Half-year Report

RNS Number : 0026Q

JPMorgan Russian Securities PLC

15 June 2020

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN RUSSIAN SECURITIES PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED
30TH APRIL 2020

Legal Entity Identifier:  549300II3MHI98ZLVH37

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance and Overview

The turmoil in global financial markets caused by the Coronovirus (Covid-19) pandemic has obviously had a serious impact on the results for this half year although it was not until the final two months of the half year that the effects of the pandemic really began to be felt. Very early on, and well before the UK lockdown, JPMorgan introduced special work practices with the majority of people working from home. As the crisis progressed the Board was kept regularly updated on the Company's progress and events in Russia. It has had a number of special briefings from the Investment Manager and the Board has been delighted by the extent to which the whole team at JPMorgan has been able to function effectively through this very difficult period.

The influence of the pandemic on the economy of Russia has been significant, and as this report is being written the full impact on the Russian economy cannot be gauged as they are still experiencing high case levels and it is not yet clear when the pandemic will subside. At the beginning of the period under review there was relatively positive outlook for the Russian market but this ended abruptly in February with firstly the disagreement between Russia and other OPEC countries that led to a steep decline in oil prices, and then late in February the rapid spread of the Covid-19 pandemic led to a crash in global equity markets.

There is some suggestion that the impact of the virus on the Russian economy may not be as harsh as in most western economies as it has fewer small companies and a relatively smaller services sector. However, Russia is contending with the unprecedented fall in oil prices and all that implies for an economy which is highly dependent on energy exports. Furthermore as a result of the severe business interruption in the country there is likely to be a significant rise in unemployment, already higher than at any time in the past four years. Consumer spending could contract by as much as 25 %. All of this will almost certainly lead to a severe economic downturn, despite Government support mechanisms and the reduction of interest rates by the Russian Central Bank. Further details of the impact of the pandemic on the portfolio are provided in the Investment Managers' Report on page 9.

During the six months ended 30th April 2020 the Company's net asset value on a total return basis decreased by 19.1%, marginally lower than the Company's benchmark (RTS index) which was negative -18.0% The Company's total return to shareholders, was -18.5%, taking into account the stock price movement and dividend paid over the period. It should be remembered that in the year to 31st October 2019 the company recorded a rise in total return to shareholders of 45.4% including a dividend yield of 5%. Even with the dramatic fall in value that we have seen over the last few months the share price of the Company at the end of the period was only 7% below where it was at the same time last year, which whilst disappointing is testament to a strong portfolio. Looking at returns on a longer term basis of three and five years the Company is still showing strong positive returns.

The Company's discount to net asset value has remained remarkably steady between 10% and 15%, with only one major outlying movement in the depths of the crisis in March 2020. The discount ended the period at 10.3%, which was narrower than at the end of the Company's last financial year, when it was 11.1%. The average discount over the period was 12.1%.

Discount Control

The Board continues 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. It has been of considerable value to have this mechanism in place over the last few months. Whilst there has been relatively thin trading in the company's shares the use of the buy back has enabled the expansion of the discount to be managed at times of moderate levels of excess supply of stock. During the period the discount ranged from 22.3% (on 23rd March 2020) to 7.0% (on 15th April 2020). As referred to in previous years statements, the Board has committed to buying back, subject to market conditions, at least 6.0% of its issued share capital per annum. During the course of the six month period 590,748 shares were bought back, approximately 1.6% of the Company's issued share capital at 30th April 2020. This added 1.1 pence to the Company's NAV return in the period. The weighted average discount at which these shares were bought back was 13.0% and these buybacks accounted for approximately 13.5% of traded market volume during the reporting period. The current policy was initiated in January 2018.

Revenue, Earnings and Dividend

Revenue for the six month period to 30th April 2020 after taxation was £2,674,000 (30th April 2019: £1,554,000) and the return per share, calculated on the basis of the average number of shares in issue was 5.82 pence (30th April 2019: 3.21 pence) per share. The Company receives most of its dividend income during the summer months and therefore, following the pattern of recent years, the Company's interim dividend is expected to be considered by the Board for declaration in September 2020 and is likely to represent the large majority of the total annual dividend, with a significantly smaller final dividend being recommended for approval by the shareholders at the Annual General Meeting for payment in March 2021. At the time of writing it is clear that there will be an adverse effect on the dividends the Company can expect to receive in the second half from its major shareholdings, many of which are in the energy sector. However, the Company has considerable distributable reserves which it can consider drawing on to supplement the dividend if it considers it appropriate from a longer term perspective.

Investment Manager

Oleg Biryulyov and Habib Saikaly continue to be the Company's Investment Managers supported by JPMorgan Asset Management's Emerging Markets and Asia Pacific equities team (EMAP), which consists of close to 100 investment professionals. The Company benefits greatly from the extensive experience of the lead investment manager, Oleg, who has successfully steered the company through a number of severe crises in the past in both the world and Russian stock markets.

In addition, the Company is supported by other teams at JPMorgan Asset Management In particular the Company's compliance with sanctions, which continue, closely monitored and reported on regularly to the Board by JPMorgan Asset Management's compliance function.

Despite the challenging investment environment JPMorgan Asset Management continues to focus on environmental, social and governance (ESG) issues in all the companies it invest in. They continue to thoroughly scrutinise companies for compliance with best practice through their embedded ESG evaluation process.

I am also pleased to report that the Board have been encouraged by the shareholder communication activities that have been undertaken by the JPMorgan Asset Management Sales, Marketing and PR teams.

Outlook

The turmoil in financial markets caused by Covid-19 pandemic have negatively impacted the Company, mirroring falls experienced in the wider market. A global recession in 2020 seems a certainty, although the Russian Central Bank along with its counterparts in the USA, Europe and other leading economies have introduced unprecedented levels of fiscal support to help mitigate this. What is presently unclear is how long and deep a recession could be, or how successful the measures to bring Covid-19 under control will be. Further market turbulence and volatility are to be expected as demonstrated by the recent rise in share price from a low of 422 pence on 18th March 2020, to 614 pence on 10th June 2020 a rise of 45.5%.

No investment process can avoid such extreme market volatility. There is no change to the Investment Managers' approach, which has stood the Company in good stead in the past, and they continue to seek out the best run companies which it is expected will deliver value over time. Usually these are companies with strongly growing revenues. Whilst many are at present experiencing a severe downturn in earnings, particularly those in the energy sector, it is expected that oil prices will recover somewhat toward the end of the year Some other sectors such as the materials and technology sectors are faring much better and are expected to continue to do well. By holding a portfolio of fundamentally strong companies the Board is confident that the Company is well placed to benefit when the world economy begins to pick up, and financial markets, including those in Russia, stabilise and recover.

Gill Nott

Chairman   15th June 2020

INVESTMENT MANAGERS' REPORT

Introduction

In this report, we consider the Company's investment performance for the six months to 30th April 2020. We discuss the unprecedented market backdrop for the period, examine the drivers of the Company's performance, and then consider the outlook for the rest of 2020.

Market review: extraordinary times

Economic and political uncertainties overshadowed global markets over the six months, with the period from late January onwards dominated by the outbreak of Covid-19. The prevailing backdrop was not at all supportive for the Russian economy nor for its investment markets which were troubled by the impact of a deepening global economic slump and oil prices falling below a level anyone imagined possible. Over the period, the Russian rouble was one of the worst performing currencies against the US dollar.

Throughout 2019, a material slowdown in global trade and weakening demand for major commodities had created headwinds for corporate profitability but the Covid-19 pandemic took this to another level. This public health tragedy swiftly suppressed global demand across sectors and commodities, creating huge challenges for Russia in its wake. The outbreak hit the country later than many other territories but there had been more than 360,000 infection cases by the time of this report, with Moscow at the epicentre. This 'perfect storm' of freefalling commodity prices and very real disruption shut down huge swathes of the Russian economy and civil activities. By the end of April, Russia had posted its worst ever drop in retail sales and unemployment had risen to its highest level in 4 years.

These are extraordinary times for oil prices, so pivotal to Russia's fortunes, as the world's largest energy exporter. The unprecedented recent price weakness reflects a global economy that has effectively come to a halt, with businesses closed, travel suspended and people staying indoors, in concerted efforts to combat the virus. There was also the added complication of a price war initiated by Saudi Arabia, after production curtailment negotiations fell through in early March; this alone sent the crude oil price down by more than 50%, an historic decline. At the time of writing, prices have made a tentative recovery but remain well below their average price over the last 5 years.

The Covid-19 crisis prompted the world's central banks and governments to announce multiple stimulus packages. These included fiscal aid, further interest rate cuts, as well as plans to inject more money into their economies, to alleviate market stress and cushion the financial blow of enforced lockdowns. Russian measures were more conservative than its global peers, perhaps because the government is reluctant to dip too deeply into its reserves until the future direction of travel for oil prices becomes clearer. Nevertheless, the stimulus package saw the government ramping up spending to support impacted businesses and individuals, whilst the Bank of Russia cut its key interest rate by 0.5% to 5.5% in late April.

By the end of April, global financial markets had stabilised, calmed by the plethora of financial measures unveiled by global authorities. In Russia, markets bounced back, with some commentators judging that the Russian economy would be relatively well placed to weather the economic fall-out, largely thanks to its significant reserves. Although equity valuations recovered somewhat investors remained cautious.

Performance

Against the testing macro backdrop highlighted above, most global stock markets suffered sharp pullbacks over the review period, and Russia did not escape this pain. For the six months to 30th April 2020, the Company's net asset value fell by 19.1% on a total return basis, marginally behind the benchmark, the RTS Index, which fell by 18.0%. The return to shareholders was -18.5% in sterling terms.

Our approach to uncovering value

The Company remains the only investment trust providing pure exposure to the ongoing transformation of the Russian economy and we strive to uncover the value in Russian equities. Despite the Covid-19 pandemic and subsequent government legislation necessitating the requirement for the JPMorgan Asset Management team to rapidly adapt to working from home, the Company continued to build a balanced portfolio of stocks from across the Russian market, with a focus on companies that provide opportunities for compounding earnings growth over the long run. To do this, we actively manage the portfolio and continue to build up internal research capabilities and a growing team of analysts with deep expertise in this complex and under-researched market. We base our decisions on a proven investment process that analyses the specific characteristics of stocks. We believe that an active approach makes sense when investing in Russia, given the market concentration and corporate governance issues.

How have specific stocks and sectors fared?

In this section, we consider how specific stock decisions and sectoral weightings impacted portfolio performance.

By way of context, we made minimal changes to the portfolio until the end of February/early March 2020 when the landscape changed so dramatically. The Company's positioning had anticipated oil prices and the rouble remaining strong, but that all changed when energy prices collapsed and rouble depreciated by 20%. We highlight below some of the key portfolio changes we made. In aggregate, portfolio turnover for the first quarter of 2020 was around 20%, well above our normal annualised rate but this was far from a normal time.

Our exposure to the Energy sector fell over the period, but still dominates the Company's portfolio. With crude oil prices spiralling downwards in historic fashion, it is no surprise that our exposure to oil companies was the key detractor from relative returns. One of the most notable detractors was Russia's biggest oil company Rosneft . We reduced our holding and moved to an underweight position during the period, on concerns about its elevated risk profile, its high level of borrowings and operational weakness in a low oil price environment. We also trimmed our holding in Gazprom , the largest supplier of natural gas to Europe and Turkey, on the basis that it too will be challenged by the oil market going from boom to bust.

Elsewhere in the Energy sector, we continue to prefer Lukoil (our largest portfolio holding) and Tatneft . Although both have suffered from the precipitous decline in oil prices, we consider them to be 'best in class' operators with robust management teams focused on delivering long-term shareholder returns. Of our other Energy holdings, we topped up our investment in natural gas producer Novatek on the back of our fundamental support for the business and the opportunity to buy stock at a favourable share price following the market sell-off. We remain on the side lines as far as Transneft and Surgutneftegas are concerned, with our absence from both stocks boosting relative performance. We previously explained our 2019 exit from Surgutneftegas in the Company's last annual report, but our position remains under regular review.

Increased exposure to the Materials sector over the period was largely organic and driven by price moves. Our investments in the following stocks performed extremely well in a falling market: Russia's largest gold producer Polyus ; the world's leading producer of nickel and palladium Norilsk Nickel ; and precious metals mining company Polymetal International . We continue to see good value in all three businesses, based on the outlook for gold, nickel and silver, as well as the relatively high dividend yields offered by each. Less successful were our holdings in diamond mining group Alrosa and steelmaker Severstal , both of which cut production following a plunge in demand.

Our underweight positions in the Utilities, Communication Services and Consumer Staples sectors were detrimental to portfolio performance over the period. To illustrate this, retailers Magnit and X5 and telecoms provider MTS would have all boosted performance had we owned them, despite the weak economic environment. Magnit was once Russia's largest food retailer but has been somewhat out of favour in recent times. Its turnaround plan shifts focus away from groceries and more towards home and personal care products, as well as implementing a drive to enhance operating efficiency. We keep our sector positioning under constant review and are actively considering our positioning in these areas to avoid missing out on future 'recovery play' opportunities as and when consumption recovers.

Moving on to Information Technology, this is a sector where we are keen to increase our exposure given its minimal correlation to the plunging oil price. Two star performing holdings were Yandex and EPAM Systems . Yandex is a multinational technology giant whose revenues have increased as it has diversified its business interests: whilst its online advertising and taxi services have been badly hit by Covid-19, its search engine, blogging, video streaming and various delivery services have all boomed during lockdown. Yandex's ambition and the increasing digitisation of society bodes well for its prospects. In the case of global software supplier EPAM, it delivered solid performance in the latter part of 2019 and its revenues held up well in the first quarter of the 2020, in spite of Covid-19 disruption. Also within the IT space, we bought into QIWI , a leading provider of next generation payment and financial services that has been restructuring its business and where a valuation opportunity arose for us.

Companies in the Financial sector are 'cyclical' stocks because they are highly sensitive to economic cycle peaks and troughs; they typically struggle in depressed economic environments like the current situation. Within the sector, we sold out of Russian bank TCS because our views changed on its corporate governance and operational risks. In the current environment of regulatory constraints, collapsing demand for new consumer loans and the need for banks to support their customers by providing interest and credit 'holidays', we see significant challenges ahead for TCS, with little prospect of growth and every possibility of significantly higher debt provisions. Moreover, TCS's founder, billionaire Oleg Tinkov is facing tax charges relating to under-reported income and is fighting extradition to the United States. All things considered, we decided that the potential risk of staying invested was simply too high.

Elsewhere in Financials, we further reduced our already underweight exposure to leading Russian bank Sberbank , as we think that credit expansion will be weakened by the economic environment; our stance boosted the portfolio's relative returns since the stock fell markedly when Covid-19 rocked global markets. We sold out of Russia's largest stock exchange Moscow Exchange (MICEX) altogether, however, on broader concerns for corporate earnings, as well as the business's changing corporate profile. MICEX had been a drag on relative performance prior to our exit and we were concerned about the various headwinds it faces. As well as recent operational issues with trading of oil futures contracts, the enduring lower interest rate environment will limit earnings, whilst higher market volatility and lower trade volumes do not create a positive fee environment.

Finally, to the Real Estate space, where we are overweight versus the benchmark. We remain committed to two of the biggest players in the sector, Etalon Group and LSR Group . Both businesses delivered solid results although short-term prospects will be severely dented by the pandemic fall-out. Etalon has launched remote sales channels which provide a useful service with Covid-19 restrictions in place and will reduce operational expenses in the long run. The Real Estate sector is a competitive environment in which only the strongest survive. Etalon and LSR face an extremely tough 2020 but we believe they have the credentials to progress over the longer term.

We continue to trim down small, illiquid stock positions wherever we can. For example, we reduced our exposure to both automotive group Sollers and footwear retailer Obuv Rossii on business outlook concerns. The Covid-19 pandemic has created a hugely challenging environment for many businesses, putting pressure on corporate earnings and dividend payments. We expect dividends to follow earnings down, with the potential for a 30-50% decline. As economies reopen and companies announce second quarter earnings we will have greater clarity, but until then forecasting dividend levels is very difficult.

Outlook

Our investment approach, and specifically our focus on identifying long-term growth opportunities from individual Russian stocks, remains unaltered by the recent challenges that have weighed down global markets. We are confident in our tried and tested strategy which has delivered robust returns to shareholders over recent reporting periods. This six-month period under review was a noticeable exception, but this was also a time when the economic and geopolitical landscape shifted in an unprecedented manner.

On a short-term view, the biggest risk for Russia is how long the coronavirus persists and how widely and deeply its impact spreads. Uncertainty will continue to weigh heavily on Russia's prospects (with market volatility an inevitability) until there is a gradual restoration of the normal order. Until such time, we will consider volatility as an opportunity to buy favoured stocks at attractive valuations.

Looking forward, we expect to see:

• Continued weak demand for oil in 2020, which will be a challenge for many Russian companies. We expect firmer prices in 2021, driven by production cuts, politics and an upward spike in demand, all of which will be positive for the earnings of Russian companies. Between now and then oil price volatility is almost guaranteed.

• Interest rates to fall by a further 0.5 to 1% over the next 6 months, to stimulate spending and investment, and buoy the market.

• The rouble likely to depreciate further until the latter part of 2020.

• The geopolitical risk environment around US/European Union sanctions remaining fluid, a situation we will continue to monitor. Russia's economic links with the European Union will be pivotal to resolving the Russia-Ukraine stalemate.

• Companies' earnings per share likely to be anywhere between 35-50% lower than they were in 2019. This will be painful in the short run but should lay the groundwork for future opportunities.

Notwithstanding the challenges that lie ahead, we believe that Russia still offers the potential for attractive investment opportunities, even if some patience may be required on the part of our investors. We are proud of our track record and continue to be very selective about the companies we invest in from across the Russian market, prioritising well-managed businesses that have robust balance sheets and the potential to deliver decent dividend yields.

We will adhere to our investment process and look beyond short-term volatility and towards a more benign outlook. We are constantly spurred on by the new stock opportunities we are unearthing and by the reasonable company valuations we are seeing. Above all, we are confident that the Company's portfolio is well positioned to weather the current difficulties and to deliver attractive returns for risk-aware investors over the long-term. Our approach is a proven one that has served us well over time.

Oleg I. Biryulyov

Habib Saikaly

Investment Managers   15th June 2020

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into the following broad categories: investing in Russia; 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. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st October 2019. The recent emergence and spread of the Covid-19 virus has raised the emerging risk of global epidemics into a principal risk.

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 twelve months from the date of the approval of this half yearly financial report. In reaching that view, the Directors have considered the impact of the current Covid-19 pandemic on the Company's financial and operational position. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

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 2019 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

Gill Nott

Chairman   15th June 2020

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30TH APRIL 2020

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th April 2020			30th April 2019			31st October 2019
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(70,558)	(70,558)	-	26,124	26,124	-	72,431	72,431
Net foreign currency
gains/(losses)	-	315	315	-	37	37	-	(621)	(621)
Income from investments	4,939	-	4,939	2,750	-	2,750	24,931	-	24,931
Interest receivable and similar
income	33	-	33	36	-	36	94	-	94
Gross return/(loss)	4,972	(70,243)	(65,271)	2,786	26,161	28,947	25,025	71,810	96,835
Management fee	(694)	(1,042)	(1,736)	(604)	(905)	(1,509)	(1,315)	(1,973)	(3,288)
Other administrative expenses	(425)	-	(425)	(347)	-	(347)	(978)	-	(978)
Net return/(loss) before
finance costs and taxation	3,853	(71,285)	(67,432)	1,835	25,256	27,091	22,732	69,837	92,569
Finance costs	(3)	-	(3)	-	-	-	-	-	-
Net return/(loss) before
taxation	3,850	(71,285)	(67,435)	1,835	25,256	27,091	22,732	69,837	92,569
Taxation	(1,176)	748	(428)	(281)	-	(281)	(3,593)	678	(2,915)
Net return/(loss) after
taxation	2,674	(70,537)	(67,863)	1,554	25,256	26,810	19,139	70,515	89,654
Return/(loss) per share
(note 3)	5.82p	(153.48)p	(147.66)p	3.21p	52.15p	55.36p	40.04p	147.53p	187.57p

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30TH APRIL 2020

	Called up	Capital
	share	redemption	Other	Capital	Revenue
	capital	reserve	reserve	Reserves1	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30th April 2019 (Unaudited)
At 31st October 2019	462	139	12,528	333,503	13,708	360,340
Repurchase and cancellation of the Company's
own shares	(6)	6	(3,517)	-	-	(3,517)
Net (loss)/return	-	-	-	(70,537)	2,674	(67,863)
Dividend paid in the period (note 4)	-	-	-	-	(4,601)	(4,601)
At 30th April 2020	456	145	9,011	262,966	11,781	284,359
Six months ended 30th April 2019 (Unaudited)
At 31st October 2018	491	110	30,438	262,988	9,162	303,189
Repurchase and cancellation of the Company's
own shares	(14)	14	(7,247)	-	-	(7,247)
Net return	-	-	-	25,256	1,554	26,810
Dividend paid in the period (note 4)	-	-	-	-	(2,905)	(2,905)
At 30th April 2019	477	124	23,191	288,244	7,811	319,847
Year ended 31st October 2019 (Audited)
At 31st October 2018	491	110	30,438	262,988	9,162	303,189
Repurchase and cancellation of the Company's
own shares	(29)	29	(17,910)	-	-	(17,910)
Net return	-	-	-	70,515	19,139	89,654
Dividends paid in the year (note 4)	-	-	-	-	(14,593)	(14,593)
At 31st October 2019	462	139	12,528	333,503	13,708	360,340

¹ These reserves form the distributable reserves of the Company and may be used to fund distributions of profits to investors

STATEMENT OF FINANCIAL POSITION

AT 30TH APRIL 2020

	(Unaudited)	(Unaudited)	(Audited)
	30th April 2020	30th April 2019	31st October 2019
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	280,690	319,332	357,455
Current assets
Debtors	203	192	1,500
Cash and cash equivalents	3,607	402	2,060
	3,810	594	3,560
Current liabilities
Creditors: amounts falling due within one year	(141)	(79)	(674)
Derivative financial liabilities	-	-	(1)
Net current assets	3,669	515	2,885
Total assets less current liabilities	284,359	319,847	360,340
Net assets	284,359	319,847	360,340
Capital and reserves
Called up share capital	456	477	462
Capital redemption reserve	145	124	139
Other reserve	9,011	23,191	12,528
Capital reserves	262,966	288,244	333,503
Revenue reserve	11,781	7,811	13,708
Total shareholders' funds	284,359	319,847	360,340
Net asset value per share (note 5)	624.2p	670.1p	780.8p

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30TH APRIL 2020

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2020	30th April 2019	31st October 2019
	£'000	£'000	£'000
Net cash outflow from operations before dividends and
interest (note 6)1	(1,594)	(1,902)	(4,879)
Dividends received	5,843	3,450	21,693
Interest received	33	36	94
Overseas tax recovered	-	13	-
Interest paid	(3)	-	-
Net cash inflow from operating activities	4,279	1,597	16,908
Purchases of investments	(52,517)	(16,182)	(71,421)
Sales of investments	58,741	22,110	85,541
Settlement of forward currency contracts	(40)	39	(10)
Net cash inflow from investing activities	6,184	5,967	14,110
Repurchase and cancellation of the Company's own shares	(4,057)	(7,247)	(17,354)
Dividends paid	(4,601)	(2,905)	(14,593)
Net cash outflow from financing activities	(8,658)	(10,152)	(31,947)
Increase/(decrease) in cash and cash equivalents	1,805	(2,588)	(929)
Cash and cash equivalents at start of period/year	2,060	2,997	2,997
Unrealised loss on foreign currency cash and cash equivalents1	(258)	(7)	(8)
Cash and cash equivalents at end of period/year	3,607	402	2,060
Increase/(decrease) in cash and cash equivalents	1,805	(2,588)	(929)
Cash and cash equivalents consist of:
Cash and short term deposits	381	356	2,060
Cash held in JPMorgan US Dollar Liquidity Fund	3,226	46	-
Total	3,607	402	2,060

¹ The unrealised exchange loss on the JPMorgan US Dollar Liquidity Fund in the comparative column has been moved from the initial 'Net cash outflow from operations' total to be disclosed separately as the 'unrealised loss on foreign currency cash and cash equivalents'.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30TH APRIL 2020

1.  Financial statements

The information contained within the 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 2019 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 October 2019.

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 2020.

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

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 2019.

3.  Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2020	30th April 2019	31st October 2019
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	2,674	1,554	19,139
Capital (loss)/return	(70,537)	25,256	70,515
Total (loss)/return	(67,863)	26,810	89,654
Weighted average number of shares in issue	45,959,452	48,427,728	47,795,970
Revenue return per share	5.82p	3.21p	40.04p
Capital (loss)/return per share	(153.48)p	52.15p	147.53p
Total (loss)/return per share	(147.66)p	55.36p	187.57p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2020	30th April 2019	31st October 2019
	£'000	£'000	£'000
2019 Final dividend paid of 10.0p (2018: 6.0p)	4,601	2,905	2,905
2019 interim dividend of 25.0p (2018 : 20.0p)	-	-	11,688
Total dividends in the period/year	4,601	2,905	14,593

All dividends paid in the period/year have been funded from the revenue reserve.

The 2020 interim dividend is expected to be payable in October 2020.

5.   Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th April 2020	30th April 2019	31st October 2019
Net assets (£'000)	284,359	319,847	360,340
Number of shares in issue	45,557,032	47,728,734	46,147,780
Net asset value per share	624.2p	670.1p	780.8p

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

15^th June 2020

ENDS

A copy of the half year will be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The half year will also shortly be 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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