TIDMJEMA
RNS Number : 2040D
JPMorgan Emerging EMEA Securities
19 June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN Emerging Europe, Middle East & Africa Securities
plc
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED
30TH APRIL 2023
Legal Entity Identifier: 549300II3MHI98ZLVH37
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Overview and performance
I am pleased to report that following shareholder approval on
23rd November 2022 of the Board's proposal to amend the Company's
investment objective, all the operations and control structures
necessary to trade securities under the new investment objective
have now been completed and the acquisition of new securities using
the Company's new name commenced during this six-month reporting
period to 30th April 2023.
The completion of this process allowed the Company to commence
measurement of the performance of its portfolio under its new
reference index, the S&P Emerging Europe, Middle East &
Africa BMI Net Return in GBP on 1st March 2023, recording an
increase in its net asset value of 2.5% over the two-month period
to 30th April 2023, an out-performance of 2.0% against the
reference index. Although this half year report is for the six
month period ended 30th April 2023, for which the Company achieved
an increase in its net asset value of 0.2%, the performance for the
two month period is also identified in the Financial highlights on
page 2 of the half year report and financial statements. This is
because the Company's new investment objective applied for this two
month period, enabling it to hold investments that could be traded
and generate income. The two-month period to 30th April 2023 is
also the focus of the Investment Managers' Report on pages 11 to 14
of the half year report and financial statements.
On a share price total return basis, the Company returned 1.9%
in the two month period from 1st March to 30th April 2023. As at
30th April 2023, the Company's share price was 111.1 pence, an
increase of 40.6% in the six-month period. As at 15 June 2023 the
share price was 102.5 pence.
The Company's new investments acquired in this reporting period
are high quality companies, with a tilt towards value and income
and a focus on maximising total return for shareholders. The new
investments have also changed the portfolio's geographical focus
with Saudi Arabia, South Africa and UAE representing 32.6%, 28.3%
and 13.3% of the portfolio respectively - see page 15 of the half
year report and financial statements.
The tragic events in Ukraine since Russia's military invasion
commenced on 24th February 2022, continue to cast a shadow over the
global economy. The strict economic sanctions that followed the
invasion have continued to drastically reduce the valuation of the
Company's Russian assets in this six-month reporting period to 30th
April 2023. Extensive details on the negative impact that the
events in Ukraine have had on the Company are provided in my
Chairman's Statement included in the Company's annual report
released on 25th January 2023 and in the list of question and
answers (Q&A) available on the Company's website
www.jpmeemeasecurities.com.
Revenue, earnings and dividend
The Company's revenue for the six-month period to 30th April
2023 after taxation was GBP375,000 (30th April 2022: GBP4,277,000)
and the return per share, calculated on the basis of the average
number of shares in issue was 0.93 pence (30th April 2022: 10.56
pence) per share.
These large reductions in the Company's revenue and return per
share are understandable given the prohibition on receipt of
dividends from Russian companies by foreign investors, introduced
soon after Russia's invasion of Ukraine in February 2022 which have
eliminated the Company's revenue from its Russian holdings
entirely.
In addition, the securities added to the Company's portfolio
under the new investment objective were only acquired towards the
end of this reporting period and therefore have had little time to
make a positive impact on revenue.
It is expected that the Company will generate revenue in the
year that will enable the payment of a small dividend as required
to maintain its investment trust status. Any such dividend payable
will be advised in the Company's annual report and financial
statements expected to be released towards the end of January
2024.
At present, the dividends paid from the Russian securities in
the Company's portfolio are held in a custody 'S' account in
Moscow. The balance on the 'S' account as at 24th May 2023 was
equivalent to approximately GBP11.6 million at the exchange rate
applicable on that date. Although there is no certainty that the
sums in the 'S' account will ever be received by the Company, the
Company's Manager is monitoring the receipts into the 'S' account
against dividends announced by the portfolio companies. As at 24th
May 2023, an additional GBP6.9 million has been announced but is
yet to be received. Your Board has also taken a keen interest in
this in order to be satisfied that all dividends due are in fact
recorded in the 'S' Account. As previously detailed, these
dividends cannot be remitted to the Company and may never be
received. They are not recognised in the Company's net asset value
or in its income statement.
Discount control
Due to the continuing extreme market conditions that have
created the unusual situation whereby the Company's shares are
currently trading at a very elevated premium to its net asset
value, the Board has no current plans to reinstate the Company's
share discount control programme. As at 30th April 2023, the
premium was 137.4%. The Board believes that this premium arises due
to the market's view of what the Company's net assets are valued at
and the likelihood of ultimately accessing the Russian assets and
should not be interpreted as an indication that investors are more
likely to derive any value from the Company's Russian
shareholdings.
The Board acknowledges the significant vote against the
resolution to amend the Company's investment objective at the
General Meeting on 23rd November 2022 and has sought feedback from
shareholders to understand their concerns. Shareholders concerns
and the actions undertaken to address them are detailed further in
question 5. in the Q&A available on the Company's website
www.jpmeemeasecurities.com. The Board reiterates that it has no
plans to buyback or issue shares in the Company.
Investment Management
Oleg Biryulyov and Pandora Omaset continue to be the Company's
Investment Managers supported by JPMorgan Asset Management's
Emerging Markets and Asia Pacific equities team (EMAP). JPMAM's
EMAP team consists of 100+ investment professionals based in both
the UK and overseas. On completion of the acquisition of new
securities under the Company's new investment objective on 1st
March 2023, the Manager reinstated the management fee in respect of
the Company's net assets, excluding the Russian holdings, with
effect from the same date. The acquisition of the new securities
were undertaken by the Manager using their established integrated
ESG procedures. For further details please see the Investment
Managers' Report on pages 11 to 14 of the half year report and
financial statements.
Outlook
With little prospect of Russia's invasion of Ukraine being
resolved in the foreseeable future or limiting of the existing
strict economic sanctions, the Company's new investment objective
at least helps the Company steer through this very difficult
period. Although cognisant of the Company's continuing holdings in
Russian companies, the challenge for the Board is to use the new
investment objective to grow the Company's assets in a way that
promotes the success of the Company for the benefit of the members
as a whole.
The Board is confident that, with the assistance of the JPMorgan
EMAP team over the long term and a supportive political and
regulatory environment, its new investment objective is
achievable.
Eric Sanderson
Chairman 19th June 2023
INVESTMENT MANAGERS' REPORT
Introduction
As explained in detail in the Company's last annual report and
referred to in the Chairman's Statement of this report, the
Company's Russian holdings continue to be effectively 'frozen'.
This Investment Managers' Report therefore relates to the new
investments acquired by the Company under its revised investment
objective, which was approved by shareholders in November 2022. All
the operations and control structures necessary to trade securities
under the new investment objective have now been completed, and the
acquisition of new securities using the Company's new name
commenced in February 2023, during this six-month reporting period
to 30th April 2023. The Company's new securities were acquired and
are managed using JPMAM's established investment process which
integrates Environmental, Social and Governance (ESG) factors into
our decision making, as detailed in the Company's Annual Report
available on the Company's website www.jpmeemeasecurities.com.
Performance
The measurement of the performance of the Company's new
investments against the reference index, the S&P Emerging
Europe, Middle East & Africa BMI Net Return in GBP, started on
1st March 2023. This report therefore covers two months of trading.
In the two months ended 30th April 2023, the Company returned 2.5%
on a net asset value basis, outperforming the reference index by
2.0 percentage points.
Market backdrop
For investors, gold was the best place to be during the review
period. Continued uncertainty about the outlook for inflation and
interest rates, combined with increased geo-political tensions
emanating not just from Russia, but also from China's territorial
ambitions towards Taiwan, drove increased demand for gold. South
African gold miners are a great proxy for this theme, so they did
well. Telecoms have been surprisingly strong. Contrary to
expectations, they continuing to grow subscriptions in the
post-pandemic environment. This will ensure their profitability
exceeds previous estimates. The valuations of companies providing
medical care in Saudi Arabian hospitals rose sharply over the
review period, driven by positive prospects. However, we believe
these valuations are now looking excessive.
Energy prices were another key focus for investors over the
review period. Oil prices were volatile but trended lower overall -
the average oil price for the period was $76.46, versus $71.99 at
30th May 2023. However, OPEC+ has agreed to cut production from May
2023, which will remove about 1.5 million barrels per day from
global supply. At the same time, we expect demand to accelerate in
the second half of 2023, as the coming winter is unlikely to be as
mild as the last. This suggests that oil prices, and energy company
share prices, are likely to rise in coming months.
In South Africa, the country has been plagued by persistent
blackouts, and we are concerned about the impact these are having
on the domestic economy. We will be travelling to South Africa in
the second week of June this year to meet the management teams of
several of our portfolio holdings, so we will hear first-hand how
companies are coping, and if necessary, adjust portfolio
positioning accordingly.
Political developments
The main development on the political front was Turkish
President Erdogan's success in May 2023, securing another five
years in office. We expect him to continue his efforts to use
Turkey's strategic location between Europe and the Middle East as a
lever to strengthen his influence in the region, and beyond. He is
likely to receive selective support from several major global
players, including Gulf Cooperation Council (GCC) countries,
particularly Qatar, which is especially keen to provide political
support if it results in increased inward investment into Qatar.
Russia is also an occasional ally. It is encouraging Turkey to make
outstanding payments for energy exports, and wants to ensure
ongoing support for the large, Russian-owned Akkuyu nuclear power
project in Mersin on Turkey's eastern Mediterranean coast.
Furthermore, we do not agree with sell-side analysts who are
forecasting a gradual improvement in Turkey's current account
deficit in the second half of 2023, as their analysis does not take
into account several key factors, including the possibility that
Turkey will make repayments on its Russian energy debts, and the
adverse impact of the recent decline in oil and gas prices on
Turkey's energy revenues. Sell-side analysts also assume an
increase in tourism income, but this seems optimistic to us. So, in
all, we retain our view that the Turkish equity market is not
investable for the foreseeable future.
Investment strategy
Under its new investment objective, the Company aims to maximise
the total return to shareholders from a diversified portfolio of
investments in Emerging Europe (including Russia), the Middle East
and Africa. To this end, we seek to invest in high quality
businesses with the capacity to compound earnings over the long
term. This includes companies with the potential to grow due to
their positions as national or global market leaders. However,
recently acquired investments have a value tilt, as we seek to
acquire stocks at reasonable prices. We are also very focused on
the income generation capacity of potential investments.
In the stock selection process, we draw on the in-depth
fundamental analysis of JPMorgan's Emerging Markets research team,
which includes assessments of the longevity of a business's
investment case, and the quality of its management and governance
practices.
Our investment approach is permeated by three broad themes:
Mass market consumption: Sixty percent of the population across
EMEA countries is less than 25 years old, and this percentage is
forecast to continue rising. The youthfulness of the population is
a major boon for consumption, as this demographic is tech savvy and
thus easy for digital marketers to access and younger people have a
higher propensity to spend than older generations. As incomes
across the region are relatively low by global standards, we look
for companies selling affordable products which are differentiated
from their competitors by their strong branding and customer
service. Many day-to-day household spending decisions are made by
women, so companies focused on products of potential interest to
them are another focus.
Leejam, a Saudi Arabian company specialising in women-only gyms,
is one portfolio holding driven by this theme. The company's
innovative, female-focused approach is proving very popular, with
new gyms fully subscribed as soon as they open. Other portfolio
holdings underpinned by this theme include two pharmaceutical
companies, South Africa's Click and Hungary's Richter, and Polish
retailer Dino. Click focuses on pharmacy, health and beauty items,
while Richter specialises in women's healthcare and wellbeing
products. Dino operates mid-sized supermarkets.
Commodity sensitivities: EMEA countries are rich in a variety of
commodities - not only oil and gas, but also platinum, gold and
copper. We are especially interested in companies with exposure to
the inexorable global transition to renewable energy. For example,
the Company is invested in global mining company Anglo American, a
major supplier of copper. This metal is a key input in the
production of motors, batteries and other components of equipment
used to generate and store wind and solar power. We also hold First
Quantum, a Zambian copper producer, whose investment case is
similar. Other portfolio holdings driven by the commodities theme
include Motor Oil Hellas, a Greek energy company and several
industrial companies including Saudi Agri-Nutrients, a fertiliser
producer, and Poland's Kety, which manufacturers aluminium
products.
Technology adopters: Many EMEA countries, especially in Africa,
are dogged by structural challenges which can often seem
intractable, given the economic and fiscal constraints and
political uncertainties endemic in the region, so we seek out
companies that are able to 'leapfrog' these challenges, or provide
much-needed consumer services which the market, or governments,
have otherwise failed to supply. For example, Vodafone is
empowering consumers in many of the countries in the EMEA region
with electronic payments systems and mobile access to banking and
insurance services, including in remote areas, thereby removing the
need for customers to travel long distances to access these
services in regional branch offices. Other portfolio holdings
motivated by this theme include telecoms companies such as Kenya's
Safaricom and South Africa's MTN, Capitec, a South African bank,
and two Polish companies, InPost, and STS Holdings. InPost operates
an e-commerce platform providing parcel delivery services, while
STS is an on-line sport betting company.
Portfolio positioning
Although we have a quality bias, the investment universe defined
by our reference index is presently dominated by companies rated by
JPMorgan analysts as 'trading' stocks, the lowest of their three
designations of 'premium', 'quality' and 'trading'. This is in part
because regional equity markets are still young, and in the early
stages of development, and also because JPMorgan's analytical
framework requires companies to possess a track record of at least
five years before they can be rated more highly. Another notable
feature of the EMEA investment universe is that commodity names and
financials feature heavily in regional markets, although the index
will certainly broaden out over time as economies and financial
markets develop, and we are excited about the prospect of looking
deeper into these markets as they evolve.
These constraints aside, the Company's new reference index
contains more than 600 names, providing us with a much larger and
more diverse investment universe compared to the very limited
number of stocks previously available to us in Russia, and we see
many compelling opportunities across the EMEA region.
The portfolio comprised of 87 holdings at the end of the
reporting period. Of these, 27 are Russian which together represent
less than 10% of the written down value of the portfolio. As
mentioned above, these assets are presently frozen, and their
valuations have been discounted accordingly.
The portfolio's active positions by country include Saudi
Arabia, South Africa the United Arab Emirates, Greece and Romania.
We view Greece as a classic re-rating story - currently unloved and
under-owned but possessing great potential for an upgrade, led by
the country's banks. In a global environment where the cost of
capital has risen dramatically over the past year, a special deal
with the European Central Bank (ECB) has bestowed a cost of funding
advantage on Greek banks. This has facilitated a restructuring of
their corporate loan and mortgage books, which is now almost
complete, and should lift bank valuations over time. Consistent
with our focus on income, we also like the high dividend policies
of Greek consumer companies OPAP, a lottery and sports betting
company and JUMBO, a retailer specialising in toys, gifts and
stationery.
The Company's exposure to Romania is quite stock specific.
Banking penetration within Romania is low and we believe Banca
Transilvania is best placed to do well as the market expands. It
has been performing well, being a consistent compounder of returns,
with a return on equity (RoE) of 20%. It is also a good dividend
payer, and last year it undertook an M&A deal which increased
its market share. Despite this, the stock has underperformed
recently, but we intend to hold in anticipation of some
re-rating.
We also have a small overweight to South Africa, which offers
many opportunities within the commodities sector, including oil,
gas and fertilisers.
Our largest underweight is to Kuwait. The rationale for our
significant underweight to Turkey is discussed above. In sum, the
investment climate is too uncertain, and we cannot rule out the
risk of political turmoil following the recent election, and
widespread public dissatisfaction with the government's inadequate
response to the recent, devastating earthquake.
Several issues underlie our underweight to Poland. We are
concerned about the country's proximity to the war in neighbouring
Ukraine, and we see some risk of domestic political instability
ahead of national elections expected in Q423, if not sooner. The
economy is under pressure due to high inflation, which is currently
close to 15%, and a drop in German and Russian demand for Polish
exports. There are also worries about the nation's banks, on two
different counts. Legislation introduced last year permitted
mortgage holders to suspend repayments for several months in both
2022 and 2023, to help them cope with rising interest rates. This
option has proved popular and is likely to significantly reduce
bank earnings again this year. There is also a risk that banks will
need to make greater provision for losses related to legacy Swiss
Franc loans, following a court ruling laying the ground for
borrowers to claim further reimbursement for loan instalments
inflated by unanticipated currency movements. Furthermore, we do
not like the state control of businesses such as energy company
PKN, copper producer KGHM and several banks, which we feel denies
them of the flexibility to operate efficiently.
Overall, we are more positive on the outlook for the Middle
East's GCC countries, compared to the prospects of central and
eastern European (CEE) countries, as rising energy costs are very
beneficial for the first grouping, and a significant concern for
the second.
On a sector basis, as mentioned above, EMEA markets are
presently dominated by commodity companies and financials, and this
is reflected in the portfolio's current configuration. The
portfolio's top 10 holdings mainly comprises energy producers,
miners and banks.
Significant commodity company holdings include Aramco, the
world's largest oil company, and SABIC, a Saudi agri-nutrients
company which is a downstream oil play due to its connection with
the oil industry and key role in decarbonisation. Industries Qatar
is a petrochemical, fertiliser and steel company with exposure to
the growing market for liquid natural gas (LNG), while Gold Fields,
a South African miner with operations in Africa, South America and
Australia, is a play on the gold price.
Financial names amongst the Company's top 10 holdings are Qatar
National Bank, which we like for its attractive valuation, First
Rand, South Africa's leading bank, with a RoE in excess of 20% and
dividend yield above 7%, and Al Rajhi, Saudi Arabia's largest Saudi
retail bank, which we like due to the long duration of its mortgage
business. Saudi National Bank is a retail and commercial bank whose
valuation has been irrationally reduced by a massive $35 billion in
response to a $1.4 billion loss on its holding of Credit Swiss (CS)
shares, which declined following CS's recent merger with UBS.
The remaining top 10 holdings are Naspers, a global internet
content and information company which is a play on the improving
prospects of China's Tencent, and Saudi Telecom, which provides
exposure to rising consumption in Saudi Arabia.
It is not surprising that our most significant sectoral
overweight is to energy names. As discussed above, we expect energy
prices to rise in the second half of 2023, due to the combination
of a reduction in supply, and a seasonal rise in demand, and we are
positioned accordingly.
However, despite their strong representation in our list of top
10 holdings, we are notably underweight financials. This is
motivated by our view that other sectors have better prospects.
Outlook
Sadly, there seems little chance that the conflict in Ukraine
will be resolved in the foreseeable future, so the current
restrictions on the Company's Russian holdings are likely to remain
in place. However, Russian stocks now comprise only a small part of
the portfolio, and we see several reasons to be positive about the
near-term outlook for other emerging markets in Europe, the Middle
East and Africa. In fact, we are more optimistic than consensus,
for several reasons.
Firstly, in 2022, GCC countries received US$1 trillion in
revenues from energy exports. This represents a massive injection
of capital into the region, which will manifest itself via higher
consumption spending and infrastructure investments. In addition,
as we discussed above, we expect oil and gas prices to rise in the
second half of 2023, which will provide further support for energy
companies, while earnings per share more broadly are likely to be
10-20% higher than initial estimates for 2022. Furthermore, just
like their UK, European and Asian counterparts, some emerging
market banks are benefiting from the rise in global interest rates.
This should provide a significant additional boost to the market,
as banks comprise almost 40% of the index. The portfolio's exposure
to financials will benefit accordingly.
In terms of overall GDP growth, activity in 2023 will not be as
robust as in 2022, but it will still be strong, with regional
growth running at a respectable pace just shy of 4%. The UAE,
Qatar, Saudi Arabia and Greece will be positive outliers. The
laggards will include Turkey and South Africa. In addition,
inflation will be lower across the region thanks to interest rate
tightening already in place.
Looking further ahead, we are very excited about the Company's
prospects over the medium-term. Emerging markets in the Middle East
and Africa are growing and evolving very rapidly and the
opportunities created by this evolution will escalate over time.
For example, last calendar year, 20 new companies entered the
Company's investment universe via initial public offerings
(IPOs).
The portfolio is likely to change significantly over coming
years as we seek out the most compelling opportunities that arise
in these developing markets. However, whatever individual stocks we
may acquire, our investment strategy will remain the same - we will
maintain our focus on maximising total returns for the Company's
shareholders by investing in high quality companies, at reasonable
valuations. We feel very well-supported in this endeavour by the
depth and strength of JPMorgan's Emerging Markets research team.
And we look forward to reporting further to you, our shareholders,
on the Company's progress on its new and exciting journey.
We thank you for your ongoing support.
Oleg I. Biryulyov
Pandora Omaset
Investment Managers 19th June 2023
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.
Investors should note that there are significant risks inherent in
investing in emerging market securities not typically associated
with investing in securities of companies in more developed
countries. 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
also considered the impact of the continued uncertainty on the
Company's financial position regarding the Company's holdings in
Russian securities and based on the information available to them
at the date of this Report, continue to apply a fair valuation
methodology to the 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 2023. The principal
risks and uncertainties faced by the Company fall into the
following broad categories: investing in emerging markets and
holdings Russian securities; 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 2022. A review of risks conducted for this
report concluded that the principal risks and uncertainties faced
by the Company have not changed significantly.
Related Parties Transactions
During the first six months of the current financial year, 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. For these reasons, the Board consider there is reasonable
evidence to continue to adopt the going concern basis in preparing
the financial statements.
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 2022 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 19th June 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th April 2023 30th April 2022 31st October 2022
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 on
investments
held
at fair value
through
profit or loss - (223) (223) - (359,285) (359,285) - (360,154) (360,154)
Net foreign
currency
(losses)/gains - (65) (65) - 605 605 - 1,293 1,293
Income from
investments 360 - 360 5,927 - 5,927 5,927 - 5,927
Interest
receivable
and
similar income 182 - 182 2 - 2 102 - 102
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
Gross
return/(loss) 542 (288) 254 5,929 (358,680) (352,751) 6,029 (358,861) (352,832)
Management fee (10) (15) (25) (420) (630) (1,050) (420) (630) (1,050)
Other
administrative
expenses (135) (30) (165) (346) - (346) (431) - (431)
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
Net
return/(loss)
before
finance costs
and taxation 397 (333) 64 5,163 (359,310) (354,147) 5,178 (359,491) (354,313)
Finance costs - - - - - - - - -
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
Net
return/(loss)
before
taxation 397 (333) 64 5,163 (359,310) (354,147) 5,178 (359,491) (354,313)
Taxation (22) - (22) (886) - (886) (864) - (864)
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
Net
return/(loss)
after
taxation 375 (333) 42 4,277 (359,310) (355,033) 4,314 (359,491) (355,177)
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
Return/(loss)
per share
(note 3) 0.93p (0.82)p 0.11p 10.56p (886.70)p (876.14)p 10.66p (888.10)p (877.44)p
---------------- -------- -------- -------- -------- ----------- ----------- -------- ----------- -----------
CONDENSED 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
2023 (Unaudited)
At 31st October 2022 405 196 10,086 8,201 18,888
Net (loss)/return - - (333) 375 42
------------------------------ -------- ----------- ------------ ----------- -----------
At 30th April 2023 405 196 9,753 8,576 18,930
------------------------------ -------- ----------- ------------ ----------- -----------
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
------------------------------ -------- ----------- ------------ ----------- -----------
Year ended 31st October 2022
(Audited)
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 - - (359,491) 4,314 (355,177)
Dividends paid in the year
(note 4) - - - (20,420) (20,420)
------------------------------ -------- ----------- ------------ ----------- -----------
At 31st October 2022 405 196 10,086 8,201 18,888
------------------------------ -------- ----------- ------------ ----------- -----------
(1) These reserves form the distributable reserves of the
Company and may be used to fund distributions of profits to
investors.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At At At
30th April 30th April 31st October
2023 2022 2022
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ -------------
Fixed assets
Investments held at fair value through
profit or loss 17,651 15,897 1,918
---------------------------------------- ------------ ------------ -------------
Current assets
Debtors 59 38 20
Cash and cash equivalents 1,263 3,254 17,064
---------------------------------------- ------------ ------------ -------------
1,322 3,292 17,084
Current liabilities
Creditors: amounts falling due within
one year (43) (157) (114)
---------------------------------------- ------------ ------------ -------------
Net current assets 1,279 3,135 16,970
---------------------------------------- ------------ ------------ -------------
Total assets less current liabilities 18,930 19,032 18,888
---------------------------------------- ------------ ------------ -------------
Net assets 18,930 19,032 18,888
---------------------------------------- ------------ ------------ -------------
Capital and reserves
Called up share capital 405 405 405
Capital redemption reserve 196 196 196
Capital reserves 9,753 10,267 10,086
Revenue reserve 8,576 8,164 8,201
---------------------------------------- ------------ ------------ -------------
Total shareholders' funds 18,930 19,032 18,888
---------------------------------------- ------------ ------------ -------------
Net asset value per share (note 5) 46.8p 47.1p 46.7p
---------------------------------------- ------------ ------------ -------------
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended
30th April 30th April 31st October
2023 2022 2022
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ------------ -------------
Cash flows from operating activities
Net return/(loss) before finance costs
and taxation 64 (354,148) (354,313)
Adjustment for:
Net loss on investments held at fair
value through profit or loss 223 359,285 360,154
Net foreign currency losses/(gains) 65 (605) (1,293)
Dividend income (360) (5,927) (5,927)
Interest income (182) - (101)
Realised (loss)/gain on foreign exchange
transactions (72) 223 924
Realised exchange gain on Liquidity - 245 524
Decrease/(increase) in accrued income
and other debtors 2 (22) (5)
Decrease in accrued expenses (44) (59) (107)
---------------------------------------------- ------------ ------------ -------------
(304) (1,008) (144)
Dividends received 332 5,740 5,740
Interest received 179 2 103
Overseas withholding tax (paid)/recovered (32) - 22
---------------------------------------------- ------------ ------------ -------------
Net cash inflow from operating activities 175 4,734 5,721
---------------------------------------------- ------------ ------------ -------------
Purchases of investments (16,675) (17,449) (17,449)
Sales of investments 692 28,039 41,154
Settlement of foreign currency contracts - (164) -
---------------------------------------------- ------------ ------------ -------------
Net cash (outflow)/inflow from investing
activities (15,983) 10,426 23,705
---------------------------------------------- ------------ ------------ -------------
Dividends paid - (20,420) (20,420)
Repurchase and cancellation of the Company's
own shares - (2,678) (2,678)
---------------------------------------------- ------------ ------------ -------------
Net cash inflow/(outflow) from financing
activities - (23,098) (23,098)
---------------------------------------------- ------------ ------------ -------------
(Decrease)/increase in cash and cash
equivalents (15,808) (7,938) 6,328
---------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at start of
year 17,064 10,951 10,951
Unrealised gain/(loss) on foreign currency
cash and
cash equivalents 7 241 (215)
---------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents at end of
year 1,263 3,254 17,064
---------------------------------------------- ------------ ------------ -------------
Cash and cash equivalents consist of:
Cash and short term deposits 263 1,583 83
Cash held in JPMorgan US Dollar Liquidity
fund 1,000 1,671 16,981
---------------------------------------------- ------------ ------------ -------------
Total 1,263 3,254 17,064
---------------------------------------------- ------------ ------------ -------------
Reconciliation of net debt
As at Other As at
31st October Cash flows non-cash 30th April
2022 charges 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------- ----------- --------- -----------
Cash and cash equivalents
Cash 83 173 7 263
Cash equivalents 16,981 (15,981) - 1,000
--------------------------- ------------- ----------- --------- -----------
Total 17,064 (15,808) 7 1,263
--------------------------- ------------- ----------- --------- -----------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 30th April 2023
1. Financial statements
The information contained within the condensed 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 2022 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 July 2022.
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 2023.
All of the Company's operations are of a continuing nature.
As reported in the 2022 Annual Report & Financial
Statements, the Directors consider that in the absence of
observable market data on its Russian investments resulting from
the closure of the Moscow Exchange (MOEX) to overseas investors,
there has been a material change to the market value of its Russian
investments and therefore a fair value valuation methodology has
been applied to those investments held as at 30th April 2023 and
31st October 2022 in accordance with the established fair valuation
policies and procedures of the Manager, JPMorgan Funds Limited. A
valuation method has been applied to the 25th February 2022 close
of day prices (i.e. when the market was still trading normally)
which have then been tapered at 99% provision for valuation
purposes. The quantum of the provision applied of 99% is a
subjective view designed to acknowledge that there is some
intrinsic value in the portfolio, albeit, it is currently
untradeable.
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 2022.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ -------------
Return/(loss) per share is based
on the following:
Revenue return 375 4,277 4,314
Capital loss (333) (359,310) (359,491)
----------------------------------- ------------ ------------ -------------
Total return/(loss) 42 (355,033) (355,177)
----------------------------------- ------------ ------------ -------------
Weighted average number of shares
in issue 40,436,176 40,522,060 40,478,765
Revenue return per share 0.93p 10.56p 10.66p
Capital loss per share (0.82)p (886.70)p (888.10)p
----------------------------------- ------------ ------------ -------------
Total return/(loss) per share 0.11p (876.14)p (877.44)p
----------------------------------- ------------ ------------ -------------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- ------------ -------------
2021 Interim dividend of 25p - 10,311 10,311
2022 Final dividend of nil (2021:
10.0p) - 4,044 4,044
2023 interim dividend of nil (2022:
15.0p) - 6,065 6,065
----------------------------------------- ------------- ------------ -------------
Total dividends paid in the period/year - 20,420 20,420
----------------------------------------- ------------- ------------ -------------
All dividends paid in the period/year have been funded from the
revenue reserve.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
30th April 30th April 31st October
2023 2022 2022
GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------ -------------
Net assets (GBP'000) 18,930 19,032 18,888
Number of shares in issue 40,436,176 40,436,176 40,436,176
--------------------------- ------------ ------------ -------------
Net asset value per share 46.8p 47.1p 46.7p
--------------------------- ------------ ------------ -------------
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
19(th) June 2023
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.jpmeemeasecurities.com 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 BSGDLUSBDGXC
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June 19, 2023 10:47 ET (14:47 GMT)
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