JPMorgan Russian hopes to expand its remit, morphing into JPMorgan Emerging Europe, Middle East & Africa Securities Plc [which is a bit of a mouthful]. Shareholders would need to approve the proposal and there is a meeting planned for 23 November 2022 to do that.
As at 30 September 2022, the portfolio was valued at £19.1m and contained 27 investments in Russian companies or other companies which operate principally in Russia valued at just shy of £2m (about 10.4% of the company’s gross assets) plus just over £17m of cash.
The board says that it is “conscious of the significant uncertainty regarding the length of time that the current sanctions regime will exist and the significant risk that the current losses in the company would crystallise in the event of a winding up or affect shareholder value in the context of a merger.” It wants to carry on but with a new mandate. [one alternative might be to distribute the bulk of the £17m to shareholders, keeping just enough resources to maintain the fund on a skeleton basis, delist it, cut the board and other overheads to a bare minimum and give shareholders the option of donating their rump investment to a Ukranian charity.]
The board’s proposal is to adopt a new objective an policy to invest in a diversified portfolio of quoted investments in Central, Eastern and Southern Europe (including Russia), the Middle East and Africa, including those markets that are considered as emerging markets according to the S&P Emerging Europe, Middle East and Africa Index.
The manager would remanin unchanged, Oleg Biryulyov (who has managed the portfolio since JPMorgan Russian’s launch) would continue to manage the portfolio. He has been the co-manager of the JP Morgan Middle East and JP Morgan Africa funds since 2017 and has been the portfolio manager for JP Morgan Emerging Europe fund since 2004. Going forward, Mrs Pandora Omaset, currently the lead portfolio manager for the JP Morgan Africa fund, would be the new co-manager.
The management fee of 0.9% of NAV has been waived by the manager since 28 February 2022. If the proposals are approved, the management fee will become payable going forward but, until further notice, the investments in Russian securities (including Russian related GDRs and ADRs) will continue to be excluded from the company’s net assets for the purposes of this calculation.
There is no continuation vote until 2027. The performance triggered tender offer in 2027 will need to be rethought and new proposals will be forthcoming.
[We do not have a problem with the idea of a JPMorgan-managed competitor to Baring Emerging EMEA Opportunities, but this fund will be too small. Will existing shareholders be happy to see the option value in their Russian exposure diluted by new share issuance? Would all new investors want to end up with Russian exposure or would they object on ethical grounds? We think the proposals need to go further, with a new class of share created to represent the Russian exposure, ring-fencing it from the new fund. We would also like at least some recognition of the misery being inflicted on Ukraine by Russia in announcements by the company.]
JRS : JPMorgan Russian to expand remit