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JPMorgan Russian underperforms falling benchmark, fees cut

JPMorgan Russian announced its results for the period that ended on 31 October 2014 on 27 January. Unsurprisingly, given the political and economic backdrop, it wasn’t a great year for Russian equities, the MSCI Russian 10/40 Equity Indices Index, fell 21.0% over the year. However the return to shareholders and the net asset value total return underperformed the benchmark index, with returns of -28.8% and -26.7% respectively. The Board took special steps to confirm that the Company was compliant with all sanctions in place.

The discount widened to 14% from 11.3%. The Board operates a policy under which the Company intends, subject to market conditions, to buy shares at discounts above 8% to achieve this. Over the course of the reporting year during periods of heightened volatility in the Russian market the Board has refrained from implementing share buybacks when the discount widened beyond 8%, as in the Board’s opinion purchases of shares were unlikely to assist in stabilising the discount.

The dividend has been cut from 15.3p to 13p in response to a big fall in revenue generated by the fund.

The management fee has been cut to 1% of net assets, with effect from 1 November 2014.

Oleg Biryulyov’s manager’s report says that stock selection was the principal driver of the fund’s underperformance of its benchmark. He says the main driver for this underperformance was the overweight positions in domestic consumer related stocks and small cap names, which represented approximately half of the Company’s NAV at year end. The stocks responsible for the underperformance during the year included Tinkoff Credit Systems, Bashneft and Sistema holdings. He has also taken a decision to avoid state controlled and poorly regulated sectors such as utilities.

JRS : JPMorgan Russian underperforms falling benchmark, fees cut

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