TIDMJRS
RNS Number : 2581E
JPMorgan Russian Securities PLC
27 October 2022
JPMORGAN RUSSIAN SECURITIES PLC
(the "Company")
Publication of circular
Recommended proposals for the adoption of a new investment
objective and policy and change of name
Legal Entity Identifier: 549300II3MHI98ZLVH37
Introduction
Further to the statements of the Board in the Company's half
year report and financial statements for the period ended 30 April
2022, the Board has progressed proposals to amend the Company's
investment objective and policy and announces that the Company has
today published a Shareholder circular (the "Circular") setting out
recommended proposals (the "Proposals") in relation to the
Company's adoption of an amended investment objective and policy
(the "New Investment Objective and Policy"), including a Notice of
General Meeting.
Background
The Company (through its predecessor which was launched in 1994)
was one of the first Russia-focused equity funds and has held,
since launch, a diversified portfolio of investments primarily in
quoted Russian securities or other companies which operate
principally in Russia, although it has also had the ability to
invest up to 10 per cent. of its gross assets in companies that
operate or are located in former Soviet Union republics.
Due to the rapid introduction of economic sanctions and
regulatory restrictions applicable to the Russian equity market and
the closure of the Moscow Exchange to many overseas investors,
including the Company, following the Russian invasion of Ukraine, a
significant portion of securities held within the Company's
portfolio have been unable to be traded and the value of such
securities has fallen significantly. In addition, the current
sanctions and restrictions have also limited the Company's ability
to access dividends from these securities. Although the Company has
distributable reserves, the Board does not consider it prudent to
pay dividends in the absence of current income and, in the light of
the Company's existing investment policy and the sanctions regime,
the Company is restricted from using its available funds to
purchase other securities. Whilst the Company's current investment
policy enables it to invest in securities of businesses that
operate, or are located in, other former Soviet Union republics,
the Board and the Investment Manager are of the view that such
investments would carry unacceptable risks for the portfolio for
the foreseeable future and, in any case, the current investment
policy only permits the Company to invest up to 10 per cent. of its
gross assets in these regions.
As at 30 September 2022, the Company's portfolio was valued at
GBP19,076,044. The Company's portfolio contained 27 investments in
Russian companies or other companies which operate principally in
Russia and which were valued at GBP1,984,653 (representing 10.4 per
cent. of the Company's gross assets as at 30 September 2022). The
balance is held in cash which generates only a very modest income
and which offers no opportunity for capital appreciation.
The Board is conscious of the significant uncertainty regarding
the length of time that the current sanctions regime will exist and
the significant risk that the current losses in the Company would
crystallise in the event of a winding up or affect shareholder
value in the context of a merger. Against this context, given the
illiquidity of the Company's existing Russian securities (resulting
in a wind up or a merger not being considered to be viable options
for the Company) and the Company's inability to invest a
significant portion of its available funds within the parameters of
its existing investment policy, the Board, together with the
Investment Manager, is therefore of the view that the Company's
investment policy should, subject to Shareholder approval, be
amended.
The proposed New Investment Objective and Policy would enable
the Company to invest in a diversified portfolio of quoted
investments in Central, Eastern and Southern Europe (including
Russia), the Middle East and Africa, including those markets that
are considered as emerging markets according to the S&P
Emerging Europe, Middle East and Africa Index. In the light of the
Company's existing holdings and the inability to dispose of these
under the current sanctions and restrictions, the Company also
needs the flexibility within its New Investment Objective and
Policy to continue to hold Russian securities.
The full text of both the Company's existing investment
objective and policy and the proposed New Investment Objective and
Policy are set out in Part 2 of the Circular.
Continuity of management arrangements
JPMorgan Funds Limited and JPMorgan Asset Management (UK)
Limited (together, the "Investment Manager") will continue as the
Company's Alternative Investment Fund Manager and portfolio manager
respectively following adoption of the New Investment Objective and
Policy.
The Investment Manager has a long established emerging markets
investment team which has an extensive network of emerging markets
specialists based locally in markets around the world. It has a
strong investment track record in this sector and has managed
JPMorgan Emerging Markets Investment Trust plc since its launch in
July 1991. Its management teams have a preference for high quality
companies with high and sustainable returns on equity as they are
expected to become industry leaders.
Oleg Biryulyov (who has managed the Company's portfolio since
its launch) will continue to manage the Company's portfolio. Mr
Biryulyov has been the co-manager of the JP Morgan Middle East and
JP Morgan Africa funds since 2017 and has been the portfolio
manager for JP Morgan Emerging Europe fund since 2004. Going
forward, Mrs Pandora Omaset, currently the lead portfolio manager
for the JP Morgan Africa fund, will be the co-manager for the
Company.
Management fee
The Company's management fee was reduced with effect from 1
November 2021 to 0.90 per cent. of the Company's net asset value
per annum and has been waived by the Investment Manager since
payment of the management fee to 28 February 2022. If the Proposals
are approved, the management fee will become payable going forward
but, until further notice, the Company's investments in Russian
securities (including Russian related GDRs and ADRs) will continue
to be excluded from the Company's net assets for the purposes of
this calculation.
Continuation vote and conditional tender offer mechanism
Following the passing of the continuation vote by Shareholders
earlier this year, the Company's next continuation vote is
currently scheduled to take place at the 2027 annual general
meeting. As stated in the Company's half year report and financial
statements to 30 April 2022, the Board has committed to undertake a
tender offer if the 2027 continuation vote is passed but the
Company's net asset value total return (in Sterling on a cum income
basis) is below the total return of the RTS Index in Sterling terms
over the five years from 1 November 2021.
Whilst the Board remains committed to offering Shareholders a
periodic continuation vote with a conditional tender offer, the
Board also recognises the need to ensure the performance related
element of any tender offer mechanism, including the time period
over which it is assessed, remains appropriate for the Company in
the context of the New Investment Objective and Policy and the
Company's portfolio. Accordingly, if the Proposals are approved at
the General Meeting, the Board intends to review the existing
continuation vote and conditional tender offer mechanisms and
further details of the revised arrangements will be explained to
shareholders in the Company's annual report in respect of the year
ending 31 October 2022.
Company name
If Shareholders approve the New Investment Objective and Policy,
it is also proposed that the Board pass a resolution, in accordance
with the Articles, to change the name of the Company to JPMorgan
Emerging Europe, Middle East & Africa Securities plc to be more
reflective of the new strategy.
General Meeting
Adoption of the New Investment Objective and Policy requires
Shareholder approval. A notice convening a general meeting which is
to be held at 60 Victoria Embankment, London EC4Y 0JP on 23
November 2022 at 12 noon is set out at the end of the Circular. The
Resolution will be proposed as an ordinary resolution and will, if
passed, result in the adoption of the New Investment Objective and
Policy as set out in Part 2 of the Circular, with effect from the
passing of the Resolution.
A copy of the Circular has been submitted to the Financial
Conduct Authority and will be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at www.jpmrussian.co.uk .
Notes: This announcement does not contain all the information
which is contained in the Circular and Shareholders should read the
Circular in full before making a decision.
Unless the context requires otherwise, terms defined in the
Circular have the same meaning where used in this announcement.
Enquiries:
Paul Winship
+44 (0) 20 7742
JPMorgan Funds Limited 4000
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END
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