Final Results

RNS Number : 7484U

JPMorgan Russian Securities PLC

20 January 2017

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN RUSSIAN SECURITIES PLC

ANNOUNCEMENT OF FINAL RESULTS

The Directors of JPMorgan Russian Securities plc announce the Company's results
for the year ended 31st October 2016

HIGHLIGHTS

-     Total return on net assets 56.2% (benchmark 50.8%)

-     Ordinary dividend 14.00p (2015:13.00p excluding special dividend)

chairman's statement

Performance and overview

The Company's positive performance continued into the second half of the year reflecting the general improvements in the Russian market following the rise in the price of oil.

It is pleasing to report that the Company's return on a net assets basis outperformed the benchmark by 5.4% returning 56.2%. The return to shareholders also outperformed the benchmark, with a rise of 53.1%. The Company's benchmark during the period under review was the MSCI Russia 10/40 Equity Indices Index and gained 50.8%.

Despite these positive movements, the discount at which the Company's shares trade relative to its net asset value widened to 16.4% at the year end. Factors that led to the widening of the discount over the year included the perceived increased political risk associated with investment in Russia and also the general widening of discounts in emerging markets as they fell out of favour.

As at 17th January 2017 the discount stood at 11.2%. Since the year end to 17th January 2017 the benchmark index rose 15.1% and the Company's return to shareholders rose 21.5%.

During the Company's financial year under review Russia's economy recorded some improving data with the increase in oil prices helping the Ruble to appreciate. The Central Bank of Russia interest rate reductions helped bring some feeling of stabilisation. Although corporate earnings in Russia have been under pressure in 2016 and the Company's dividend income declined, the longer term outlook for dividend income remains positive.

Russia's external politics with Western powers continued to be tense as its involvement in Syria proved controversial, and relations with Turkey remained fragile. However, although far too early to comment with any certainty, the impact of the Trump presidential victory in the US may lead to some thawing of relations.

The United States and European Union economic sanctions due to Russia's involvement in the conflict in Ukraine remain in force with an extension to March 2017 signed by President Obama in spring 2016. JPMorgan Asset Management's compliance & investment functions monitor investments and the Company is assured by J.P. Morgan that processes are in place to ensure that the Company remains compliant with the current sanctions regime. In addition, the political and economic developments and risks in the region are closely monitored. The Board carried out regular reviews of the Company's risk profile during the year and you will see details of what we judge to be the key risks set out on page 18 of the Annual Report and Accounts. The Company's Manager maintains a diversified portfolio which adheres to the Company's investment and risk control guidelines.

Objective and Strategy of the Company

The Board holds a strategy day each year during which it reviews the external environment in which the Company operates and other major factors affecting the Company. This year we paid particular attention to the political and economic environment, the Company's upcoming continuation vote and feedback from major shareholders.

As referred to in the Investment Manager's Report, at the Company's AGM, the shareholders approved a resolution to widen the Company's Investment Objectives. Later in the year, after consulting with major shareholders, on 28th October 2016 the Company also announced that the benchmark would be changed to the RTS Index from 1st November 2016. This was because the RTS Index is a more appropriate benchmark for the Company as it includes a wider range of stocks, more accurately reflecting the universe in which the Company invests. This is particularly relevant as the previous benchmark, MSCI Russia 10/40 Equity Indices Index in sterling terms, consists of a significantly narrower range of companies than that offered by the market in Russia and its former states.

Continuation Vote

At the Company's General Meeting on 27th January 2012, a resolution was passed requiring the Company to put a continuation vote to shareholders every five years. Therefore, a continuation vote will be put to shareholders as an ordinary resolution at the forthcoming Annual General Meeting (AGM) to be held on 7th March 2017. Given the positive performance returns highlighted above, and after considering the risks associated with investments in Russia your Board recommends to shareholders that they vote in favour of the Company continuing as an investment trust for a further five year period.

On the 4th January 2017 the Board of the Company announced that, following consultation with the Company's large shareholders and its advisers, it plans to introduce, subject to the passing of a resolution in favour of the Company's continuation as an investment trust at the Company's AGM on 7th March 2017, a measure to oblige the Board to make a tender offer to shareholders for up to 20% of the outstanding share capital at NAV less costs and less a discount of 2% if, over the next five years (from the start of the current financial year being 1st November 2016), the Company's net asset value total return in sterling on a cum income basis is below the total return of the benchmark in sterling terms over the 5-year period.

Any tender offer will also be conditional on shareholders approving the continuation vote in 2022. The Board believes this measure is in shareholders' interests as it further incentivises the manager to focus on long-term investment performance.

The Board also considered whether to include a discount related condition when proposing a tender offer but felt that the higher levels of volatility in Russia, both political and market related, meant that this measure was inappropriate. Given the current reliance that the Russian economy has on the oil price, the Board believes it would be hard to influence the discount if there was a global commodities slump, or significant geopolitical pressures affecting Russia and political sentiment. As the Board has stated in the past, the Board monitors discount movements closely and, subject to market conditions, the share repurchase authority will be used to assist in managing the imbalance between supply and demand when the discount widens for Company-specific reasons.

Dividends

Revenue for the year, after taxation, was £8,096,000 (2015: £10,268,000) and the revenue return per share, calculated on the average number of shares in issue, was 15.47 pence (2015: 19.60 pence). Based upon the revenue generated by the portfolio, an interim dividend of 6.0 pence per share in respect of the year ended 31st October 2016 was paid on 28th October 2016. Also in respect of the year ended 31st October 2016, the Board proposes a final dividend of 8.0 pence making a total of 14.0 pence per share for the year (2015: 13.0 pence per share, excluding special dividends of 4.0 pence per share). The final dividend is proposed to be paid on 10th March 2017 to ordinary shareholders on the register at the close of business on 10th February 2017, if approved by shareholders the final dividend will amount to £4,187,000 (2015: £6,804,000). The Company's objective remains that of capital growth, and the payment of dividends to investors is dependent on the level of dividend distributions from the companies in the portfolio. The Board reviews income expectations throughout the year. Should income receipts permit the Board will continue to make payment of an interim dividend as well as a final dividend in 2017.

Discount Control

The Board's objective remains to use the share repurchase authority to assist in managing any imbalance between supply and demand for the Company's shares, thereby reducing the volatility of the discount. During the period the discount ranged from 13.8% to 18.2%. Earlier this year the Board reviewed the Company's discount control policy in light of the high market volatility. It concluded that buybacks of shares should be considered when the Company's discount was above 10% (previously 8%) and the absolute level of the Company's discount should be taken into account, together with the relative level of discount amongst peers investing in emerging markets. After regular and careful consideration during the course of the year the Board decided against the buying back of shares. It concluded that buybacks would be ineffective in reducing the discount, given the particular uncertainties around prospects for the Russian market and the generally widening discounts for emerging markets.

The Board will seek authority to renew the Company's share issuance and buyback powers at the forthcoming AGM.

Board of Directors

As referred to in my Chairman's Statement in the Company's Half Year Report and Accounts to 30th April 2016, following Lysander Tennant's retirement as a Director at the Company's AGM in March 2016, a search for a new director to join the Board was conducted by an independent non-executive search consultancy. On the 27th July 2016 we were delighted to announce the appointment of Tamara Sakovska as a new Director of the Company, effective from 1st August 2016. You can see the details of Tamara's experience on page 22 of the Annual Report and Accounts. In compliance with corporate governance best practice, all Directors will be standing for reappointment at the forthcoming AGM. Following the Company's annual evaluation of the Directors, the Chairman, the Board and its Committees, the Board recommends to shareholders that all Directors be reappointed.

The Company's Directors fees were last increased with effect from 1st November 2013. The Board has agreed that, bearing in mind the time since the last increase and the extra burden placed by new regulations and developments it was appropriate to increase directors fees effective from 1st November 2016 as follows: Board Chairman's fee increased by £2,500 (from £35,000 to £37,500), Audit Committee Chairman by £3,000 (from £27,000 to £30,000), Directors by £2,000 per annum (from £23,000 to £25,000).

Investment Manager

The Board pays particular attention to the way in which the Trust is run and the cost of so doing. As part of the Board's scrutiny of the management of the Trust the Investment Manager is subject to an annual review including performance record management processes, investment style, resources and risk control mechanisms. After a careful review the Board feeds back to the Manager any areas where it feels changes are needed or improvements could be made.

Annual General Meeting

The Company's AGM will be held on Tuesday, 7th March 2017 at 12.00 noon, at The Honourable Society of the Inner Temple, Treasury Office, Inner Temple, London EC4Y 7HL. In addition to the formal part of the meeting, there will be a presentation from Oleg Biryulyov, who will be available to answer questions on the portfolio and performance. There will also be an opportunity to meet the Board, the Investment Manager and representatives of JPMF and JPMAM. I look forward to seeing as many of you as possible at this meeting. Shareholders are asked to submit in writing any detailed or technical questions that they wish to raise at the AGM in advance to the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP. Alternatively you can lodge questions on the Company's website at www.jpmrussian.co.uk.

Outlook

The price of oil is a major determining factor for the Russian economy and if recent increases continue it seems likely that this will have a positive economic impact on the Russian economy and stock market in 2017. The Investment Manager has maintained his consistent approach of investing in well managed companies with strong balance sheets. He continues to believe that the equity market in Russia provides a good long term investment opportunity if the right stocks are selected. However, economic sanctions against Russia remain and the political outlook is uncertain on many fronts, including the Middle-East, USA and Europe. These significant geopolitical and economic issues will continue to impact the Russian market. There are some signs of improvement in the domestic economy with a stable outlook for fiscal policy and expected growth in Russia's GDP. Thus, the outlook remains uncertain but with some potential for upside if the oil price continues to strengthen and economic and political stability are maintained.

Gill Nott

Chairman

20th January 2017

Investment manager's report

Market Review and Performance

The Company delivered strong returns to shareholders in the financial reporting year to 31st October 2016, as the market benefited from a degree of normalisation of trade. The Company's net asset value (NAV) was up 56.2% on a total return basis, and the return to shareholders was 53.1% in sterling terms. This resulted in the Company outperforming its benchmark, the MSCI Russian 10/40 Equity Indices Index by 5.4% on a net asset basis. As referred to in the Chairman's Statement, effective from the 1st November 2016 the Company's benchmark was changed to the RTS Index (sterling).

In the market, the start of the period under review was much like the beginning of the previous year, with a global risk sell-off and oil price weakness leading to a slide for Russian equities. The turnaround for the Russian market came with a 90% jump in the oil price (Brent crude) from the lows of February 2016 to the middle of June 2016. At the same time, sentiment was lifted by positive newsflow as economic conditions stabilised: The Ruble appreciated by 10%; the Central Bank of Russia cut rates by 1 percentage point; the current account balance stayed positive and domestic consumption showed signs of bottoming out. Earnings revisions have been mixed so far, but an increase in payout ratios has helped to improve the dividend yield of the market. The exceptionally large dividends the Company received from Surgutneftegaz in the prior year, were not repeated in 2016.

Asset allocation and stock selection added 3.5% and 2.7% respectively to performance. The underweight positions in telecommunications and utilities were contributors to the positive stock selection performance. In the portfolio, the companies that contributed to returns over the period were broad-based. In the financials sector, our longstanding exposure to Sberbank, the dominant banking franchise in Russia and a clear market leader, was positive, as was our avoidance of VTB, the second-largest bank, which has state involvement. Similarly, we benefited from an underweight to telecoms giant Rostelecom, Russia's leading long-distance telephony company, which reflected our concerns around the economics and governance of the business, which are not expected to change fundamentally yet. Other key positions, in Magnit, Russia's largest retailer, and Ros Agro, an industry leader in agricultural commodities and food, also contributed positively.

Detractors were also spread across companies we hold and like, and those where we were underweight. In the energy space, we were underweight Lukoil for most of the year given our preference for other companies, and in materials, we held low exposure to diamond mining company Alrosa. Both of these positions hurt us when the prices moved sharply up. Another energy company, Surgutneftegas, paid a large dividend during the year, but failed to keep up with the market rally. The consumer food producer Cherkizovo was a disappointment, with its earnings outlook deteriorating over the period. Finally, internet stock Qiwi was a stock selection mistake, as we realised the company did not offer the quality and prospects we had believed.

Portfolio positioning

The widening of the Company's Investment Policy agreed by shareholders at the Company's AGM in March 2016 provides a broader investment universe, allowing the Company to invest up to 10% of its gross assets in companies that operate or are located in former Soviet Republics. This has allowed the manager to establish positions in new names, including technology companies EPAM and Luxoft, and Georgia's TBC Bank. At the Company's year end these companies represented 3.71% of the portfolio value. Further acquisitions will be considered subject to availability and the Company's Investment Regulations Guidelines. The Company has reduced exposure to Surgutneftegaz, a long-held position in the portfolio, due to the weak outlook for earnings and dividend payments.

Energy holdings are high relative to the history of the Company. Large holdings in Gazprom, Rosneft and Lukoil reflect the Manager's view that these companies are attractively valued with a good outlook for dividends while a position in Novatek reflects the Manager's expectations of superior production growth and cash flow generation.

Investment Management Team

The Company's Investment Management Team is part of J.P. Morgan Asset Management's Emerging Markets and Asia Pacific Equities team (EMAP). The EMAP team is headed by Richard Titherington and consists of around 100 investment professionals with approximately USD 90 billion under management. As referred to in the Chairman's Statement of the Company's Half Year Report and Accounts to 30th April 2016, Sonal Tanna transferred into another area of EMAP and is no longer involved as an Investment Manager of the Company. A team of Investment professionals within EMAP are available to support me in managing the Company' s portfolio. In addition a succession plan helps ensure a process for the continuity of Investment Management services to the Company.

Outlook

We believe that economic stabilisation is underway in Russia, with positive implications for Russian equities. At the same time, we anticipate reduced volatility in the oil price over the next 12-18 months as lower investment over the last three years starts to cap global production growth. Greater stability of the oil price will help to improve the outlook for the Ruble and for earnings growth, particularly in US dollar and sterling terms.

Two years on from the introduction of the sanctions, we have started to see early signs of a recovery in domestic demand. The real estate sector was the early indicator, with demand improving for mortgage products. The market for cars has also steadied and we expect growth in 2017. An increase in consumer demand should ultimately feed through into a resumption of corporate long-term investment plans, in consumer sectors and then beyond, supported by falling interest rates.

We continue to see scope for reforms and hope that slowly but surely further liberalization and restructuring of the Russian economy will take place. Privatization can be useful tool for Government to address budget constraints and we would anticipate a number of such transactions in the coming year.

On the dividend front, Russia is beginning to deliver on its promise of becoming a higher-yielding market, and with the payout ratio less than 50% at the market level there is further scope for improvement. It is important to highlight that the state is becoming more active as a shareholder, so that state-controlled companies are now willing to commit to higher payout ratios.

The domestic political outlook currently looks stable in Russia. Although we would expect to see some rotation of specialists in the government and presidential administration, we think the senior leadership in the country will remain unchanged for the foreseeable future. Parliament elections in September ran smoothly as expected, although surprisingly, United Russia won a landslide victory despite the difficult economic environment. This should allow the implementation of tougher reforms in the next couple of years prior to the Presidential elections in 2018 and supports our view of a stable outlook for fiscal policy. The global political outlook would appear to be improving somewhat for Russia, although there are still many uncertainties whilst western sanctions continue, and the conflict in Syria heightens tensions generally.

Based on the comments above we hope that slowly but surely further liberalisation and restructuring of the Russian economy will take place. For investors willing to accept the current level of country risk, we believe that current equity valuations are attractive.

Oleg I. Biryulyov

Investment Manager

20th January 2017

Principal Risks

The Directors confirm that they have carried out an assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified and the ways in which they are managed or mitigated are summarised as follows:

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company and the Company's actions to manage the risks.

In the year under review the Board monitored the risks arising which included continuing sanctions against Russia and the significant falls in the price of oil and valuation of the Ruble which have impacted market sentiment.

These key risks fall broadly under the following categories:

• Investing in Russia: Investors should note that there are significant risks inherent in investing in Russian securities not typically associated with investing in securities of companies in more developed countries. In terms of gauging the economic and political risk of investing in Russia, it frequently appears in the higher risk categories when compared with most Western countries. The value of Russian securities, and therefore the net asset value of the Company, may be affected by uncertainties such as economic, political or diplomatic developments, social and religious instability, taxation and interest rates, currency repatriation restrictions, crime and corruption and developments in the law or regulations in Russia and, in particular, the risks of expropriation, nationalisation and confiscation of assets and changes in legislation relating to the level of foreign ownership.

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. The Board acknowledges the negative impact of sanctions on the wider market although the current sanctions regime has not prevented the Company from operating within its investment guidelines.

• 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 shares are said to be trading at a discount. The widening of the discount can be seen as a disadvantage of investment trusts which could discourage investors. Although it is common for an investment trust's shares to trade at a discount, the current sanctions regime and recent large falls in the price of oil and value of the Ruble have negatively impacted market sentiment. 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.

• Investment Under Performance and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies. 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 investment managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile.

Possible actions 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. 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 investment manager or several members of the wider investment management team could result in a short term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel.

• Operational and Cyber Crime: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Under the terms of its agreement, the Depositary has strict liability for the loss or misappropriation of assets held in custody. See note 19(c) of the Annual Report and Accounts for further details on the responsibilities of the Depositary. Details of how the Board monitors the services provided by JPMF and its associates and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report on pages 25 and 29 of the Annual Report and Accounts. The threat of Cyber attack is increasing and regarded as having the ability to cause 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 Deloitte and reported every six months against the AAF standard.

• Board Relationship with Shareholders: The risk that the Company's strategy and performance does not align with shareholders expectations is addressed by the Manager and includes the organisation of a programme of visits to major shareholders, and the provision of an extensive range of investor information including nationwide presentations by sales teams. Feedback from shareholders is received directly and via brokers which is fed back to the Board regularly.

• Political and Economic: Changes in financial or tax legislation, including in the European Union, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital. A widening of the capital controls recently introduced by the Russian Government could negatively impact the Company. The introduction of limitations on the ability of Russian companies to distribute dividends to foreign companies could materially reduce the Company's revenue and amount available for distribution to shareholders.

• Regulatory and Legal: Breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. Loss of investment trust status could lead to the Company being subject to tax on capital gains. The Directors seek to comply with all relevant regulation and legislation and rely on the services of its Company Secretary, the Manager, and its professional advisors to monitor compliance with all relevant requirements.

• Market and Financial: The Company's assets consist of listed securities and it is therefore exposed to movements in the prices of individual securities and the market generally. The Board considers asset allocation and stock selection on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager. The recent significant falls in the price of oil and devaluation of the Ruble have had a negative impact on the Company's NAV. The financial risks faced by the Company include market price risk, interest rate risk, foreign currency risk, liquidity risk and credit risk. Further details are disclosed in note 19 on pages 53 to 57 of the Annual Report and Accounts. 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. As can be seen in Note 18 on page 52 of the Annual Report and Accounts, all the Company's assets are categorised as Level 1 as they have quoted prices in an active market.

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 accounts 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 accounts 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.

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; and

• The Directors confirm that, taken as a whole, the annual report and accounts are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

• 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 it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, business model and strategy of the Company.

The accounts are published on the www.jpmrussian.co.uk 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 Auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditors accept 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.

For and on behalf of the Board
Gill Nott
Chairman

20th January 2017

statement of comprehensive income

for the year ended 31st October 2016

	2016			2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair value through profit or loss	-	94,420	94,420	-	(43,673)	(43,673)
Net foreign currency gains	-	1,166	1,166	-	254	254
Income from investments	11,087	-	11,087	13,590	-	13,590
Interest receivable	22	-	22	8	-	8
Gross return/(loss)	11,109	95,586	106,695	13,598	(43,419)	(29,821)
Management fee	(435)	(1,739)	(2,174)	(397)	(1,587)	(1,984)
Other administrative expenses	(913)	-	(913)	(840)	-	(840)
Net return/(loss) on ordinary activities before taxation	9,761	93,847	103,608	12,361	(45,006)	(32,645)
Taxation	(1,665)	348	(1,317)	(2,093)	324	(1,769)
Net return/(loss) on ordinary activities after taxation	8,096	94,195	102,291	10,268	(44,682)	(34,414)
Return/(loss) per share	15.47p	179.98p	195.45p	19.60p	(85.31)p	(65.71)p

Statement of Changes in equity

for the year ended 31st October 2016

	Called up	Capital
	share	redemption	Other	Capital	Revenue
	capital	reserve	reserve	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st October 2014	526	75	47,764	181,024	7,029	236,418
Repurchase and cancellation of the Company's own shares	(2)	2	(560)	-	-	(560)
Net (loss)/return on ordinary activities	-	-	-	(44,682)	10,268	(34,414)
Dividends paid in the year	-	-	-	-	(6,804)	(6,804)
At 31st October 2015	524	77	47,204	136,342	10,493	194,640
Net return on ordinary activities	-	-	-	94,195	8,096	102,291
Dividends paid in the year	-	-	-	-	(12,037)	(12,037)
At 31st October 2016	524	77	47,204	230,537	6,552	284,894

¹ These reserves form the distributable reserves of the Company and may be used to fund distribution of profits to investors via dividend payments.

statement of financial position

at 31st October 2016

	2016	2015
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	279,865	191,910
Current assets
Debtors	494	552
Cash and cash equivalents1	5,150	4,330
	5,644	4,882
Current liabilities
Creditors: amounts falling due within one year	(615)	(2,152)
Net current assets	5,029	2,730
Total assets less current liabilities	284,894	194,640
Net assets	284,894	194,640
Capital and reserves
Called up share capital	524	524
Capital redemption reserve	77	77
Other reserve	47,204	47,204
Capital reserves	230,537	136,342
Revenue reserve	6,552	10,493
Total shareholders' funds	284,894	194,640
Net asset value per share	544.3p	371.9p

¹ This line item combines the two lines of 'Investment in liquidity fund held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the year ended 31st October 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.

Company registration number: 4567378.

Notes to the financial statements 

for the year ended 31st October 2016

1.     Accounting policies

(a)   Basis of accounting

�The financial statements are prepared 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 November 2014.

All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis.

2.     Dividends¹

(a)   Dividends paid and proposed

		2016	2015
		£'000	£'000
	Dividend paid
	2015 final dividend of 13.0p (2014: 13.0p)	6,804	6,804
	2015 special dividend of 4.0p (2014: nil)	2,093	-
	2016 interim dividend of 6.0p (2015: nil)	3,140	-
		12,037	6,804
	Dividend proposed
	2016 final ordinary dividend of 8.0p (2015: 13.0p)	4,187	6,804
	2016 special dividend of nil (2015: 4.0p)	-	2,093

The dividend proposed in respect of the year ended 31st October 2016 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 2017.

(b)  Dividend 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 £8,096,000 (2015: £10,268,000).

		2016	2015
		£'000	£'000
	2016 interim dividend of 6.0p (2015: nil)	3,140	-
	2016 final ordinary dividend of 8.0p (2015: 13.0p)	4,187	6,804
	2016 special dividend of nil (2015: 4.0p)	-	2,093
	Total dividends for Section 1158 purposes	7,327	8,897

¹ All dividends paid and proposed in the period are funded from the revenue reserve.

The revenue reserve after payment of the final dividend will amount to £2,365,000 (2015: £1,596,000).

3.     Return/(loss) per share

		2016	2015
		£'000	£'000
	Revenue return	8,096	10,268
	Capital return/(loss)	94,195	(44,682)
	Total return/(loss)	102,291	(34,414)
	Weighted average number of shares in issue during the year	52,337,112	52,379,071
	Revenue return per share	15.47p	19.60p
	Capital return/(loss) per share	179.98p	(85.31)p
	Total return/(loss) per share	195.45p	(65.71)p

4.     Net asset value per share

		2016	2015
	Net assets (£'000)	284,894	194,640
	Number of shares in issue	52,337,112	52,337,112
	Net asset value per share	544.3p	371.9p

5.         Status of announcement

2015 Financial Information

The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 31st October 2015 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.

2016 Financial Information

The figures and financial information for 2016 are extracted from the Annual Report and Accounts for the year ended 31st October 2016 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 - 020 7742 4000

20 January 2017

ENDS

Annual Report and Accounts

The Annual Report and Accounts will be posted to shareholders on or around 30 January 2017 and will shortly be available on the Company's website (www.jpmrussian.co.uk ) or in hard copy format from the Company's Registered Office, 60 Victoria Embankment  London EC4Y 0JP.

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report is also available on the Company's website at www.jpmrussian.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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