REG - JPMorgan Emerg. EMEA - Final Results
04/02/2025 07:15
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RNS Number : 7519V JPMorgan Emerging EMEA Securities 04 February 2025
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 (the "Company")
Announce the Company's Results for the Year Ended 31(st) October 2024
Legal Entity Identifier: 549300II3MHI98ZLVH37
Information disclosed in accordance with DTR 4.1.3
CHAIRMAN'S STATEMENT
Overview and Performance
I am pleased to report that in the year ended 31st October 2024, the Company's
net asset value on a total return basis increased by 13.6%, an
out-performance of 1.7% against the Company's reference index, the S&P
Emerging Europe, Middle East & Africa BMI Net Return in GBP (the
'Reference Index'), which increased 11.9% on a total return basis over the
same period. The reason for the outperformance was stock selection. The
Investment Manager's Report below provides further details.
On a share price total return basis, the Company returned +0.9% in the 12
month reporting period. As at 31st October 2024, the Company's share price
was 120.5 pence, an increase of 0.5% in the reporting period. As at 31st
January 2025 the share price was 209.5 pence. Throughout the period, from 31st
October 2024 to 31st January 2025 the shares have traded in a wide range of
between 120.5p and 244.0p which the Board believes is due to the uncertainty
about the values attaching to our Russian shareholdings.
The Company's Portfolio
The Company continues to invest in higher quality companies, with a tilt
towards value and income and a focus on maximising total return for
shareholders. The portfolio's geographical focus is on Saudi Arabia, South
Africa and the United Arab Emirates, which at the year end represented 21.6%,
17.0% and 14.4% of the portfolio respectively.
The tragic events in Ukraine since Russia's military invasion on 24th February
2022 sadly continue to cast a shadow over the global economy. The strict
economic sanctions that followed the invasion have continued to reduce the
valuation of the Company's Russian assets. Additionally, the rouble has
continued to reduce in value against sterling and other currencies further
reducing the already heavily written down value of Russian assets in the
Company's balance sheet. Despite the expiry of certain Office of Foreign
Assets Control (OFAC) licences during the reporting period which added to the
existing uncertainty about the realisation of the Company's Russian
securities, the Company retained the 99% provision for valuation of the
Russian assets, as set out in the Company's announcement made on 29th October
2024.
Extensive details on the negative impact that the events in Ukraine have had
on the Company are provided in my Chairman's Statement within the Company's
2022 and 2023 annual reports, which are available on the Company's website
www.jpmeemeasecurities.com.
With one exception, the Company has not engaged in any disposals of its
Russian assets during this period. On 10th October 2024, the Company announced
the sale of its stake in Nebius (formerly Yandex), a security that had been
previously sanctioned. As detailed in the announcement, the sale should not be
taken as an indication that similar sales can be made for the other Russian
securities held by the Company. The sale arose because Nebius decoupled from
Yandex's business in Russia, ceased to be sanctioned under US sanctions as a
result, and became solely listed on western exchanges giving rise to its
relocation outside the Emerging Europe, Middle East and Africa markets in
which the Company invests.
As detailed in the numerous RNS announcements that the Company has released in
this reporting period and up until the date of this report, in the first half
of 2024 VTB made a claim in the Russian courts against a number of J.P.Morgan
legal entities, including JPMorgan Bank International (the Russian
sub-custodian for the Company's Russian assets) and the Company. As detailed
in the Company's RNS announcement of 18th October 2024, the Russian courts
granted VTB's claim in full against the Company and seven other named
defendants. The Russian court has announced an appeal hearing date of 26th
February 2025. The announcements included reference to the possibility that,
if VTB's claim was to be successful, it may result in the insolvency of the
Company's sub-custodian in Russia and may constitute a Force Majeure and or
Country Risk event (as defined in the contracts that clients have with J.P.
Morgan). If the Russian sub-custodian were to be declared insolvent, the
Manager has advised us that the Company's Russian assets could not be serviced
by them and due to the current sanction regime it would not be possible to
transfer the Company's Russian assets to another custodian. The Board will
provide a further update once more information becomes available. The Russian
Court continues to allow VTB to include the Company in the list of defendants
despite being a separate client entity, rather than a proprietary entity of
the J.P. Morgan Asset Management group.
In addition, as detailed in a prior RNS announcement, on 8th October 2024 VTB
made two further claims in the Russian courts against the same J.P.Morgan
legal entities and the Company, but no final determination has yet been made
in either claim.
The RNS announcements released in the reporting period have referred to the
protection that the Company may derive from Russian Decree 8 which offers
protection to client securities and RUB cash in S type accounts from the
enforcement of court decisions issued after 3rd January 2024. The Russian
courts have so far respected this. However, the situation remains dynamic. In
addition, Presidential Decree 442 published on 23rd May 2024 established a
framework for compensating the Russian Federation and/or the Central Bank of
Russia for damage caused by 'unfriendly' actions of the United States of
America. Decree 442 indicated that a detailed procedure would be published
within four months, however, details of that further procedure remain yet to
be published and analysed by market participants.
In view of the early stages of the legal action, and taking account of the
protection of the S type accounts and the unknown outcome, there has been no
impact on the financial statements at 31st October 2024. As at 31st October
2024 the Company's Russian investments amounted to 6.7% of the portfolio,
although that figure should be considered in the context of the Company's
share price premium to net asset value per share of 129.5% as detailed in the
Discount Control section below and in the context of the considerable
uncertainty attaching to the value of its Russian assets. All these
developments reinforce that there is much uncertainty of these values ever
being realisable by the Company.
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.
Revenue, Earnings, and Dividend
The Company's net revenue for the 12 month period to 31st October 2024 after
taxation was £225,000 (31st October 2023: £306,000) and the return per
share, calculated on the basis of the average number of shares in issue, was
0.56 pence (31st October 2023: 0.76 pence) per share.
One of the main drivers of the reduction in the Company's revenue after
taxation compared to the previous annual reporting period is the increase in
the Company's custody fees, charged by JPMorgan Chase Bank, N.A. (the
Company's Custodian) for the Company's Russian assets, which with effect from
1st January 2023 reverted to being calculated on their local market value,
which are significantly higher than the written down valuation included in the
Company's accounts. The increased custody fees are also a major factor in the
increase in the Company's ongoing charge, which was 4.2% (on an annualised
basis) as at 31st October 2024 (31st October 2023: 3.2%). During the reporting
period, the Board requested that the Custodian consider reducing its custody
fee on the Company's Russian assets. After careful consideration, the
Custodian agreed to implement a reduction, effective from 1st August 2024,
which the Board deemed more satisfactory given the prevailing circumstances.
The management fee charged by the Manager continues to be based on the
Company's assets, excluding the value of the Russian holdings.
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 31st October 2024 was equivalent to approximately £31.7 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. The Board also monitors the
underlying local value of the Russian assets, although there remains
increasing uncertainty of these values ever being realisable by the Company.
In view of the unknown outcome of the VTB case at the appeal hearing date of
26th February 2025, there has been no impact on the financial statements as at
31st October 2024. As at 31st October 2024, an additional £3.6 million of
dividend income from Russian portfolio companies has been announced but is yet
to be credited to the S account. Your Board also monitors this in order to
assess whether all dividends due are in fact accurately 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 £35.3 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. See above for
reference to the protection afforded to 'S' Accounts by Decree 8.
Nonetheless, I am pleased to announce that the Company will recommend the
payment of a dividend of 0.5p per share (2023: 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 14th March 2025 to shareholders on the
Company's register on 14th February 2025, with the ex-dividend date set for
13th February 2025. 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
2024, the premium was 129.5%. The premium as at 31st January 2025 is 264.6%.
The Board believes that this premium arises due to a difference in the view of
the valuation of the Company's net assets and should not be interpreted as an
indication that investors are more likely to derive any value from the
Company's Russian shareholdings.
Environmental, Social and Governance
Environmental, Social and Governance (ESG) considerations remain integral to
our investment process. We continue to engage with our investee companies to
promote ESG processes and practices and are committed to integrating
financially material ESG factors into our investment decisions. The Company's
ESG processes in respect of its Russian held securities will recommence as
soon as permissible. Further details are provided in the ESG Report in the
Annual Report.
Investment Management
Oleg Biryulyov continues to be the Company's Portfolio Manager supported by
JPMorgan Asset Management's Emerging Markets and Asia Pacific equities team
(EMAP). As detailed in the RNS announcement of 26th March 2024, Pandora Omaset
left JPMorgan and we are pleased to announce that Luis Carrillo will be a
named Portfolio Manager and support Oleg Biryulyov. 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,
Investment Manager and the Company's key service providers. Through the
Management Engagement Committee, the Board formally evaluated their
performance in September 2024. Following that review, the Board concluded that
it was satisfied with the current levels of service.
Board Composition
Following a thorough selection process undertaken with the assistance of a
third party independent search consultancy, the Board are delighted that as
previously announced, Ms Yulia Chekunaeva was appointed as a Non-executive
Director of the Company on 1st July 2024. See Board Diversity and Inclusion on
page 29 in the Annual Report for further details of the Board's approach to
this requirement.
During the year, the Board evaluation process reviewed Directors, the Chair,
the Committees and the working of the Board as a whole. It was concluded that
all aspects of the Board and its procedures were operating effectively.
Following the year end, Nicholas Pink informed the Board that he would be
retiring as a Non-executive Director of the Company, effective 4th February
2025, due to personal reasons. The Board has engaged a third party independent
search consultancy to identify appropriate candidates for this vacancy and
will provide a further update in due course. I would like to thank Nicholas
for his five years of service on the Board, through what has been a very
challenging period.
In accordance with corporate governance best practice, the continuing
Directors retire by rotation at this year's AGM and will offer themselves for
re-election/election.
Change of Company Registrar
With effect from 3rd June 2024, the Company transferred the management of its
share register from Equiniti Financial Services Limited to Computershare
Investor Services PLC. Further details are available on the Company's website.
Annual General Meeting
The Company's Annual General Meeting (AGM) will be held on Friday 7th March
2025 at 2.00 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 Portfolio Manager 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
91 in the Annual Report.
If there are any changes to these arrangements for the AGM, the Company will
update shareholders via the Company's website.
Outlook
The arrival of Donald Trump as President of the USA in early 2025 following
his victory in the November 2024 US elections could bring significant change
both to the world stage and to US economic policy. However, the path to a
resolution to the conflict in Ukraine is unclear and may remain so in the
coming months and years. The appeal hearing date of 26th February 2025 for the
Russian litigation means that the decision in the VTB case will not be known
until after the date of this report. We will keep shareholders informed of the
decision by RNS announcement.
Despite these unprecedented and complex events, the Company's investment
objective at least helps the Company steer through this very difficult period.
Although cognisant of the impact of the Russian holdings on the Company, the
challenge for the Board is to use the investment objective to grow the
Company's assets in a way that promotes the success of the Company for the
benefit of the shareholders 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, the
Company's investment objective is achievable.
Eric Sanderson
Chairman
3rd February 2025
INVESTMENT MANAGER'S REPORT
Introduction
As mentioned by the Chairman in his latest report, and in previous reporting,
the Company's Russian holdings continue to be subject to strict sanctions, and
their valuations have been discounted accordingly. This Investment Manager's
Report therefore relates to the Company's strategy and portfolio activity
under it 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). It covers the 12-month
period ended 31st October 2024.
Performance
Over this period, the Company returned +13.6% on an NAV total return basis,
outperforming the Company's Reference Index, which returned +11.9% on a total
return basis over the same period.
Portfolio
At the end of the financial year, the Company's portfolio comprised 106
stocks, compared to 89 holdings at the end of the previous year. Of these, 25
were Russian securities, one less than at the end of the previous financial
year following the sale of Nebius (formerly Yandex) in 2024 when the sanctions
on this security were lifted (see the Chairman's Statement for further
details). The Company's Russian securities now comprise approximately 7% of
the written down value of the portfolio, versus 9% at end FY23. The Company's
holding in the JPM Liquidity Fund is not included in the above numbers.
Market backdrop
The year ended 31st October 2024 was a positive one for EMEA markets. The
index rose steadily over the course of the year, despite the deterioration in
oil prices in the second half of 2024, from around $90pbbl at the end of April
2024, to approximately $75pbbl at the end of 2024, below their level at the
end of 2023. This decline was the result of uncertainty around the global
economic growth and the potential growth in demand for oil products. We do not
share these concerns and see supply as a bigger issue for the long term oil
price trajectory. The main factor supporting regional markets over the period
was the demand from local investors.
The performance of EMEA markets lagged that of the Emerging Markets Index,
which increased 18.3% over the period. It also failed to match the 25.3% rise
in the All Country World Index, which was underpinned by ongoing strength in
US technology and related stocks with exposure to the rapid spread of
artificial intelligence (AI).
Most countries in the EMEA index made gains over the period. The notable
outperformers included South Africa, which benefitted from a relief rally
following May's general election, as the incumbent ANC party was returned to
power, albeit without a ruling majority. The improved political stability
reduced the costs of capital for the market, leading to price appreciation.
Hungary also outperformed, supported by the strong performance of Magyar
Telecom and OTP Bank. In both cases positive earnings surprises led to higher
prices. The Egyptian market was the most significant underperformer, due to
capital control and currency devaluation. The Turkish market saw a rally in
first quarter of 2024, but was subsequently hurt by valuation fatigue and the
realisation that the disinflationary path would be harder than earlier
anticipated.
Investment strategy
The Company's investment objective is to maximise the total return from
investments in EMEA markets. We aim to meet this objective 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
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 Gold Fields, a South African
gold miner. Other portfolio holdings driven by the commodities theme include
Motor Oil Hellas, a Greek energy company, MOL (a Hungarian refinery) and
ARAMCO (the world's largest oil company).
Mass market consumption: 60% 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. Portfolio holdings
underpinned by this theme include the pharmaceutical company in Hungary,
Richter. We also opened a position in the Greek Company, Sarantis, a national
and potentially regional leader in the production of cosmetics and household
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, Benefit Systems is empowering consumers in many
Central and Eastern European countries with electronic access to sports
facilities, enabling employers to promote healthy lifestyles and improving the
work life balance for the general public.
How have specific sectors and stocks fared over the review period?
Stock selection decisions contributed to relative performance over the year.
Portfolio holdings benefited from a series of earnings surprises and upward
revisions to earnings forecasts, thanks to companies' efforts to strengthen
their balance sheets and improve performance. The Company's out-of-index
holding in Halyk Savings Bank, a major Kazakh bank, was the most significant
contributor to performance over the year. It boasts an impressive return on
equity (RoE) of above 25% and a dividend yield of more than 7%. Parking,
Dubai's largest supplier of parking services, was another key contributor to
returns following its successful initial public offering (IPO).
Other positive influences on performance included our decision to avoid Sasol,
a South African chemical and energy company which we dislike due to the
structural challenges it faces and the poor quality of its management. Our
out-of-index position in Banca Transilvania - a niche player and national
champion - also paid off, as did our holdings in telecoms providers Emirates
Telecom and Hungary's Magyar Telekom, and in Adnoc Logistics, a United Arab
Emirates (UAE) oil services company with a dividend yield of over 4%.
Key detractors from returns included an underweight to Naspers, a South
African internet content company with an interest in its Chinese counterpart,
Tencent. This company does not pay an attractive dividend and following a
rally which we viewed as unsustainable, we closed the position in H124. Our
decision not to hold ACWA Power, a Saudi Arabian engineering and utilities
firm, also detracted, but we are very wary of this name due to its massive
leverage and very expensive valuation. We also avoided Capitec Bank, a South
African bank, due to its high valuation. Our positions in several other banks,
including Turkey's Akbank, Poland's PKO Bank Polski and Bank Pekao also
detracted from returns due to changes in leadership and potential changes in
their strategies. We reduced our position in Bank Pekao after the financial
year end following a meeting with the new senior management due to concerns
about the company's new, highly politicised chief executive officer.
At the sector level, the portfolio's underweights to materials (notably
petrochemical companies), industrials and consumer staples were the most
significant contributors, as these sectors underperformed the index over the
year. Smaller underweights to healthcare and IT also enhanced returns. Our
significant overweight to financials supported returns, as most of the
portfolio's bank names continued to benefit from high interest rates. A lesser
overweight to energy was another positive contributor, thanks to stock
selection and our preference for high income names over high capital intensity
ones. A small underweight to consumer discretionary and a larger underweight
to utilities (due in part to our decision to avoid ACWA Power, as mentioned
above) were the main detractors.
At the country level, our overweight to UAE was by far the greatest
contributor to performance, thanks to our participation in two successful IPOs
(see further discussion below), and strong income from our holdings of real
estate and bank stocks. Out-of-index positions in Kazakhstan and Slovenia also
added, as high-income stocks re-rated, with many raising dividend payments.
Returns benefited from our overweight to top performing market, Hungary, and
from our underweight to the lagging Turkish market. Our decision to avoid
Egypt, another underperforming market, helped, as did our underweight to
Qatar, which declined due to lack of domestic growth.
The main detractors at the country level included an underweight to Saudi
Arabia. Small cap stocks outperformed the larger cap stocks we favour in this
market, and market volatility was unusually high over the year. An underweight
to South Africa also hurt returns at the country level, as we missed the
post-election rally in this market. Likewise, an underweight to Poland meant
we missed the benefit of this market's politically driven rally in Q423. An
overweight to Greece detracted, as this market came under pressure from
general concerns about EU growth.
Our legacy holdings of several Russian securities also detracted slightly from
performance, as their value, which has already been written down, was impacted
by the decline in the rouble versus sterling and other currencies.
Performance attribution
Year ended 31st October 2024
% %
Contributions to total returns
Reference Index 11.9
Asset allocation (1.8)
Stock selection 8.0
Gearing/(net cash) (0.3)
Investment Manager contribution 5.9
Portfolio return 17.8
Management fee and other expenses(1) (4.2)
Return on net asset value per share(APM) 13.6
Effect of movement in discount over the year (12.7)
Return on share price(APM) 0.9
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.
(1) The Ongoing Charge of 4.17% 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, it is important to note
that the investment universe defined by our reference index is presently
dominated by companies rated by JPMorgan analysts as 'standard' stocks, the
lowest of their three designations of 'premium', 'quality' and 'standard'.
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 financials and commodity names feature heavily, although the
index will broaden out over time as economies and financial markets develop,
and we are excited about the prospect of exploring these markets more deeply
as they evolve. However, despite the current market concentration around these
sectors, the Company's reference index already contains more than 680 names -
a much larger and more diverse investment universe than the very limited
number of stocks previously available to us in Russia, and we see many
compelling opportunities across the EMEA regions.
Three themes governed the purchases we made over the past year:
- We opened positions in several new markets. We added exposure to
Turkey as the macro environment began to look more promising. Acquisitions
included Turkiye Sigorta, which we view as the country's best insurance
company, regional banks Akbank and Yapi Kredi, Turkish Airlines, an
award-winning airline, Turkcell, an internet and digital services provider,
and grocery retailer BIM. We also opened positions in Slovenia and Kazakhstan,
due to the attractive income opportunities available in these markets. A new,
out-of-index position in Georgia was motivated by our view that self-help
stories, supported by attractive valuation and yield, are the right place to
be.
- We participated in two successful UAE IPOs - Parking, mentioned
above, which we find attractive given its reasonably high and predictable
income, and Tecom, a property services business. Along with our existing
holding Salik, an infrastructure operations company, these two companies
provide the portfolio with exposure to structural growth within the UAE. They
also appeal to us as they are all capital light businesses with high
dividends.
- We also sought to capitalise on new investment opportunities in
several markets, including Saudi Arabia. We bought an ARAMCO subsidiary,
ARAMCO Base Oil - Luberef, a niche player in the base oil market. We also
opened a position in Alkhorayef, a Saudi water company, and Tawuaniya, a key
player in the Saudi insurance market. We purchased two Polish names, LPP, a
clothing manufacturer and Kety, a producer of aluminium products, in
anticipation of a recovery in earnings in 2025. We also initiated a position
in Sarantis, a Greek family business manufacturing household and personal
products, which is positioning itself as a regional player.
These new positions were funded in part by trims to existing holdings in South
Africa and Saudi Arabia. We drew on cash reserves, as the persistent,
broad-based strength of portfolio income has increased our confidence in the
Company's ability to maintain and grow income over the longer term.
The outright sales of several holdings were motivated by changes in our
investment view, or in the companies' earnings outlook or valuations. In South
Africa, in addition to the sale of Naspers, we closed positions in Old Mutual,
a provider of financial services across Africa, and Outsurance Group, a
diversified insurer. We also sold two other financial names, Al Ansari, a
UAE-based provider of financial services, and First Abu Dhabi Bank, and we
closed positions in Industries Qatar, an agricultural inputs supplier and
Jarir Marketing, a Saudi producer of office and school supplies.
These transactions have not altered the portfolio structure significantly at
the sector level. We maintain our substantial overweights to banks and other
financials, due to their low valuations and attractive dividends, and to
energy companies, in part because we expect oil prices to rise over time. We
remain underweight in all other sectors, most notably materials, as we do not
see much value in petrochemicals at this stage of the commodity cycle.
At the country level, our largest active positions are in Greece, UAE, Hungary
and Kazakhstan, as these markets all offer high income at reasonable
valuations. As we have noted in previous reports, Greece is a particular
favourite. We expect this market to continue to re-rate over time, led by
Greek banks, which are benefiting from an advantageous funding arrangement
provided by the European Central Bank that should lift valuations. Consistent
with our focus on income, we especially like the high dividend policy of Greek
consumer companies JUMBO and OPAP.
Conversely, we are most negative on Saudi Arabia, South Africa, Poland and
Kuwait. Our Saudi underweight is based on our view that the valuation of
petrochemicals names is still not appealing. In South Africa, we are
pessimistic about the new coalition government's ability to lift the country
out of economic stagnation and eliminate corruption. We hold some positions
intended to generate income from this market, but we will not be increasing
our overall country exposure. We remain cautious on Poland, due to ongoing
political instability and on Kuwait, which continues to delay reforms and hold
back economic growth.
At the stock level, our top holdings reflect our preference for quality names
offering attractive yields at appealing valuations, high expected returns and
earnings momentum.
The Company's top 10 holdings can be seen on page 23 in the Annual Report.
With an exception of Naspers (a South African holding company with most of its
value coming from its holding in the Chinese technology company Tencent),
EMAAR Properties (UAE, real estate company) and ARAMCO, our top ten holdings
are dominated by banks. This reflects an early stage of the market
development, where markets are mostly represented by financials and
commodities.
Outlook
A change in the US's political leadership has recently occurred, conflict is
ongoing in Ukraine and the Middle East, and it remains to be seen whether the
new US President will be able to fulfil his commitment to end these wars.
Furthermore, the collapse of the Al Basaad regime in Syria is widely expected
to have profound implications for the entire region over the longer term,
although it is unclear how events will play out. Given all these significant
uncertainties, it is even more difficult than usual to predict the direction
of EMEA markets over the near-term.
However, there are some observations we can make with reasonable confidence.
For instance, it seems likely that interest rates will remain elevated over
the coming year and are unlikely to return to the lows which were the norm
over the past two decades. This will provide ongoing support for bank interest
margins. The portfolio's overweight to financials will benefit accordingly.
And with banks comprising almost 40% of the index, this should remain
supportive for the entire market.
On a more sombre note, economic growth across the EMEA is likely to disappoint
over the coming year. The reduction in oil production agreed in 2023, combined
with the recent weakness in oil prices, is likely to weigh on energy companies
and have an adverse impact on growth in the Middle East's oil-producing
nations. We expect the recovery in central and eastern Europe and Africa to
remain lacklustre. European countries will face additional challenges related
to energy security and rising military expenditures, which are required to
support Ukraine and strengthen national defences to discourage Russia from
broaden this conflict. We expect earnings growth to be specific to companies,
rather than regions, and in general earnings growth is likely to be lower than
currently forecast. Consensus suggests earnings growth of 5% across EMEA
markets in 2025, but we think growth of 7-8% is a more realistic expectation
for our portfolio. We are skewed towards names with positive earnings
momentum.
Given this relatively uninspiring economic backdrop, our preference across all
markets is for defensive names. Companies with the wherewithal to generate
reasonable growth and dividends should outperform, and more nimble,
innovative, small and mid-size companies should do better than mega cap
stocks. IPOs will remain an important driver of returns, as they have been in
the last few years.
As we noted in the Half Year Report, stocks with exposure to the AI revolution
have been very popular with global investors, but there are limited ways to
gain exposure to this theme in the EMEA region. As with advent of the
internet in 1990s, we expect a favourable impact on some companies, and on
economic activity more broadly. And businesses will need to increase capital
expenditure to incorporate AI into their production and administrative
processes. But it is too early to say when and how investors will receive a
payback from investments in this technology, especially in emerging markets.
Despite pervasive near-term geopolitical uncertainty and the disappointing
outlook for growth, we remain optimistic about the longer-term prospects of
emerging markets in Europe, the Middle East and Africa. We believe the region
already offers equity investors compelling opportunities for growth, value and
income, at attractive levels. And these markets will continue to expand and
change very rapidly as more companies, offering an increasing range of goods
and services, enter the investment universe.
In our view, this remains a very exciting investment environment in which to
seek out high quality, attractively priced investment opportunities. We are
well-supported in our quest by the depth and strength of JPMorgan Asset
Management's research resources, which we believe provide us with a distinct
competitive edge, as the research coverage of much of the region by other
investors remains scant and shallow. 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.
We thank you for your ongoing support.
For and on behalf of the Investment Manager
Oleg I. Biryulyov
Portfolio Manager
3(rd) February 2025
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 é
in emerging market securities not typically associated with investing in of trading of Russian securities, prohibition on the ultimate receipt of
securities of companies in more developed countries. In terms of gauging the dividends and reduction in the value of the Company by circa 95% led the Board
economic and political risk of investing in emerging markets, it frequently to propose a shareholder resolution to widen the Company's investment
appears in the higher risk categories when compared with most Western objective and permit investments in Emerging Europe, Africa & Middle East.
countries. The value of emerging market securities, and therefore the net Shareholders approved the widening of the Company's investment objective on
asset value of the Company, may be affected by uncertainties such as economic, 23rd November 2022 and the Company acquired shares under its new investment
political or diplomatic developments, social and religious instability, objective in the first quarter of 2023. The Board also temporarily suspended
taxation and interest rates, currency repatriation restrictions, crime and its dividend payment policy and the Company's financial statements no longer
corruption and developments in the law or regulations in emerging markets and, reflect dividends receivable from the Company's Russian stocks. The Board's
in particular, the risks of expropriation, nationalisation and confiscation of activities also included reviewing the value of the Company's portfolio,
assets and changes in legislation relating to the level of foreign ownership. discount/premium to share price, sanctions, counter-parties status, inability
Some of these risks arise in the current VTB legal case against JPM entities to trade stocks and review of investment strategy. The Board has sought
and The Company referred to in Chair statement and recent RNS announcements. external professional advice where appropriate.
Such factors may lead to a reduction in the size of the Company's net assets
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 in the Middle East 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 the
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 Portfolio Manager, who attends 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 2023 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 Portfolio Manager or several members of the wider The Investment Manager takes steps to reduce the likelihood of such an event è
investment management team could result in a short term deterioration in by ensuring appropriate succession planning and the adoption of a team based
investment performance. approach, as well as special efforts to retain key personnel. During the
period, Pandora Omaset left JPMorgan and will be replaced by Luis Carrillo as
a named portfolio manager to support Oleg Biryulyov. The Board engages
privately with the portfolio manager 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 82 to 85 in the Annual
Report. 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 49 in the Annual Report. The threat of
misappropriation of assets held in custody. See note 20(c) for further details Cyber attack is increasing and regarded as having the ability to cause
on the responsibilities of the Depositary. 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 Audit and
Assurance Faculty (AAF) standard.
Counterparty Risk Local custodian or broker counterparty failure resulting in loss of The Manager monitors counterparty exposures closely and has set limits é
stock/money. Inability of Custodian to service the Company's assets. In according to various criteria (including an assessment of financial stability
Chairman's statement and recent RNS announcements, the Company has said that of counterparty). The Board receives information relating to counterparties.
if the VTB claim is successful then the Company's sub-custodian may become The possibility of the Company's custodian in Russia becoming insolvent and a
insolvent and may constitute a Force Majeure event and/or Country risk event, force majeure scenario arising in respect of the Company's Russian assets is
as defined in the contracts that clients have with J.P. Morgan. referred to in detail in the Chairman's Statement and in recent RNS
announcements. The Board has sought external professional advice where
appropriate.
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.
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 é
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, legal and economic developments and reports
of the capital controls by the Russian Government could negatively impact the significant events to the Board either at scheduled meetings or when an event
Company. The introduction of limitations on the ability of Russian companies arises. The Board factors in the status of current political and economic
to distribute dividends to foreign companies could materially reduce the developments in its decision making. See above for details of the Board's
Company's revenue and amount available for distribution to shareholders. The responses to Russia's invasion of Ukraine including the prohibition on trading
Company may not be able to trade Russian holdings or find a counter party to and ultimate receipt of dividends from Russian held companies, and successful
trade with. In addition, The Russian Government may change legislation which proposal to widen the Company's investment objective. The Board has sought
currently protects 'S' accounts against loss from legal action. external professional advice where appropriate.
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 the
subject to tax on capital gains. Company's 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 the Company Secretary, the
Manager, and the Company's professional advisors to monitor compliance with
all relevant requirements. The Board and its Committees review the status of
the Company's regulatory and legal requirements at regular intervals.
Climate risk
Climate Change Climate change, which barely registered with investors a decade ago, has today The Investment Manager's investment process integrates consideration of è
become one of the most critical issues confronting asset managers and their financially material environmental, social and governance factors into
investors. Investors can no longer ignore the impact that the world's changing investment decisions. This includes the approach investee companies take to
climate will have on their portfolios, with the impact of climate change on recognising and mitigating climate change risks. The Manager aims to influence
returns now inevitable. the management of climate related risks 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.
Emerging Description Mitigating activities Movement from
risk
prior year
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 as climate change, may cause significant reductions in the through regular updates from the Investment 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, seek 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 the Manager in
be an increasing risk to society from the threat posed by AI. identifying 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 44 in the Annual Report. The management fee payable to the Manager for
the year was £164,000 (2023: £103,000) of which £2,000 (2023: £nil) was
outstanding at the year end.
Included in note 6 on page 74 in the Annual Report are safe custody fees
amounting to £284,000 (2023: £193,000) payable to JPMorgan Chase Bank N.A.
during the year of which £66,000 (2023: £96,000) 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
(2023: £nil) of which £nil (2023: £nil) was outstanding at the year end.
The Company was invested in the JPMorgan GBP Liquidity Fund, which is managed
by JPMorgan Asset Management (Europe) S.à r.l. At the year end this was
valued at £nil (2023: £1,001,000). Interest amounting to £32,000 (2023:
£207,000) was receivable during the year of which £nil (2023: £nil) was
outstanding at the year end.
Handling charges on dealing transactions amounting to £22,000 (2023: £3,000)
were payable to JPMorgan Chase Bank N.A. during the year of which £3,000
(2023: £5,000) was outstanding at the year end.
At the year end, total cash of £50,000 (2023: £39,000) was held with
JPMorgan Chase Bank, N.A. A net amount of interest of £3,000 (2023: £2,000)
was receivable by the Company during the year from JPMorgan Chase Bank, N.A.
Full details of Directors' remuneration and shareholdings can be found on page
57 and in note 6 on page 74 in the Annual Report.
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.
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 Auditor does not involve consideration of
the maintenance and integrity of this website and, accordingly, the Auditor
accepts 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.
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 Board confirms that it is satisfied that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company's
position, performance, business model and strategy.
For and on behalf of the Board
Eric Sanderson
Chairman
3rd February 2025
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st October
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair
value through profit or loss - 2,431 2,431 - (161) (161)
Net foreign currency losses - (29) (29) - (72) (72)
Income from investments 974 2 976 641 11 652
Interest income 35 - 35 209 - 209
Gross return/(loss) 1,009 2,404 3,413 850 (222) 628
Management fee (66) (98) (164) (41) (62) (103)
Other administrative expenses (666) - (666) (467) (30) (497)
Net return/(loss) before finance costs and taxation 277 2,306 2,583 342 (314) 28
Finance costs - - - (1) - (1)
Net return/(loss) before taxation 277 2,306 2,583 341 (314) 27
Taxation charge (52) - (52) (35) - (35)
Net return/(loss) after taxation 225 2,306 2,531 306 (314) (8)
Return/(loss) per share 0.56p 5.70p 6.26p 0.76p (0.78)p (0.02)p
All revenue and capital items in the above statement derive from continuing
operations.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies. The net return/(loss) after taxation represents the profit/(loss)
for the year and also total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31st October
Called up Capital
share redemption Capital Revenue
capital reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000
At 31st October 2022 405 196 10,086 8,201 18,888
Net (loss)/return after taxation - - (314) 306 (8)
At 31st October 2023 405 196 9,772 8,507 18,880
Net return after taxation - - 2,306 225 2,531
Dividend paid in the year - - - (202) (202)
At 31st October 2024 405 196 12,078 8,530 21,209
(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 in the Annual Report for details.
STATEMENT OF FINANCIAL POSITION
At 31st October
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 21,241 17,370
Current assets
Debtors 247 882
Current asset investment(1) - 1,001
Cash at bank 50 39
297 1,922
Current liabilities
Creditors: amounts falling due within one year (329) (412)
Net current (liabilities)/assets (32) 1,510
Total assets less current liabilities 21,209 18,880
Net assets 21,209 18,880
Capital and reserves
Called up share capital 405 405
Capital redemption reserve 196 196
Capital reserves 12,078 9,772
Revenue reserve 8,530 8,507
Total shareholders' funds 21,209 18,880
Net asset value per share 52.5p 46.7p
(1) Cash at bank in the Statement of Financial Position has been
restated to exclude the investment in the JPMorgan GBP Liquidity Fund of
£1,001,000 for the year ended 31st October 2023, and to disclose this
separately as current asset investments to conform with the statutory format
as required by the Companies Act. There is no impact on other line items in
the Statement of Financial Position nor on the total current assets.
STATEMENT OF CASH FLOWS
For the year ended 31st October
2024 2023
£'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 2,583 28
Adjustment for:
Net (gains)/losses on investments held at fair value through profit or (2,431) 161
loss
Net foreign currency losses 29 72
Dividend income (976) (652)
Interest income (35) (209)
Realised losses on foreign exchange transactions (24) (78)
Increase in accrued income and other debtors (46) (7)
(Decrease)/increase in accrued expenses (11) 132
Net cash outflow from operating activities before dividends, interest and (911) (553)
taxation
Dividends received 907 577
Interest received 35 209
Overseas withholding tax recovered 2 5
Net cash inflow from operating activities 33 238
Purchases of investments (10,643) (19,928)
Sales of investments 9,827 3,661
Net cash outflow from investing activities (816) (16,267)
Equity dividends paid (202) -
Interest paid - (1)
Net cash outflow from financing activities (202) (1)
Decrease in cash and cash equivalents (985) (16,030)
Cash at bank and current asset investments at start of year 1,040 17,064
Exchange movements (5) 6
Cash at bank and current asset investments at end of year 50 1,040
Cash at bank and current asset investments consist of:
Cash at bank 50 39
Investment in JPMorgan GBP Liquidity Fund - 1,001
Total 50 1,040
( )
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st October 2024
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. The
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence up to 31st January 2026 which
is at least 12 months from the date of approval of these Financial
Statements. In forming this opinion, the Directors have considered the impact
of Russia's invasion of Ukraine and conflict in the Middle East. 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.
In addition to the above, the Company carried out stress testing that included
modelling significantly reduced market liquidity and considered the impact of
stressed revenue. In even the most stressed scenario, the Company was shown to
have sufficient cash, or to be able to liquidate a sufficient portion of its
listed holdings, in order to meet its liabilities as they fall due.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Dividends
(a) Dividends paid and proposed
2024 2023
Pence £'000 Pence £'000
Dividend paid
Final dividend in respect of prior year 0.5 202 - -
Total dividends paid in the year 0.5 202 - -
(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 £225,000 (2023: £306,000).
2024 2023
Pence £'000 Pence £'000
Final dividend proposed 0.5 202 0.5 202
Total dividend for Section 1158 purposes 0.5 202 0.5 202
The final dividend proposed in respect of the year ended 31st October 2024 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 2025.
3. Return/(loss) per share
2024 2023
£'000 £'000
Revenue return 225 306
Capital return/(loss) 2,306 (314)
Total return/(loss) 2,531 (8)
Weighted average number of shares in issue during the year 40,436,176 40,436,176
Revenue return per share 0.56p 0.76p
Capital return/(loss) per share 5.70p (0.78)p
Total return/(loss) per share 6.26p (0.02)p
4. Net asset value per share
2024 2023
Net assets (£'000) 21,209 18,880
Number of shares in issue 40,436,176 40,436,176
Net asset value per share 52.5p 46.7p
Status of announcement
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.
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Accounts for the year ended 31st October 2024 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 - 0800 20 40 20 or +44 1268 44 44 70
4th February 2025
ENDS
Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to shareholders on
or around 6th February 2025 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
(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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