JPMorgan Emerg. EMEA - Half-year Report
19/06/2023 15:47
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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 MONTHS ENDED
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 £375,000 (30th April 2022: £4,277,000) 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 £11.6 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 £6.9 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
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'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 up Capital
share redemption Capital Revenue
capital reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'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 2023 30th April 2022 31st October 2022
£'000 £'000 £'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 ended Six months ended Year ended
30th April 2023 30th April 2022 31st October 2022
£'000 £'000 £'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 2022 Cash flows non-cash charges 30th April 2023
£'000 £'000 £'000 £'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 2023 30th April 2022 31st October 2022
£'000 £'000 £'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 2023 30th April 2022 31st October 2022
£'000 £'000 £'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 2023 30th April 2022 31st October 2022
£'000 £'000 £'000
Net assets (£'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
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www.jpmeemeasecurities.com (http://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.
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