JPMorgan Emerging Europe, Middle East and Africa Securities (JEMA), formerly JPMorgan Russian Securities, announced its annual results for the period ended 31 October 2023. The company’s performance over the 12 month period was flat, however the managers point out that in the eight months from 1st March 2023 to 31st October 2023, the company’s net asset value increased by 2.2%, an out-performance of 1.9% against the reference index. This is relevant as the company’s new 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 ) applied for this eight month period, enabling it to hold investments that could be traded and generate income.
On a share price total return basis, the company returned 10.0% in the eight month period from 1st March to 31st October 2023. As at 31st October 2023, the company’s share price was 119.9 pence, an increase of 51.8% in the 12 month period. As at 19th January 2024 the share price was 130.0 pence.
The company provided an update on its portfolio given the changes that it has undertaken over the past year. Its new investments acquired in this reporting period are considered to be in high quality companies, with a tilt towards value and income and a focus on maximising total return for shareholders. The new investments have also changed the portfolio’s geographical focus with Saudi Arabia, South Africa and UAE representing 31.7%, 23.8% and 14.2% of the portfolio respectively. The tragic events in Ukraine since Russia’s military invasion commenced on 24th February 2022 continue to cast a shadow over the global economy and the valuation of the stocks that are hold in Russia were reduced to nominal values last year. The strict economic sanctions that followed the invasion have continued to reduce the valuation of the company’s Russian assets in this 12 month reporting period to 31st October 2023. Additionally, the rouble has materially reduced in value against sterling and other currencies.
Discussing its Russian exposure in more detail the report noted:
“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. In August and October 2023, the board released RNS announcements referring to the tender offers received from Detsky Mir and Magnit, two companies in the company’s portfolio, and to the company’s participation in the Detsky Mir tender offer. The board reiterates that where it is permissible and beneficial for shareholders under the current sanctions regime the Company’s Investment Manager will seek to participate in such corporate actions. On that basis the company participated in the Detsky Mir tender offer which was being undertaken in Detsky Mir’s restructuring from being a public listed company to a private company. The company’s application was successful and it received proceeds of RUB 286.2 million, (approx. £2.35 million based on exchange rates at that time).
“The Board is also aware that some western institutions have been able to sell Russian stockholdings at a substantial discount to local exchange values where they are held through depository receipts in exchange for western currencies. Most of our holdings are held directly on the local exchange and some depository receipts. Where permissible and beneficial for shareholders under the current sanctions regime the Company’s Investment Manager may consider such actions.”
Discussing the outlook for the fund, chairman Eric Sanderson added:
“With little prospect of Russia’s invasion of Ukraine being resolved in the foreseeable future or limiting of the existing strict economic sanctions, the company’s new investment objective at least helps the company steer through this very difficult period. Although cognisant of the company’s continuing holdings in Russian companies, the challenge for the board is to use the new investment objective to grow the company’s assets in a way that promotes the success of the company for the benefit of the members as a whole.
“The board is confident that, with the assistance of the JPMorgan EMAP team over the long term and a supportive political and regulatory environment, its new investment objective is achievable.”
JEMA : Only way is up for JPMorgan Emerging Europe, Middle East and Africa