JPMorgan Emerg. EMEA - Final Results
24/01/2024 07:00
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RNS Number : 6822A JPMorgan Emerging EMEA Securities 24 January 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EMERGING EUROPE, MIDDLE EAST & AFRICA SECURITIES PLC
ANNOUNCEMENT OF FINAL RESULTS
The Directors of JPMorgan Emerging Europe, Middle East & Africa Securities
plc
Announce the Company's Results for the Year Ended 31(st) October 2023
Legal Entity Identifier:
549300II3MHI98ZLVH37
Information disclosed in accordance with DTR 4.1.
CHAIRMAN'S STATEMENT
Overview and performance
In November, 2022 the Company received shareholder approval of the Company's
new investment objective. The operations, control structures and trading of
securities under the new investment objective and using the Company's new name
were completed and commenced in the first half of this reporting period. The
Company no longer has a benchmark index against which it is measured but the
completion of this process allowed the Company to commence measurement of the
performance of its portfolio against its new reference index, the S&P
Emerging Europe, Middle East & Africa BMI Net Return in GBP on 1st March
2023.
I am pleased to report that in the eight months from 1st March 2023 (from
which date the new reference index applied) to 31st October 2023 the Company's
net asset value increased by 2.2%, an out-performance of 1.9% against the
reference index. Although this annual report is for the 12 month period ended
31st October 2023, which resulted in no change in the Company's net asset
value (0.0%), the performance for the eight month period is also identified in
the Financial highlights on page 6 of the Company's annual report and
financial statements. This is because the Company's new investment objective
applied for this eight month period, enabling it to hold investments that
could be traded and generate income. The eight month period to 31st October
2023 is also the focus of the Investment Managers' Report on pages 12 to 17 of
this report.
On a share price total return basis, the Company returned 10.0% in the eight
month period from 1st March to 31st October 2023. As at 31st October 2023,
the Company's share price was 119.9 pence, an increase of 51.8% in the 12
month period. As at 19th January 2024 the share price was 130.0 pence.
The Company's Portfolio
The Company's new investments acquired in this reporting period are considered
to be in 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 31.7%, 23.8% and 14.2% of the portfolio
respectively - see page 26 of the Company's annual 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 valuation of the stocks that we hold in Russia were reduced to nominal
values last year. The strict economic sanctions that followed the invasion
have continued to reduce the valuation of the Company's Russian assets in this
12 month reporting period to 31st October 2023. Additionally, the rouble has
materially reduced in value against sterling and other currencies.
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 2022 annual report and in the list of questions and answers
(Q&A) available on the Company's website www.jpmeemeasecurities.com.
The Board has sought to keep shareholders informed of material developments
arising in relation to the Company's holdings in its Russian stocks during
this continuing difficult period. In August and October 2023, the Board
released RNS announcements referring to the tender offers received from Detsky
Mir and Magnit, two companies in the Company's portfolio, and to the Company's
participation in the Detsky Mir tender offer. The Board reiterates that where
it is permissible and beneficial for shareholders under the current sanctions
regime the Company's Investment Manager will seek to participate in such
corporate actions. On that basis the Company participated in the Detsky Mir
tender offer which was being undertaken in Detsky Mir's restructuring from
being a public listed company to a private company. The Company's application
was successful and it received proceeds of RUB 286.2 million, (approx.
£2.35 million based on exchange rates at that time). The proceeds are held
in a custody 'S' account in Moscow and are not recognised in the Company's net
asset value (for further details regarding the 'S' account see below).
The Board is also aware that some western institutions have been able to sell
Russian stockholdings at a substantial discount to local exchange values where
they are held through depository receipts in exchange for western currencies.
Most of our holdings are held directly on the local exchange and some
depository receipts. Where permissible and beneficial for shareholders under
the current sanctions regime the Company's Investment Manager may consider
such actions.
Revenue, earnings and dividend
The Company's net revenue for the 12 month period to 31st October 2023 after
taxation was £306,000 (31st October 2022: £4,314,000) and the return per
share, calculated on the basis of the average number of shares in issue, was
0.76 pence (31st October 2022: 10.66 pence) per share.
These large reductions in the Company's net 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 in its accounts entirely. In addition, the securities added
to the Company's portfolio under the new investment objective were only
acquired towards the end of the first half of this reporting period and
therefore have had less time to make a positive impact on revenue.
At present, the dividends paid from the Russian securities in the Company's
portfolio and the £2.35 million proceeds from the Detsky Mir tender are held
in a custody 'S' account in Moscow. The balance on the 'S' account as at 31st
October 2023 was equivalent to approximately £19.3 million at the exchange
rate applicable on that date. The Company's Manager is monitoring the receipts
into the 'S' account against dividends announced by the portfolio companies,
although there is no certainty that the sums in the 'S' account will ever be
received by the Company.
As at 31st October 2023, an additional £5.1 million of dividend income has
been announced but is yet to be received. Your Board maintains a keen interest
in this in order to be satisfied that all dividends due are in fact recorded
in the 'S' account. The addition of this sum to dividends already in an
'S' account brings the total dividends received or announced in relation to
our Russian holdings to £24.4 million. 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.
Nonetheless I am pleased to announce that the Company will recommend the
payment of a dividend of 0.5p per share. This will be funded from net revenue
received during the year. Subject to shareholder approval the dividend will be
paid on 15th March 2024 to shareholders on the Company's register on 2nd
February 2024 the ex dividend date being 1st February 2024. Going forward, the
Board's expectation is that an annual dividend will be paid if net revenue
allows.
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 31st October
2023, the premium was 156.7%. 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 the Q&A
available on the Company's website www.jpmeemeasecurities.com. The Board
reiterates that it has no current plans to buy back or issue shares in the
Company.
Environmental, Social and Governance
Environmental, Social and Governance ('ESG') considerations are integrated
into the Investment Managers' investment process as set out in the ESG Report
on page 18 of the Company's annual report and financial statements. The Board
shares the Investment Managers' view of the importance of ESG factors when
making investments for the long term and of the necessity of continued
engagement with investee companies throughout the duration of the investment
where it is feasible.
Task Force on Climate-related Financial Disclosures
On 30th June 2023, JPMAM published its first UK Task Force on Climate-related
Financial Disclosures Report ('TCFD') for the Company in respect of the year
ended 31st December 2022. This was required in order to meet its regulatory
requirements as the Company's Manager. The report discloses estimates of the
portfolio's climate-related risks and opportunities according to the Financial
Conduct Authority Environmental, Social and Governance Sourcebook and the Task
Force on Climate-related Financial Disclosures Recommendations. The report is
available under ESG Documents section on the Company's website:
www.jpmeemeasecurities.com This is the first report under the new guidelines
and disclosure requirements. The Board is aware that best practice reporting
under the TCFD regime is still evolving both with regard to metrics and input
data quality, as well as the interpretation and implications of the outputs
produced, and will continue to monitor developments as they occur.
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.
The Board receives regular reports on the service levels of the Manager and
its key service providers and formally evaluated their services in September
2023. Following that review the Board concluded that it was satisfied with the
current levels of service.
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 page 12 of
the Company's annual report and financial statements.
Board Composition
Your Board has been considering whether or not it would be appropriate to
recruit an additional board member at present. The board has sought to balance
the requirements to be effective and have resources to achieve long term
sustainable success together with the need to manage ongoing costs. Given that
the Company has now established a source of dividend income from its new
portfolio, it has decided to commence the search for a fourth director. A
third party independent search consultant has been engaged to identify
appropriate candidates for this role with the aim of making the appointment in
2024.
Annual general meeting
The Company's Annual General Meeting (AGM) will be held on Monday 4th March
2024 at 2.30 p.m. at 60 Victoria Embankment, London EC4Y 0JP. We are pleased
to invite shareholders to join us in person for the Company's AGM, hear from
the Investment Managers and ask questions. Shareholders wishing to follow the
AGM proceedings but choosing not to attend in person will be able to view
proceedings live and ask questions (but not vote) through conferencing
software. Details on how to register, together with access details, will be
available shortly on the Company's website at www.jpmeemeasecurities.com or by
contacting the Company Secretary at invtrusts.cosec@jpmorgan.com
My fellow Board members, representatives of JPMorgan and I look forward to the
opportunity to meet and speak with shareholders after the formalities of the
meeting have been concluded. Shareholders who are unable to attend the AGM are
strongly encouraged to submit their proxy votes in advance of the meeting, so
that they are registered and recorded at the AGM. Proxy votes can be lodged in
advance of the AGM either by post or electronically: detailed instructions are
included in the Notes to the Notice of Annual General Meeting on pages 89 to
92.
If there are any changes to these arrangements for the AGM, the Company will
update shareholders via the Company's website.
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
23rd January 2024
INVESTMENT MANAGERS' REPORT
Introduction
As discussed in the Chairman's Statement of this report, and in previous
reporting, 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 is to
maximise total return to shareholders from a diversified portfolio of
investments in Emerging Europe (including Russia), Middle East and Africa
(EMEA). This new investment objective was approved by shareholders in November
2022 and we finished restructuring the Company in February 2023. This Report
thus covers eight months of investment commencing on 1st March 2023, and
ending on 31st October 2023.
Performance
During the period from 1st March 2023 to 31st October 2023, the Company's new
investments rose 2.2% on a net asset value (NAV) basis, an out-performance of
1.9% against the reference index, the S&P Emerging Europe, Middle East
& Africa BMI Net Return in GBP, which rose by a lacklustre 0.3%.
Portfolio
At the end of the financial year, the Company's portfolio comprised 89 stocks,
compared to 87 holdings at the end of the financial half year. Of these, 26
are Russian securities, one less than at the financial half year end due to
the change in status of Detsky Mir into a private company and the tender offer
that followed in which the Company participated. The Company's Russian
securities comprise approximately 8% of the written down value of the
portfolio. As mentioned above, the Companies Russian securities are presently
'frozen', and their valuations have been discounted accordingly. The Company's
holding in the JPM Liquidity fund is not included in the above numbers.
Market backdrop
During the review period, EMEA markets were, as usual, driven in part by
developments beyond the Company's investable universe. Disappointment in the
performance of the Chinese economy since its reopening in late 2022 weighed on
investor sentiment not only in Asia, but also in other emerging markets, and
across the developed world, as Chinese export demand has been weaker than
expected. Investors are also concerned about ongoing issues in the Chinese
property sector. The rapid increase in global interest rates over the past two
years has been slow to register on economic activity, but the spectre of
recession in the US and other western economies cast a pall over these markets
for much of the past year. However, higher rates have been supportive for most
financial names in these markets, boosting margins and dividends.
Within EMEA markets, the oil price remained the key determinant of market
direction, and it has been volatile over the past year. News in May 2023 that
the OPEC+ group of oil producers had agreed to cut production, removing about
1.5 million bbl per day from supply, supported the oil price during the
3rd quarter of 2023 ('3Q23'), but concerns about economic growth and
stability of demand set downward pressure. This 'tug of war' tends to occur on
the derivative market when 'real oil' markets are far more stable and mostly
focused on volumes rather than price volatility. Thus, we saw the price end
the period close to where it began. The reduction in oil production and oil
price volatility ensured most major Middle Eastern oil producers struggled to
make gains over the period. The notable exception was ARAMCO, the world's
largest oil producer, and one of our largest positions, which benefitted from
better than expected income reported for 3Q23 and consequent announcement of
additional dividend pay out above the previously declared range.
Political developments were another significant driver for EMEA regional
markets. In Poland, market euphoria in response to the victory for progressive
opposition parties in national elections seems to us to be overdone, as we do
not expect the change of government to result in any major changes to the
country's economic outlook. In Turkey, the confirmation of President Erdogan
for another five-year term came as no surprise, but investors, especially
those from abroad, welcomed the appointment of market-friendly heads to both
the central bank and the Ministry of Economy. The President has given them
clear mandates to fight inflation and rationalise economic policy, but this
will be a long and difficult task. As we outlined in the Company's Half Year
Report, Turkey faces several significant macroeconomic challenges, and we are
sceptical that the market's recent gains can be sustained. However, recent
events at least hold out hope for some improvement in the Turkish economy, and
we may be tempted to invest in this market if these early positive signs are
followed by concrete evidence that the investment environment has stabilised.
Elsewhere, the sudden, violent developments in Israel and Gaza shocked the
world, but are unlikely, in our view, to escalate into broader conflict across
the Middle East. However, their longer-term implications for the regional and
global political situation, while still unclear, are likely to be profound.
Events in Poland and Turkey saw these markets outperform relative to other
countries in the reference index over the review period on the market
assessment that their country risk premia had diminished. Greece also did
well, thanks to upward revisions to the earnings outlook., Greece is going
through the process of upward adjustment of the investment grade of its debt.
This upward revision led to a reduction in the costs of equity and increase
market acceptance of investment multiples. Cuts to oil production saw Saudi
Arabia and UAE underperform. South Africa also lagged due to long running
concerns about stability of electricity supply and negative earnings momentum
related to lower consumption rates of the population and profit margin
squeezes for business.
Another notable feature of the past year was the poor relative performance of
large stocks such as those within the financial and petrochemical industries,
while mid-caps such as Al Arabia (largest outdoor advertising Company in
Kingdom of Saudi Arabia) and Saudi companies ELM, an IT services company and
Riyadh Cables, a supplier of power transmission and communication cables,
outperformed. Newly listed names such as oil and gas companies ADES, Abu Dhabi
National Oil Company (ADNOC) Drilling and ADNOC Logistics & Services
(L&S), also outperformed. Disappointingly, large caps in the Middle East
region, mostly consisting of banks, had a mediocre year. Investors were
concerned that liquidity would not support market growth and faster repricing
of deposits rather than loans will create challenges for earnings momentum. In
addition, the Petrochemical sector is suffering global competition from Asia,
mostly Chinese players. When new names were listed with realistic prices and
clear dividend policies, this created anchor valuations and helped the new
issues experience strong gains in early trading.
Investment strategy
We aim to meet the Company's investment objective of maximising total return
from investments in EMEA markets by identifying high quality businesses with
high expected returns and the capacity to compound earnings, and generate
sustainable dividends, over the long term. This includes companies with the
potential to grow due to their positions as national or global market leaders.
However, we aim to buy stocks at reasonable prices, so recent acquisitions
have a value tilt. We adopt a bottom-up stock selection process, drawing on
the in-depth fundamental analysis of JPMorgan's Emerging Markets and Asia
Pacific (EMAP) equity 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:
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 global transition to renewable
energy. For example, the Company is invested in global mining gold company
AngloGold Ashanti. Other portfolio holdings driven by the commodities theme
include Motor Oil Hellas, a Greek energy company, MOL (Hungarian refinery),
ARAMCO (The 'Oil company of the world') and several industrial companies
including Saudi Basic Industries Corporation, a fertiliser producer, and
Sahara Petrochemical Company.
Mass market consumption: Sixty percent of the population of 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 EMEA regions 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 Sports, 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 Clicks and Hungary's Richter. Clicks
focuses on pharmacy, health and beauty items, while Richter specialises in
women's healthcare and wellbeing 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 EMEA
countries 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. 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.
How have specific sectors and stocks fared over the review period?
Telecommunications companies, including our positions in Arabian Contracting
Services, Emirates Telecoms and MTN Group were surprisingly strong, thanks to
continued growth in subscriptions, which lays the basis for improved
profitability. This sector was the most significant contributor to returns
over the period.
Consumer discretionary names also enhanced returns, due in part to our
positions in some mid-cap consumer names, including Al Arabia and ELM. The
share prices of both these companies more than doubled over the period. Our
holdings in Greek companies, JUMBO, a retailer specialising in toys, gifts and
stationery, and OPAP, a lottery and sports betting company, also did well, as
did our position in Leejam Sports. However, our holdings in other consumer
companies such as Almarai, a Saudi supplier of packaged goods and African
retailers Pepkor and Mr Price detracted. Our position in KRUK, a Polish credit
services provider, made good contribution to our performance. It was a
reflection of better profitability on operational leverage as well as
geographical diversification of earnings.
Our energy sector holdings contributed to performance, due in part to our
exposure to oil service names. During the year, we took the opportunities
presented by the IPOs of ADES, ADNOC Drilling and ADNOC L&S, mentioned
above, to acquire exposure, and all performed strongly post-listing. Our
position in ARAMCO also added to returns thanks to the company's
outperformance over the period, as discussed above. Elsewhere the valuation of
companies providing medical care in Saudi hospitals continued to climb, and
our exposure to Mouwasat Medical Services Company benefitted accordingly.
However, these names are looking increasingly expensive, and we took the
opportunity to take some profits on Dr Sulaiman Habib Medical Services Group.
The main detractor from performance at the sector level was utilities, due to
the strong performance of ACWA Power, a Saudi provider of electricity and
water desalination, which was climbing to new highs in terms of investment
multiples. The performance of financials was lacklustre, dragged down by
Middle East and Polish banks. Large names underperforming, as discussed above,
while small, mid-cap and peripheral banks did relatively well, thanks to
Alinma Bank (Saudi Arabia) , Riyadh Bank (Saudi Arabia) as well as Halyk Bank
(Kazakhstan) with Banca Transilvania (Romania). Our holdings in mid-cap Greek
bank Piraeus and in Poland's insurer PZU, contributed to returns accordingly,
as did our positions in Kazakhstan's KASPI and Georgian bank TBC. We were a
bit slow in reducing our exposure to petrochemical holdings, particularly
Sabic, the Saudi agrochemicals company, and that ultimately prevented us from
adding to relative gains. Unusually high levels of global instability
increased demand for gold as a safe haven. Our holdings in South African gold
miners such as Gold Fields AngloGold Ashanti were a great proxy for this
theme, although near term performance fluctuates in response to gold price
volatility and their contribution to returns over the period was limited.
At the country level, our overweight to Greece and Kazakhstan enhanced
returns, while our decision to avoid Turkey, and underweight Poland, detracted
from returns due the strong relative performance of these markets, as
discussed above.
Performance attribution
From 1st March 2023 to 31st October 2023
% %
Contributions to Total Returns From 1st March 2023
Reference Index 0.3(1)
Asset allocation 0.6
Stock selection 3.4
Gearing/(net cash) 0.1
Investment Manager contribution 4.1
Portfolio return 4.4
Management fee/other expenses(2) -2.2
Return on net assets(APM) 2.2
Effect of movement in discount over the year 7.8
Return to shareholders(APM) 10.0
Source: FactSet, JPMAM and Morningstar. All figures are on a Cum Income total
return basis.
Performance attribution analyses how the Company achieved its recorded
performance relative to its reference index.
Reference Index used. S&P Emerging Europe, Middle East & Africa BMI
Net Return in GBP
(1) Since S&P Emerging Europe, Middle East & Africa BMI Net
Return in GBP was adopted as a reference index on (1st March 2023).
(2) The Ongoing Charge of 3.19% that will be published in Annual
Accounts as at 31st October has been used in these calculations.
(APM) Alternative Performance Measure ('APM').
Portfolio positioning
Although our investment strategy has 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, although the index will 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. However, despite
the current market concentration around these sectors, the Company's reference
index already contains more than 600 names - 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 regions.
During the review period, in addition to our participation in several IPOs, as
discussed above, we also added to our overweight in The United Arab Emirates
(UAE), via the acquisition of ADNOC group names on IPOs. We opened positions
in Humansoft, a Kuwaiti education company, Oredo, a Qatari telecom company,
and Arabian Centres, a Saudi real estate company, on the back of company
meetings and reviews of these businesses. We reinstated a position in OTE, a
Greek telecom, on the view that the price correction in 1Q23 was good enough
to re-enter the name but this stock has since declined due to ongoing
competition and a 'price war'. However, the holding is small, so its impact on
performance has been limited, and we have retained the position due to our
confidence in the company's longer-term prospects.
We opened a position in Sahara International, a Saudi petrochemical producer,
funded by a switch out of its competitors Borouge and Saudi Agri-Nuitriens
Company. Following a meeting with Sahara, and a review of the sector, we
concluded that Sahara is a better play on the sector than our previous
holdings. A research trip to South Africa in June resulted in several
adjustments to the portfolio, across consumer names and banks. For example, we
exited TFG, Mr Price and Truworths. We also closed a position in Polish sports
betting company STS Holding, in response to a buy-out offer.
At the country level, we are most positive about Greece (GR). As we discussed
in the Half Year report, we view Greece as a classic rerating story - unloved
and under-owned but possessing great potential, led by the country's banks,
thanks to an advantageous funding arrangement provided by the European Central
Bank. This arrangement has facilitated a restructuring of their corporate loan
and mortgage books, which is now almost complete, and should lift bank
valuations over time. We also believe the market does yet fully appreciate the
progress Greece has made since the global financial crisis and we see scope
for further upgrades and multiple expansion over time. Consistent with our
focus on income, we also like the high dividend policies of Greek consumer
companies JUMBO and OPAP, mentioned above.
We have maintained our negative view on Turkey (TR), and our caution on
Poland, as discussed above, and the recent outperformance of these markets has
meant that our underweights to these countries have increased proportionally.
Our underweights to Kuwait (KU) and Qatar (QA) reflect our preference for
Saudi Arabia and the UAE, whose markets are more liquid and transparent.
The Company's top 10 holdings can be seen on page 25 of the Company's annual
report and financial statements.
Al Rajhi Bank is the largest Saudi bank, with a focus on retail business. We
like the company's mortgage business for its long duration, although we have
recently reduced exposure marginally, due to a decline in the share price.
ARAMCO - Saudi Arabia's oil giant. It has the lowest costs of production and
will be the last man standing in the industry regardless of oil price. It has
an upward scaled dividend policy with increasing distribution of profit if oil
price gains rise above their expectations.
Naspers - a South African internet content and information company. We view
this holding as a play on China's Tencent, which we believe is currently
undervalued and likely to recover over time.
Saudi National Bank - the second largest bank in Saudi Arabia, with a focus on
corporate lending. Attractive valuations and steady return on equity ('ROE')
make them a national leader.
First Rand - the largest bank in South Africa, which we favour due to its very
strong (+20%) return on ROE and its +7% dividend yield.
Qatar National Bank - a leading Qatari bank with an attractive valuation.
Saudi Telecom - provides exposure to trend growth in consumption spending in
the Kingdom.
Standard Bank - a South African bank which we like due to its well-diversified
exposure to retail and corporate banking activities.
Gold Fields - a South African gold mining company which is the portfolio's key
play on the gold price.
Alinma Bank - a second tier private Saudi Arabian bank, which we favour due to
its exposure to SMEs and retail clients.
Outlook
We expect inflation in the US and other developed markets to remain elevated
for some time, and it is unclear when rates will begin to decline in these
countries, but contrary to the consensus view, we do not expect the US to slip
into recession. This should be a key positive for global investor sentiment in
2024, although investors are likely to remain somewhat cautious ahead of the
US Presidential election. Within EMEA regions, we expect inflation pressures
to ease in response to interest rate tightening already in place. However,
higher rates suggest that in aggregate, growth in EMEA will slow in 2024,
although economic prospects vary between countries. We expect the Greek
economy to grow by around 2-3% over 2024, while the Hungarian economy looks
set to accelerate now the government has tamed inflation. Elsewhere in central
Europe, Turkey and Africa, the recovery seen in 2023 may lose momentum in
2024. It is particularly difficult to be positive about Poland's prospects, as
tight fiscal policy will constrain activity, and consumer spending is unlikely
to pick up the slack. We see a risk of negative surprises in this market after
the relative strong performance during 2023.
In the Middle East, oil will, as ever, be the key driver of economic
performance and markets. We expect oil and gas prices to firm in 2024,
supported by OPEC+'s decision to cut daily output by a further 1.5 million
bbl from 1st January 2024. This will reduce daily oil production by a total of
3 million bbl compared to this time last year - an unprecedented cut which
will support energy companies. However, these cuts will result in slower
growth in the Gulf's major oil-producing nations.
South Africa and Turkey will see key elections in Q1 2024. In South Africa,
our baseline assumption is that the election will maintain the status quo,
with the ANC retaining its grip on power. The market is also likely to price
in this outcome, although some reduction in South Africa's country risk
premium is very likely after the election. Beyond the elections, we expect GDP
growth of 1.0-1.5%, although any reforms within the troubled power generation
sector, which has been plagued with constant blackouts and political scandal,
or in transportation, may add 0.5-1.5 percentage points to annual growth. In
Turkey, municipal elections are most important as a measure of President
Erdogan's political popularity, which remains relatively low in metropolitan
areas. Once these elections are over, we are likely to see an acceleration of
monetary tightening to address inflation pressures, and some currency
devaluation. So, in contrast to the situation in South Africa, we expect to
see an increase in Turkey's country risk premium in Q224. We will therefore
continue to steer clear of this market in the near-term, as we await evidence
of a clear improvement in the investment environment, as discussed above.
On the earnings front, we are more positive than consensus for 2023. We expect
EPS to be 10-20% higher than in 2022, followed by a further 5-10% rise in
2024. Banks will lead the way, as revenues continue to rise faster than costs,
thanks to elevated net interest margins. The portfolio's exposure to
financials will benefit accordingly. And with banks comprising almost 40% of
the index, this should prove supportive for the entire market.
Regardless of events over the coming year, we remain positive about the
longer-term outlook for emerging markets in Europe, the Middle East and
Africa, and we believe that these regions offer investors compelling
opportunities for both growth and income, at attractive valuations.
Furthermore, these markets will continue to grow and evolve very rapidly,
generating new opportunities as more and diverse companies enter the
investment universe.
This is very promising backdrop for our ongoing search for high quality,
attractively priced investments across the region. Our confidence in the
success of our quest is enhanced by the fact that it is well-supported by the
depth and strength of JPMorgan Asset Management's research resources, which we
believe provide us with a distinct competitive advantage, as research coverage
of much of the region is still very low. The portfolio will continue to evolve
over coming years as our target markets develop and deepen, and we look
forward to reporting on the Company's further progress on its new and exciting
journey.
We thank you for your ongoing support.
Oleg I. Biryulyov
Pandora Omaset
Investment
Managers
23rd January 2024
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they have carried out a robust assessment of the
principal and emerging risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity. With
the assistance of JPMF, the Audit Committee has drawn up a risk matrix, which
identifies the key risks to the Company. These are reviewed and noted by the
Board. The risks identified and the broad categories in which they fall, and
the ways in which they are managed or mitigated are summarised below. The AIC
Code of Corporate Governance requires the Audit Committee to put in place
procedures to identify emerging risks. The key emerging risks identified are
also summarised below.
Principal Movement from
risk Description Mitigating activities prior year
Investment Management and Performance
Investing in Emerging Markets Investors should note that there are significant risks inherent in investing Following Russia's invasion of Ukraine on 24th February 2022, the prohibition è
in emerging market securities not typically associated with investing in of trading of Russian securities, prohibition on the receipt of dividends and
securities of companies in more developed countries. In terms of gauging the reduction in the value of the Company by circa 95% led the Board to propose a
economic and political risk of investing in emerging markets, it frequently shareholder resolution to widen the Company's investment objective and permit
appears in the higher risk categories when compared with most Western investments in Emerging Europe, Africa & Middle East. Shareholders
countries. The value of emerging market securities, and therefore the net approved the widening of the Company's investment objective on 23rd November
asset value of the Company, may be affected by uncertainties such as economic, 2022 and the Company acquired shares under its new investment objective in the
political or diplomatic developments, social and religious instability, first quarter of 2023. The Board also temporarily suspended its dividend
taxation and interest rates, currency repatriation restrictions, crime and payment policy and the Company's financial statements no longer reflect
corruption and developments in the law or regulations in emerging markets and, dividends receivable from the Company's Russian stocks. The Board's activities
in particular, the risks of expropriation, nationalisation and confiscation of also included reviewing the value of the Company's portfolio, discount/premium
assets and changes in legislation relating to the level of foreign ownership. to share price, sanctions, counter-parties status, inability to trade stocks
Such factors may lead to a reduction in the size of the Company's net assets and review of investment strategy.
and it becoming unviable. Russia's invasion of Ukraine on 24th February 2022
led to the realisation of some of the above risks and Russia becoming
a pariah state for western investors. The conflict between Israel and
Palestine from October 2023 has increased the possibility of further
instability in the region.
Share Price Discount to Net Asset Value ('NAV') per Share If the share price of an investment trust is lower than the NAV per share, the The prohibition of trading of securities in Russian companies held in the è
shares are said to be trading at a discount. The widening of the discount can Company's portfolio which was introduced following Russia's invasion of
be seen as a disadvantage of investment trusts which could discourage Ukraine on 24th February 2022 led the Board to suspend its share buy back
investors. Although it is common for an investment trust's shares to trade at policy. In addition the Board has withdrawn its commitment to provide
a discount, particular events can negatively impact market sentiment. Due to a tender offer based on performance of the Company against the RTS benchmark
the substantial reduction in the book value of the Company's assets following in the five year period to 31st October 2026.
Russia's invasion of Ukraine the Company's shares have traded at a premium.
In normal market conditions the Board monitors the Company's discount level
and seeks, where deemed prudent, to address imbalances in the supply and
demand of the Company's shares through a programme of share buybacks. For
details of the Company's Continuation Vote, including recent updates, see Key
Features at the front of this document.
Investment Under-performance An inappropriate investment strategy, for example asset allocation may lead to Following Russia's invasion of Ukraine on 24th February 2022, the prohibition è
underperformance against the Company's reference index and peer companies. of the trading of Russian securities led to the closure of the Russian market
and Strategy to the Company and its peers together with the cessation of reporting of
benchmark data by western news companies. The Board managed these
unprecedented events by keeping regularly updated regarding compliance with
sanctions and ensuring sufficient liquidity in order to maintain a going
concern basis. The Board also waived the Company's current investment
guidelines to help address the unprecedented market conditions.
In normal market conditions, the Board manages these risks by diversification
of investments through its investment restrictions and guidelines, which are
monitored and reported on by the Manager. The Manager provides the Directors
with timely and accurate management information, including performance data
and attribution analyses, 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.
Following adoption of the new mandate the board re-commenced this process for
its new investments.
The Company amended its investment objective in the period to widen its
investment to include Emerging Europe, Middle East and Africa. Possible
actions that the Board may consider to address underperformance include
changing the portfolio manager or selecting another manager.
Failure of Investment Process A failure of process could lead to losses. The Manager mitigates this risk through internal controls and monitoring. è
Fraud requires immediate notification to the Board and regular reports are
provided on control processes.
Loss of Investment Team or Investment Manager The sudden departure of the investment manager or several members of the wider The Manager takes steps to reduce the likelihood of such an event by ensuring è
investment management team could result in a short term deterioration in appropriate succession planning and the adoption of a team based approach, as
investment performance. well as special efforts to retain key personnel. The Board engages privately
with the investment managers on a regular basis.
Market and Financial The Company's assets consist of listed securities and it is therefore exposed In normal market conditions the Board considers asset allocation and stock è
to movements in the prices of individual securities and the market generally. selection on a regular basis and has set investment restrictions and
The financial risks faced by the Company include market price risk, interest guidelines, which are monitored and reported on by the Manager. During the
rate risk, foreign currency risk, liquidity risk and credit risk. current period of prohibition on the trading of Russian securities, a fair
value valuation method involving a 99% provision against the Company's Russian
investments is applied.
Further details are disclosed in note 20 on pages 81 to 86. The Manager
regularly monitors the liquidity of the portfolio including determining the
market valuation of securities held, the average daily volume and number of
days to liquidate a holding.
Operational Risks
Cyber Crime Disruption to, or failure of, the Manager's accounting, dealing or payments Details of how the Board monitors the services provided by JPMF and its è
systems or the Depositary or custodian's records could prevent accurate associates and the key elements designed to provide effective internal control
reporting and monitoring of the Company's financial position. Under the terms are included within the Risk Management and Internal Control section of the
of its agreement, the Depositary has strict liability for the loss or Corporate Governance report on page 51 of the Company's annual report and
misappropriation of assets held in custody. See note 20(c) for further details financial statements. The threat of Cyber attack is increasing and regarded as
on the responsibilities of the Depositary. having the ability to cause equivalent disruption to the Company's business as
more traditional business continuity and security threats. The Company
benefits from JPMorgan's Cyber Security Programme. The information technology
controls around the physical security of JPMorgan's data centres, security of
its networks and security of its trading applications are tested by
independent auditors PricewaterhouseCoopers and reported every six months
against the AAF standard.
Counterparty Risk Local broker counterparty failure resulting in loss of stock/money. The Manager monitors counterparty exposures closely and has set limits è
according to various criteria (including an assessment of financial stability
of counterparty). The Board receives information relating to counterparties.
Regulatory Risks
Board Relationship with Shareholders The risk that the Company's strategy and performance does not align with The Manager addresses this by the organisation of an email address on the è
shareholders expectations. Company's website whereby shareholders can raise questions. Feedback from
shareholders is received directly through the email address provided on the
Company's website and via brokers which is fed back to the Board regularly.
At a shareholding meeting on 23rd November 2022 to vote on the resolution to
widen the Company's investment objective, 37.5% of shareholders voted against
the proposal. As more than 20% of votes had been cast against the Board
recommendation for a resolution, the Company has complied with the AIC Code
of Corporate Governance and explained that has been taken to consult
shareholders to understand the reasons behind the result and the actions
taken.
Political and Economic Changes in financial or tax legislation may adversely affect the Company. In The Manager makes recommendations to the Board on accounting, dividend and tax è
addition, the Company is subject to administrative risks, such as policies and the Board seeks external advice where appropriate. The Manager
the imposition of restrictions on the free movement of capital. A widening closely monitors political and economic developments and reports significant
of the capital controls by the Russian Government could negatively impact the events to the Board either at scheduled meetings or when an event arises. The
Company. The introduction of limitations on the ability of Russian companies Board factor in the status of current political and economic developments in
to distribute dividends to foreign companies could materially reduce the their decision making. See above for details of the Board's responses to
Company's revenue and amount available for distribution to shareholders. The Russia's invasion of Ukraine including the prohibition on trading and receipt
Company may not be able to trade Russian holdings or find a counter party to of dividends from Russian held companies, and successful proposal to widen the
trade with. Company's investment objective.
Regulatory and Legal Breach of regulatory rules, including sanctions could lead to suspension of The Board has remained informed of the impact of the sanctions and è
the Company's Stock Exchange listing, financial penalties, or a qualified restrictions that followed Russia's invasion of Ukraine on 24th February 2022.
audit report. Loss of investment trust status could lead to the Company being Moreover, the Board sought and received FCA approval for the change to its
subject to tax on capital gains. investment objective, which includes investment in Russia. HMRC also confirmed
the continuation of the Company's investment trust status. The Board, with the
assistance of the Manager, monitors the Company's activities to ensure that
they remain compliant with the current sanctions regime including the specific
requirements applicable to the Manager as a company subject to the laws of the
United States of America and other jurisdictions that it operates in. The
Directors seek to comply with all relevant regulation and legislation and rely
on the services of its Company Secretary, the Manager, and its professional
advisors to monitor compliance with all relevant requirements. The Board and
its Committees reviews the status of the Company's regulatory and legal
requirements at regular internals.
Climate risk
Climate Change Climate change, which barely registered with investors a decade ago, has today The Manager's investment process integrates consideration of environmental, è
become one of the most critical issues confronting asset managers and their social and governance factors into investment decisions. This includes the
investors. Investors can no longer ignore the impact that the world's changing approach investee companies take to recognising and mitigating climate change
climate will have on their portfolios, with the impact of climate change on risks. The Manager aims to influence the management of climate related risks
returns now inevitable. through engagement and voting and is a participant of Climate Action 100+ and
a signatory of the United Nations Principles for Responsible Investment. The
Board is also considering the threat posed by the direct impact on climate
change on the operations of the Manager and other major service providers. As
extreme weather events become more common, the resiliency, business continuity
planning and the location strategies of our services providers will come under
greater scrutiny.
Global Crisis A wide scale economic crisis which could be caused by a number of catastrophic The Board keeps informed of economic developments and latest ESG requirements è
events such a climate change, may cause significant reductions in the through regular updates from the Manager.
valuations of companies in the portfolio.
Global Trade Protectionism A reduction in global trading arising from increased barriers to trade is The Portfolio Manager manages the Company's portfolio in light of ongoing è
a risk to economic growth, to investors' risk appetites and, consequently, to current events. The Board can, with shareholder approval, look to amend the
the valuations of companies in the portfolio. investment policy and objectives of the Company to mitigate the risks.
Artificial Intelligence (AI) Advances in computing power means that AI has become a powerful tool that will The Board monitors developments concerning AI as its use evolves and consider è
impact society, with a wide range of applications that include the potential how it might threaten the Company's activities, which may include a heightened
to harm. While it might equally be deemed a force for good, there appears to threat to cybersecurity. The Board works closely with JPMF in identifying
be an increasing risk to society from the threat posed by AI. these threats and monitors the strategies of our service providers.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on
page 46 of the Company's annual report and financial statements. The
management fee payable to the Manager for the year was £103,000 (2022:
£1,050,000) of which £nil (2022: £nil) was outstanding at the year end.
Included in note 6 on page 75 of the Company's annual report and financial
statements are safe custody fees amounting to £193,000 (2022: £82,000)
payable to JPMorgan Chase Bank N.A. during the year of which £96,000 (2022:
£nil) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through group
subsidiaries. These transactions are carried out at arm's length. The
commission payable to JPMorgan Securities Limited for the year was £nil
(2022: £2,000) of which £nil (2022: £nil) was outstanding at the year end.
The Company was also holding cash in the JPMorgan Sterling Liquidity Fund,
which is managed by JPMF. At the year end this was valued at £1,001,000
(2022: £16,981,000). Interest amounting to £207,000 (2022: £101,000) was
receivable during the year of which £nil (2022: £nil) was outstanding at the
year end.
Handling charges on dealing transactions amounting to £3,000 (2022: £20,000)
were payable to JPMorgan Chase Bank N.A. during the year of which £5,000
(2022: £20,000) was outstanding at the year end.
Included in note 6 on page 75 of the Company's annual report and financial
statements, are American Depositary Receipts (ADRs) and Global Depositary
Receipts (GDRs) costs of £nil (2022: £27,000) charged by the JPMorgan Chase
Bank N.A.. JPMorgan Chase Bank N.A.'s cost is 'passed through' with no
additional margin added.
At the year end, total cash of £39,000 (2022: £83,000) was held with
JPMorgan Chase Bank, N.A.. A net amount of interest of £2,000 (2022: £1,000)
was receivable by the Company during the year from JPMorgan Chase.
Full details of Directors' remuneration and shareholdings can be found on page
57 and in note 6 on page 75 of the Company's annual report and financial
statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report and financial
statements, and the Directors' Remuneration Report 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 prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law) and
Financial Reporting Standard (FRS) 102. Under company law the Directors must
not approve the financial statements unless they are satisfied that, taken as
a whole, the annual report and financial statements 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 addition, to provide these confirmations, and in preparing these financial
statements, the Directors must be satisfied that, taken as a whole, the annual
report and financial statements are fair, balanced and understandable. In
order to provide these confirmations and in preparing these annual 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 they have done so.
The Directors are responsible for keeping proper 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.
Under applicable law and regulations the Directors are also responsible for
preparing a Strategic Report, a Directors' Report, Directors' Remuneration
Report and Statement of Corporate Governance that comply with that law and
those regulations.
Each of the Directors, whose names and functions are listed in the Directors'
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 Directors confirm that, taken as a whole, the annual
report and financial statements are fair, balanced and understandable and
provide the information necessary for shareholders to assess the strategy and
business model of the Company; and of the total return or loss of the Company
for that period.
• That the Strategic Report and Directors Report include
a fair review of the development and performance of the business and the
position of the Company together with a description of the principal risks
and uncertainties that the Company faces.
The report and financial statements are published on the
www.jpmeemeasecurities.com 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 Auditors does not involve consideration
of the maintenance and integrity of this website and, accordingly, the
Auditors accept no responsibility for any changes that have occurred to the
financial statements since they were initially presented on the website. The
financial statements are prepared in accordance with UK legislation, which may
differ from legislation in other jurisdictions.
For and on behalf of the Board
Eric Sanderson
Chairman
23rd January 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st October 2023
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Losses on investments held at fair value
through profit or loss - (161) (161) - (360,154) (360,154)
Net foreign currency (losses)/gains - (72) (72) - 1,293 1,293
Income from investments 641 11 652 5,927 - 5,927
Interest income 209 - 209 102 - 102
Gross return/(loss) 850 (222) 628 6,029 (358,861) (352,832)
Management fee (41) (62) (103) (420) (630) (1,050)
Other administrative expenses (467) (30) (497) (431) - (431)
Net return/(loss) before finance costs and taxation 342 (314) 28 5,178 (359,491) (354,313)
Finance costs (1) - (1) - - -
Net return/(loss) before taxation 341 (314) 27 5,178 (359,491) (354,313)
Taxation charge (35) - (35) (864) - (864)
Net return/(loss) after taxation 306 (314) (8) 4,314 (359,491) (355,177)
Return/(loss) per share 0.76p (0.78)p (0.02)p 10.66p (888.10)p (877.44)p
STATEMENT OF CHANGES IN EQUITY
For the year ended 31st October 2023
Called up Capital
share redemption Capital Revenue
capital reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000
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 - - - (20,420) (20,420)
At 31st October 2022 405 196 10,086 8,201 18,888
Net (loss)/return - - (314) 306 (8)
At 31st October 2023 405 196 9,772 8,507 18,880
(1) Revenue reserve and the capital reserves form the distributable
reserves of the Company and may be used to fund distributions to shareholders.
See note 15 on page 79 of the Company's annual report and financial statements
for details.
STATEMENT OF FINANCIAL POSITION
At 31st October 2023
2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 17,370 1,918
Current assets
Debtors 882 20
Cash and cash equivalents 1,040 17,064
1,922 17,084
Current liabilities
Creditors: amounts falling due within one year (412) (114)
Net current assets 1,510 16,970
Total assets less current liabilities 18,880 18,888
Net assets 18,880 18,888
Capital and reserves
Called up share capital 405 405
Capital redemption reserve 196 196
Capital reserves 9,772 10,086
Revenue reserve 8,507 8,201
Total shareholders' funds 18,880 18,888
Net asset value per share 46.7p 46.7p
STATEMENT OF CASH FLOWS
For the year ended 31st October 2023
2023 2022(1)
£'000 £'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation 28 (354,313)
Adjustment for:
Net loss on investments held at fair value through profit or loss 161 360,154
Net foreign currency losses/(gains) 72 (1,293)
Dividend income (652) (5,927)
Interest income (209) (102)
Realised (loss)/gain on foreign exchange transactions (78) 924
Realised exchange gain on Liquidity - 524
Increase in accrued income and other debtors (7) (4)
Increase/(decrease) in accrued expenses 132 (107)
Net cash outflow from operating activities before dividends and interest (553) (144)
Dividends received 577 5,740
Interest received 209 103
Overseas withholding tax recovered 5 22
Net cash inflow from operating activities 238 5,721
Purchases of investments (19,928) (17,449)
Sales of investments 3,661 41,154
Settlement of currency contracts - -
Net cash (outflow)/inflow from investing activities (16,267) 23,705
Dividends paid - (20,420)
Repurchase and cancellation of the Company's own shares - (2,678)
Interest paid (1) -
Net cash outflow from financing activities (1) (23,098)
(Decrease)/increase in cash and cash equivalents (16,030) 6,328
Cash and cash equivalents at start of year 17,064 10,951
Exchange movements 6 (215)
Cash and cash equivalents at end of year 1,040 17,064
Cash and cash equivalents consist of:
Cash and short term deposits 39 83
Cash held in JPMorgan Sterling Liquidity Fund 1,001 16,981
Total 1,040 17,064
(1) The presentation of the Cash Flow Statement, as permitted under
FRS 102, has been changed so as to present the reconciliation of 'net
return/(loss) before finance costs and taxation' to 'net cash inflow from
operating activities' on the face of the Cash Flow Statement. Previously, this
was shown by way of note. Other than consequential changes in presentation of
the certain cash flow items, there is no change to the cash flows as presented
in previous periods.
Analysis of changes in net cash
As at Other non-cash As at
31st October 2022 Cash flows charges 31st October 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 83 (50) 6 39
Cash equivalents 16,981 (15,980) - 1,001
Net cash 17,064 (16,030) 6 1,040
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st October 2023
1. Accounting policies
(a) 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 July 2022.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. In
forming this opinion, the Directors have considered the impact of Russia's
invasion of Ukraine and conflict between Israel and Palestine. They have
considered the mitigation measures which key service providers, including the
Manager, have in place to maintain operational resilience. The Directors have
broadened the Company's investment mandate to include emerging European,
Middle Eastern and African countries and concluded that this is sufficient to
apply the going concern basis. The Directors have reviewed income and expense
projections and the liquidity of the investment portfolio in making their
assessment.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Dividends
(a) Dividends paid and proposed
2023 2022
£'000 £'000
Dividends paid
2022 interim dividend of nil (2021: 25.0p) - 10,311
2022 final dividend of nil (2021: 10.0p) - 4,044
2023 interim dividend of nil (2022: 15.0p) - 6,065
- 20,420
(b) Dividends for the purposes of Section 1158 of the Corporation Tax
Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of the dividend
proposed in respect of the financial year, shown below. The revenue available
for distribution by way of dividend is £306,000 (2022: £4,314,000).
2023 2022
£'000 £'000
2023 interim dividend of nil (2022: 15.0p) - 6,065
2023 final dividend of 0.5p (2022: nil) 202 -
Total dividends for Section 1158 purposes 202 6,065
The final dividend proposed in respect of the year ended 31st October 2023 is
subject to shareholder approval at the forthcoming Annual General Meeting. In
accordance with the accounting policy of the Company, this dividend will be
reflected in the financial statements for the year ending 31st October 2024.
3. Return/(loss) per share
2023 2022
£'000 £'000
Revenue return 306 4,314
Capital loss (314) (359,491)
Total loss (8) (355,177)
Weighted average number of shares in issue during the year 40,436,176 40,478,765
Revenue return per share 0.76p 10.66p
Capital loss per share (0.78)p (888.10)p
Total loss per share (0.02)p (877.44)p
4. Net asset value per share
2023 2022
Net assets (£'000) 18,880 18,888
Number of shares in issue 40,436,176 40,436,176
Net asset value per share 46.7p 46.7p
Status of announcement
2022 Financial Information
The figures and financial information for 2022 are extracted from the Annual
Report and Accounts for the year ended 31st October 2022 and do not constitute
the statutory accounts for the year. The Annual Report and Accounts includes
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
Registrar of Companies in due course.
2023 Financial Information
The figures and financial information for 2023 are extracted from the Annual
Report and Accounts for the year ended 31st October 2023 and do not constitute
the statutory accounts for the year. The Annual Report and Accounts includes
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
Registrar of Companies in due course.
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.
For further information please contact:
Paul Winship
For and on behalf of
JPMorgan Funds Limited, Secretary - 020 7742 4000
24(th) January 2024
ENDS
Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to shareholders on
or around 31 January 2024 and will shortly be available on the Company's
website (www. jpmeemeasecurities.com) or in hard copy format from the
Company's Registered Office, 60 Victoria Embankment London EC4Y 0JP.
A copy of the annual report 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 annual report is also available on the Company's website at
jpmeemeasecurities.com where up to date information on the Company, including
daily NAV and share prices, factsheets and portfolio information can also be
found.
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. END FR SEIFUDELSEFF
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