectives and policy, however, it was necessary for the Board to
waive the Company's investment restriction guidelines (IRGs) as it
is not possible to manage the portfolio within the IRGs, given the
fair valuation policy currently in place and the high proportionate
level of cash and liquidity funds.
-- Will the Company purchase any additional stocks for its portfolio?
The Company's remaining funds will not be used to purchase
further stocks for its portfolio for the foreseeable future.
However, this approach may change and investors should look out for
announcements from the Company on the London Stock Exchange for
latest updates.
In May 2022, the Manager took the opportunity to de-risk the
portfolio by selling the Company's holdings in Kazakhstan stock for
cash
-- Benchmark
Following Russia's invasion of Ukraine on 24th February 2022,
the Moscow Exchange (MOEX) has been closed to many overseas
investors, including the Company. This has resulted in the Company
being prohibited from trading, thereby negating the purpose of
measuring the Company's performance against its benchmark.
Furthermore, data from many Russian benchmarks, including the
Company's, will no longer be distributed by western news services
after 30th June 2022. Hence, the Board's decision that, with effect
from 1st May 2022 until further notice, the Company will not have a
benchmark.
The Company's benchmark has been the RTS index in sterling
terms. Prior to 1st November 2016, the Company's benchmark was the
MSCI Russian 10/40 Equity Indices Index in sterling terms.
-- How long can the Company continue to pay its essential running costs?
Based on current estimates, the Company has adequate liquidity
to keep running for many years. This is assisted by the Company's
Manager who has waived its management fee with effect following
payment of the management fee to 28th February 2022 and will apply
until further notice.
-- Will the Company continue its share buyback programme?
The Company will not be buying back shares whilst current market
conditions prevail.
-- Will JPMorgan Funds Ltd continue as the Company's Manager?
Yes.
-- Will the Company continue its Continuation Vote and Tender?
Changes may be required to the Continuation Vote and Tender
details due to the closure of the Moscow Exchange following
Russia's invasion of Ukraine in February 2022 and its impact on the
benchmark. As this is still a developing process the Company will
announce details which will be notified in due course.
The Company's performance over a five-year period to 31st
October 2021 exceeded the performance of its benchmark, thereby
achieving its performance related tender offer target. In addition,
as shareholders approved the resolution for the Company to continue
for a further five years at the Company's Annual General Meeting
(AGM) on 4th March 2022, a tender offer was not required. The Board
has committed to continue with a similar arrangement for the
forthcoming five years. Therefore, in the absence of changes being
made to the Company's Continuation Vote and Tender as outlined
above, then on the basis that the Continuation Vote is passed at
the Company's 2027 AGM, if the Company does not outperform its
benchmark on a net asset value cum income basis over the five-year
period to 31st October 2026, the Tender Offer would be for 25% (in
the previous five-year period this was 20%) of the outstanding
shares which would be bought back at NAV less costs and less a
discount of 2%.
Note:
The above details are based on information as at 27th July
2022.
This schedule will also be available on the Company's website
www.jpmrussian.co.uk
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.
JPMORGAN FUNDS LIMITED
28(th) July 2022
For further information, please contact:
Paul Winship
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
END
A copy of the half year 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 half year will also shortly be available on the Company's
website at www.jpmrussian.co.uk where up to date information on the
Company, including daily NAV and share prices, factsheets and
portfolio information can also be found.
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.
This information is provided by RNS, the news service of the
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END
IR BBGDRXBDDGDI
(END) Dow Jones Newswires
July 28, 2022 07:14 ET (11:14 GMT)
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