JPMorgan Emerg Mkts - Half Year Results
14/06/2024 07:00
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RNS Number : 3946S JPMorgan Emerging Mkts Invest Trust 14 June 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EMERGING EUROPE MIDDLE EAST & AFRICA SECURITIES PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30TH APRIL 2024
Legal Entity Identifier: 549300II3MHI98ZLVH37
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Overview and performance
During the six months ended 30th April 2024, the Company's net asset value on
a total return basis increased by 6.9%, an underperformance of 2.2% against
the Company's reference index, the S&P Emerging Europe, Middle East &
Africa BMI Net Return in GBP, which increased 9.1% on a total return basis to
the end of this reporting period. The reasons for the underperformance against
the reference index includes the Company's currently high ongoing charges and
its holding of Russian assets, which do not form part of the reference index.
As at 30th April 2024, the Company's share price was 89.5 pence, a decrease of
25.4% in the six-month period. As at 12th June 2024 the share price was 107.5
pence.
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 remain in place and the
valuation of the Company's Russian assets continues to be drastically reduced.
Extensive details on the negative impact that the events in Ukraine have had
on the Company are provided in my Chairman's Statement included in the
Company's 2022 annual report and in the list of 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 2024 after
taxation was £41,000 (30th April 2023: £375,000) and the return per share,
calculated on the basis of the average number of shares in issue was 0.10
pence (30th April 2023: 0.93 pence) per share.
One of the main drivers of the reduction in the Company's revenue after
taxation compared to the previous year 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 have now 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 4.4% (on an annualised basis) as at 30th April 2024 (30th April 2023:
2.3%). The management fee charged by JPMorgan Funds Ltd continues to be based
on the Company's assets excluding the value of the Russian holdings. The Board
are in discussion with the Manager regarding the current level of the custody
fee.
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 2nd May 2024 was equivalent to approximately £25.2 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 is much uncertainty of these
values ever being realisable by the Company.
As at 2nd May 2024, an additional £7.9 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.
As previously announced by the Board via RNS, the Company's Manager confirmed
that the Company's assets (both securities and funds) held in custody 'S'
accounts in the name of JPMorgan Bank International (the Russian sub-custodian
used by JPMorgan Chase Bank, N.A.) are not subject to the freezing order
claimed by VTB in the Russian courts on 17th April 2024. However, the
possibility of a retaliatory response to current Western governments
discussions regarding the use of sanctioned Russian assets to help finance
Ukraine's war effort seems to be always possible. We will continue to monitor
developments.
Discount control
Due to the current 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 plans to reinstate
the Company's share discount control programme. As at 30th April 2024, the
premium was 81.2%, this a significant reduction from the premium at the year
end of 156.7%. The Board believes that this premium arises due to a difference
in the view of what the Company's net assets are valued at and should not be
interpreted as an indication that investors are more likely to derive any
value from the Company's Russian shareholdings.
Investment Management
As detailed in the RNS announcement of 26th March 2024, Pandora Omaset left
JPMorgan and Oleg Biryulyov continues to be the Company's Investment Manager
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.
Board Composition
As noted in the Company's previous Annual Report, the Board has engaged an
independent third party search consultant to undertake a search for a fourth
non-executive director. We are hopeful that the search will result in the
appointment of a new director this year.
Change of Company Registrar
With effect from 3rd June 2024, the Company has transferred the management of
its share register from Equiniti Financial Services Limited to Computershare
Investor Services PLC ('Computershare'). Shareholders holding their shares
directly, rather than via a third-party platform, will be contacted directly
by Computershare. Further details are available on the Company's website.
Outlook
With little prospect of Russia's invasion of Ukraine being resolved in the
foreseeable future or the limiting of the existing strict economic sanctions,
the Company's 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
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, its
investment objective is achievable.
Eric Sanderson
Chairman
13th June 2024
INVESTMENT MANAGER'S REPORT
Introduction
As mentioned in the Chairman's Statement of this report, and in previous
reporting, the Company's Russian holdings continue to be subject to strict
sanctions. This Investment Managers' Report therefore relates to the Company's
strategy and portfolio activity under its revised investment objective, which
is to maximise total return to shareholders from a diversified portfolio of
investments in Emerging Europe (including Russia), Middle East and Africa
(EMEA).
This report covers the six-month period commencing 1st November 2023, and
ending 30th April 2024.
Performance
We are pleased to report that during this period, the Company's new
investments delivered positive returns to shareholders, rising 6.9% on a net
asset value (NAV) basis, although returns lagged the reference index, the
S&P Emerging Europe, Middle East & Africa BMI Net Return in GBP, which
rose by 9.1%.
Portfolio
At the end of the review period, the Company's portfolio comprised 100 stocks,
compared to 89 holdings at the end of the financial year (31st October 2023).
Of these, 26 were Russian securities, unchanged since the end of the financial
year. The Company's Russian securities now comprise approximately 8% of the
written down value of the portfolio (versus 9% of the portfolio at the time of
the 2023 Annual Report). As mentioned above, the Company's Russian securities
are presently subject to strict sanctions and their valuations have been
discounted accordingly. The Company's holding in the JPM Liquidity Fund is not
included in the above numbers.
Market backdrop
The six months ended 30th April 2024 were positive for the EMEA region, and
for Turkey particularly. However, the region marginally underperformed the
Global Emerging Markets index and lagged further behind the Global Equity
Index. This underperformance relative to global markets was due mainly to the
EMEA region's greater focus on value- and income-oriented stocks, which drags
on relative performance any time growth stocks, especially those related to
technology and artificial intelligence (AI), are in favour with global
investors, as they were during the review period. This factor weighted
particularly heavily on the UAE market.
Regional markets received support from rising oil prices during the review
period. Oil began the period around US$75 pbbl, and ended the half year closer
to US$90 pbbl, as the OPEC+ group agreed to limit production by a further 1.5m
barrels per day during 2024. This means that daily oil production will be a
total of 3.0m bbl lower than in 2023.
Turkey continues to benefit from a resurgence of interest from international
investors, who are still very underweight this market. But the major driver is
demand from local investors, who use equities as a saving instrument to
protect their savings from devaluation. Investors' enthusiasm was not dampened
by the opposition's victory in municipal elections in Ankara and Istanbul. As
we expected, President Erdogan did not make any subsequent policy concessions,
or even meet with opposition leaders, so the result will probably have few
implications for economic policy. Small, peripheral markets like Slovenia,
Georgia, Kazakhstan and Romania all did reasonably well in the review period,
with financials and energy names leading the way. We expect a significant
contribution to portfolio income from these holdings in late Q224 and Q324,
notably from Kazatomprom, a Kazak supplier of uranium to global markets, with
a 5+% dividend yield.
Several major political developments across the region weighed on investor
sentiment during the review period:
• The Israeli invasion of Gaza continued, and Yemeni forces
sympathetic to the Palestinian cause have had a significant adverse impact on
shipping in the Red Sea. We do not expect the conflict to escalate into
outright war across the Arab world, as almost all region players including
Iran, Iraq, Syria, Egypt, Turkey, Qatar, Saudi Arabia and United Arab Emirates
(UAE), along with the US and other Western governments, are engaged in efforts
to resolve the crisis. However, the conflict has sparked a significant
escalation of global geopolitical tensions and will have long-lasting economic
and political implications across the region and beyond.
• In South Africa, the run-up to parliamentary elections in
late May created major uncertainty for investors.
• Political instability continues in Kuwait, as the Emir
dissolved Parliament due to unresolved disagreements about reform agenda
between legislative and executive powers.
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 Emerging
Markets and Asia Pacific (EMAP) equity research team, which includes
assessments of the longevity of a business's investment case, and the quality
of its management and governance practices.
Our investment approach is permeated by three broad themes:
Commodity sensitivities: EMEA countries are rich in a variety of commodities -
not only oil and gas, but also platinum, gold and copper. We are especially
interested in companies with exposure to the global transition to renewable
energy. For example, the Company is invested in 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), 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 two pharmaceutical companies, South Africa's
Clicks and Hungary's Richter. Clicks focuses on pharmacy, health and beauty
items, while Richter specialises in women's healthcare and wellbeing products.
Technology adopters: Many EMEA countries, especially in Africa, are dogged by
structural challenges which can often seem intractable, given the economic and
fiscal constraints and political uncertainties endemic in the region, so we
seek out companies that are able to 'leapfrog' these challenges, or provide
much-needed consumer services which the market, or governments, have otherwise
failed to supply. For example, Vodafone is empowering consumers in many EMEA
countries with electronic payments systems and mobile access to banking and
insurance services, including in remote areas, thereby removing the need for
customers to travel long distances to access these services. Other portfolio
holdings motivated by this theme include Capitec, a South African bank, and
Polish company InPost. InPost operates an e-commerce platform providing parcel
delivery services.
How have specific sectors and stocks fared over the review period?
Asset allocation detracted from relative performance over the period. Our
overweight to Energy was the most significant detractor. Despite the rise in
oil prices, this sector was undermined by expectations of a potential new
placement of ARAMCO. Health Care, IT and Consumer discretionary did well in
the review period, and our underweights to these sectors had more minor
adverse impacts on relative returns. However, our underweight to materials
added, and gold companies are still outperforming, as they retain their appeal
as a safe haven in volatile, uncertain and conflict-ridden times.
At the country level, performance was supported by our decision not to invest
in Egypt and by our underweights to Kuwait and the Czech Republic. However,
the positive impact of these decisions was more than offset by our overweight
in UAE, which detracted given the underperformance referenced above. Our
underweight to Turkey meant the ongoing rally in this market proved a further
drag on relative returns over the period.
Stock selection made a positive contribution to relative returns over the past
six months, although this was not quite sufficient to fully offset the adverse
impact of our asset allocation decisions. Our overweight to Tupras, a Turkish
oil and gas producer which we purchased during the review period, was the
largest contributor, as the stock benefited from its defensive nature, ability
to hedge FX risks and generate significant income for shareholders, via
dividend's distribution. Our decisions to hold several out-of-index names, and
to avoid other names within the index, proved profitable and supportive of
relative returns over the period, and we believe this reflects favourably on
our stock selection skills. These out-of-index positions included: Halyk
Savings Bank, a major Kazak bank with an ROE above 25% and a dividend yield
above 7%; Bank of Georgia, another recent acquisition and one of Georgia's
largest banks, with a 20+5% ROE and 4+% dividend yield; and another Georgia
bank, TBC. JSC Kaspi KZ, an out-of-index Kazak fintech company with a 5+%
dividend yield also enhanced performance, as did our decisions to avoid Sasol,
a South African chemical and energy company, due to ESG factor and exposure to
coal/pollution of this Company, SABIC Agri, a Saudi materials company, and
Emirates Telecom, the UAE's major telecoms provider.
The main detractor from returns over the review period at the stock level was
our decision not to hold ACWA power, a Saudi engineering and utilities firm.
We are very wary of this company due its massive leverage and extraordinarily
expensive valuation. We also avoided Saudi Mining Company, due to valuation
and excessive CAPEX plans, and we were underweight Naspers, a South African
internet content company which has an interest in its Chinese counterpart,
Tencent, as this company does not pay an attractive dividend. The stock
rallied during the review period, but we did not expect the rally to be
sustained, so we took the opportunity to close the position.
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.
During the review period, we participated on one initial public offering
(IPO), the listing of Parking, the largest supplier of parking services in
Dubai. This is an infrastructure play, which is well suited to our income
strategy given the company's reasonably high, and predictable, income
distribution policy. We also opened a significant number of other new
positions in addition to Tupras and Bank of Georgia, mentioned above. We
initiated several positions in other bank names, including Poland's Pekao and
PKO, the National Bank of Greece, two Greek regional banks, Eurobank Ergasias
Services and Piraeus, and in two telecom providers, Hungary's Magyar Telekom
and South Africa's MTN Group. We also topped up existing positions in several
bank names, and in ADNOC Gas, a UAE oil services company with a 4+% dividend
yield.
These purchases were funded by the outright sale of a variety of holdings.
These disposals were motivated in part by information gleaned during three
regional trips we took during the review period. We met with the management
teams of many current holdings, as well as some prospective investments. These
discussions led us to dispose of several retail and telecom names whose
investment cases have either run their course or deteriorated. In addition to
the sale of Naspers, mentioned above, we also closed loss-making holdings in
Industries Qatar and Woolworths.
These transactions did not significantly alter portfolio structure 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 continue rising. We
are underweight all other sectors, most notably materials, as we do not see
much value in Petrochemicals at this stage of commodity cycle.
At the country level, our largest active positions are in Greece, Kazakhstan
and UAE, as these markets all offer high income at reasonable valuations. As
we noted in the Annual Report, 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 Kuwait, Turkey and South Africa. In
Kuwait, the latest dissolution of parliament will delay reforms and stifle the
economy's capacity to expand. We view investors in the Turkish market as
excessively bullish on the economic and market outlook and after a very strong
rally so far this year, financial names are now priced at extravagant levels -
2+x price to book value (P/BV) for banks with negative real ROE (ROE less
CPI). We remain sceptical of this market and will continue to avoid it until
we see clear evidence of an improvement in the investment environment. We do
not expect any radical changes or an end to the current economic stagnation
following the loss of the ruling ANC party's overall majority in South
Africa's General Election on 29th May 2024. We have some positions intended to
generate income from this market, but we will not be increasing our overall
country exposure.
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.
Our top 10 holdings by value are:
Rank Stock name Portfolio Weight
%
1. Al Rajhi Bank 4.04
2. The Saudi National Bank 3.37
3. Firstrand Ltd 2.71
4. Saudi Arabian Oil Co (ARAMCO) 2.55
5. Tupras-Türkiye Petrol Rafinerileri 2.27
6. Gold Fields Ltd 2.18
7. Standard Bank Group 2.16
8. Saudi Telecom Co 2.09
9. Powszechny Zakład Ubezpieczen´ (PZU) 1.98
10. Qatar National Bank 1.97
Al Rajhi - Saudi Arabia's largest bank, with a focus on retail business. We
like the long duration of the bank's mortgage business.
The Saudi National Bank - the second largest Saudi bank, focused on corporate
lending. The bank's attractive valuation and steady return on equity (RoE)
make this bank a national leader.
Firstrand -South Africa's largest bank, which we like due to its 20+% RoE and
7+% dividend yield.
ARAMCO - Saudi Arabia's oil giant whose low production costs make it resilient
relative to its competitors. We also like its distribution policy, which aims
to pass on unexpected oil price rises to shareholders.
Tupras - this Turkish oil and gas producer offers exposure to the energy
sector and income, at a relatively low valuation.
Gold Fields - a South African gold mining company which is our key play on the
gold price.
Standard Bank - a South African bank which we like for its well-diversified
exposure to retail and corporate banking.
Saudi Telecom - provides exposure to trend growth in consumption spending in
this economy.
PZU - A Polish general insurance company which we like due to its monopolistic
grasp on the national market, and its 7+ dividend yield.
Qatar National Bank - a leading Qatari bank with an attractive valuation.
Outlook
The economic outlook for the EMEA region is mixed. The OPEC+ group's reduction
in oil supplies is unprecedented and it will support energy companies and the
oil price. (Indeed, we would not be surprised to see oil prices exceed the
US$100 pbbl level over the next 18 months.) However, lower oil production will
slow growth in the Gulf's major oil-producing nations, although the non-oil
sectors of the Saudi and UAE economies are likely to grow by 3-4% over the
year. In case of South Africa, the country risk premium will diminish
post-election, and may lift the market accordingly, but as mentioned above, we
do not expect the election result to have a significant positive impact on the
economy. We expect GDP growth of only 0.5-1.0% this year, although any reforms
to the electricity sector, which has suffered constant blackouts and political
scandal, or transportation, may add 0.5-1.5 percentage points to annual
growth.
Growth in Eastern Europe will be mixed. Greece is likely to see growth of
2-3%, while we expect the Turkish economy to slow in response to a
post-election tightening in monetary policy intended to quell inflation
pressures and support the currency. The Hungarian economy is likely to
accelerate after the authorities' apparent victory over inflation, but the
prospects for the Polish economy are very difficult to call, as tight fiscal
policy will constrain activity, although government handouts to individuals
may stimulate a consumption-led recovery.
We are positive on the earnings outlook for 2024, but less so than consensus.
We expect EPS to be 5-10% higher than the base results for 2023, a respectable
rise, but more cautious than the consensus forecast of 18% EPS growth. We
expect banks to lead the way, as net interest margins remain elevated. The
portfolio's exposure to financials will continue to benefit accordingly. And
with banks comprising almost 40% of the index, this should prove supportive
for the entire market.
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.
Whatever 2024 may hold, 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.
This is 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.
Oleg I. Biryulyov
Investment Manager
13th June 2024
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 2024. 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; climate change.
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 2023. 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 2023 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
13th June 2024
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th April 2024 30th April 2023 31st October 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments
held at fair value through
profit or loss - 1,323 1,323 - (223) (223) - (161) (161)
Net foreign currency losses - (36) (36) - (65) (65) - (72) (72)
Income from investments 429 - 429 360 - 360 641 11 652
Interest receivable and
similar income 21 - 21 182 - 182 209 - 209
Gross return/(loss) 450 1,287 1,737 542 (288) 254 850 (222) 628
Management fee (32) (48) (80) (10) (15) (25) (41) (62) (103)
Other administrative expenses (353) - (353) (135) (30) (165) (467) (30) (497)
Net return/(loss) before
finance costs and taxation 65 1,239 1,304 397 (333) 64 342 (314) 28
Finance costs - - - - - - (1) - (1)
Net return/(loss) before
taxation 65 1,239 1,304 397 (333) 64 341 (314) 27
Taxation (24) - (24) (22) - (22) (35) - (35)
Net return/(loss) after
taxation 41 1,239 1,280 375 (333) 42 306 (314) (8)
Return/(loss) per share
(note 3) 0.10p 3.07p 3.17p 0.93p (0.82)p 0.11p 0.76p (0.78)p (0.02)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 2024 (Unaudited)
At 31st October 2023 405 196 9,772 8,507 18,880
Net return - - 1,239 41 1,280
Dividends paid in the period (note 4) - - - (202) (202)
At 30th April 2024 405 196 11,011 8,346 19,958
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
Year ended 31st October 2023 (Audited)
At 31st October 2022 405 196 10,086 8,201 18,888
Net (loss)/return - - (314) 306 (8)
At 31st October 2023 405 196 9,772 8,507 18,880
(1) 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 2024 30th April 2023 31st October 2023
£'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 19,316 17,651 17,370
Current assets
Debtors 114 59 882
Cash and cash equivalents 677 1,263 1,040
791 1,322 1,922
Current liabilities
Creditors: amounts falling due within one year (149) (43) (412)
Net current assets 642 1,279 1,510
Total assets less current liabilities 19,958 18,930 18,880
Net assets 19,958 18,930 18,880
Capital and reserves
Called up share capital 405 405 405
Capital redemption reserve 196 196 196
Capital reserves 11,011 9,753 9,772
Revenue reserve 8,346 8,576 8,507
Total shareholders' funds 19,958 18,930 18,880
Net asset value per share (note 5) 49.4p 46.8p 46.7p
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th April 2024 30th April 2023 31st October 2023
£'000 £'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 1,304 64 28
Adjustment for:
Net (gains)/losses on investments held at fair value
through profit or loss (1,323) 223 161
Net foreign currency losses 36 65 72
Dividend income (429) (360) (652)
Interest income (21) (182) (209)
Realised gains on foreign exchange transactions (61) (72) (78)
Decrease/(Increase) in accrued income and other debtors (4) 2 (7)
(Decrease)/increase in accrued expenses (77) (44) 132
Net cash outflow from operating activities before dividends,
interest and taxation (575) (304) (553)
Dividends received 353 332 577
Interest received 21 179 209
Overseas withholding tax recovered/(paid) 3 (32) 5
Net cash (outflow)/inflow from operating activities (198) 175 238
Purchases of investments (5,302) (16,675) (19,928)
Sales of investments 5,314 692 3,661
Net cash inflow/(outflow) from investing activities 12 (15,983) (16,267)
Equity dividends paid (202) - -
Interest paid - - (1)
Net cash outflow from financing activities (202) - (1)
Decrease in cash and cash equivalents (388) (15,808) (16,030)
Cash and cash equivalents at start of period/year 1,040 17,064 17,064
Exchange movements 25 7 6
Cash and cash equivalents at end of period/year 677 1,263 1,040
Cash and cash equivalents consist of:
Cash and short term deposits 163 263 39
Cash held in JPMorgan Liquidity Fund 514 1,000 1,001
Total 677 1,263 1,040
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 30th April 2024
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 2023 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 2024.
All of the Company's operations are of a continuing nature.
As reported in the 2023 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. The fair value valuation methodology applied to those
investments held at the 30th April 2024 and 31st October 2023 is in accordance
with the established fair valuation policies and procedures of the Manager,
JPMorgan Funds Limited. This fair valuation was applied to the last traded
price on 25th February 2022 for locally held stock on the MOEX (i.e. when the
market was still trading normally) using a 99% provision for valuation
purposes. Similarly, for the American Depositary Receipts and Global
Depositary Receipts the fair value adjustment has been applied to the last
trade price on 2nd March 2022 and a 99% provision for valuation applied. 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 2023.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
30th April 2024 30th April 2023 31st October 2023
£'000 £'000 £'000
Return/(loss) per share is based on the following:
Revenue return 41 375 306
Capital return/(loss) 1,239 (333) (314)
Total return/(loss) 1,280 42 (8)
Weighted average number of shares in issue 40,436,176 40,436,176 40,436,176
Revenue return per share 0.10p 0.93p 0.76p
Capital gains/(losses) per share 3.07p (0.82)p (0.78)p
Total return/(loss) per share 3.17p 0.11p (0.02)p
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
30th April 2024 30th April 2023 31st October 2023
£'000 £'000 £'000
2023 final dividend of 0.5p (2022: nil) 202 - -
Total dividends paid in the period/year 202 - -
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 2024 30th April 2023 31st October 2023
Net assets (£'000) 19,958 18,930 18,880
Number of shares in issue 40,436,176 40,436,176 40,436,176
Net asset value per share 49.4p 46.8p 46.7p
6. Fair valuation of investments
The fair value hierarchy disclosures required by FRS 102 are given below:
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th April 2024 30th April 2023 31st October 2023
Assets Liabilities Assets Liabilities Assets Liabilities
£'000 £'000 £'000 £'000 £'000 £'000
Level 1 17,807 - 16,044 - - -
Level 3(1) 1,509 - 1,607 - 1,558 -
Total value of investments 19,316 - 17,651 - 1,558 -
(1) Following Russia's invasion of Ukraine and closure of the Moscow
Exchange (MOEX) to overseas investors, including the Company, a fair value
valuation method was applied to the Company's holdings in Russian stocks.
Therefore the Company has applied an alternative valuation method. For its
MOEX local stock, a fair value adjustment has been applied to the last trade
price on 25th February 2022. The price of these stocks has been determined by
taking the live market price as at 25th February 2022 and applying a 99%
provision for valuation and for American Depositary Receipts and Global
Depositary Receipts a fair value adjustment has been applied to the last trade
price on 2nd March 2022.
7. Analysis of Changes in Net Cash
As at Other As at
31st October 2023 Cash flows non-cash charges 30th April 2024
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 39 99 25 163
Cash equivalents 1,001 (487) - 514
Net Cash 1,040 (388) 25 677
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
14(th) June 2024
For further information, please contact:
Paul Winship
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
END
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factsheets and portfolio information can also be found.
Neither the contents of the Company's website
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