JPMORGAN RUSSIAN SECURITIES PLC

(the "Company")

Publication of circular

Recommended proposals for the adoption of a new investment objective and policy and change of name

Legal Entity Identifier: 549300II3MHI98ZLVH37

Introduction

Further to the statements of the Board in the Company's half year report and financial statements for the period ended 30 April 2022, the Board has progressed proposals to amend the Company's investment objective and policy and announces that the Company has today published a Shareholder circular (the "Circular") setting out recommended proposals (the "Proposals") in relation to the Company's adoption of an amended investment objective and policy (the "New Investment Objective and Policy"), including a Notice of General Meeting.

Background

The Company (through its predecessor which was launched in 1994) was one of the first Russia-focused equity funds and has held, since launch, a diversified portfolio of investments primarily in quoted Russian securities or other companies which operate principally in Russia, although it has also had the ability to invest up to 10 per cent. of its gross assets in companies that operate or are located in former Soviet Union republics.

Due to the rapid introduction of economic sanctions and regulatory restrictions applicable to the Russian equity market and the closure of the Moscow Exchange to many overseas investors, including the Company, following the Russian invasion of Ukraine, a significant portion of securities held within the Company's portfolio have been unable to be traded and the value of such securities has fallen significantly. In addition, the current sanctions and restrictions have also limited the Company's ability to access dividends from these securities. Although the Company has distributable reserves, the Board does not consider it prudent to pay dividends in the absence of current income and, in the light of the Company's existing investment policy and the sanctions regime, the Company is restricted from using its available funds to purchase other securities. Whilst the Company's current investment policy enables it to invest in securities of businesses that operate, or are located in, other former Soviet Union republics, the Board and the Investment Manager are of the view that such investments would carry unacceptable risks for the portfolio for the foreseeable future and, in any case, the current investment policy only permits the Company to invest up to 10 per cent. of its gross assets in these regions.

As at 30 September 2022, the Company's portfolio was valued at £19,076,044. The Company's portfolio contained 27 investments in Russian companies or other companies which operate principally in Russia and which were valued at £1,984,653 (representing 10.4 per cent. of the Company's gross assets as at 30 September 2022). The balance is held in cash which generates only a very modest income and which offers no opportunity for capital appreciation.

The Board 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. Against this context, given the illiquidity of the Company's existing Russian securities (resulting in a wind up or a merger not being considered to be viable options for the Company) and the Company's inability to invest a significant portion of its available funds within the parameters of its existing investment policy, the Board, together with the Investment Manager, is therefore of the view that the Company's investment policy should, subject to Shareholder approval, be amended.

The proposed New Investment Objective and Policy would enable the Company 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. In the light of the Company's existing holdings and the inability to dispose of these under the current sanctions and restrictions, the Company also needs the flexibility within its New Investment Objective and Policy to continue to hold Russian securities.

The full text of both the Company's existing investment objective and policy and the proposed New Investment Objective and Policy are set out in Part 2 of the Circular.

Continuity of management arrangements 

JPMorgan Funds Limited and JPMorgan Asset Management (UK) Limited (together, the "Investment Manager") will continue as the Company's Alternative Investment Fund Manager and portfolio manager respectively following adoption of the New Investment Objective and Policy.

The Investment Manager has a long established emerging markets investment team which has an extensive network of emerging markets specialists based locally in markets around the world. It has a strong investment track record in this sector and has managed JPMorgan Emerging Markets Investment Trust plc since its launch in July 1991. Its management teams have a preference for high quality companies with high and sustainable returns on equity as they are expected to become industry leaders.

Oleg Biryulyov (who has managed the Company's portfolio since its launch) will continue to manage the Company's portfolio. Mr Biryulyov 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, will be the co-manager for the Company.

Management fee

The Company's management fee was reduced with effect from 1 November 2021 to 0.90 per cent. of the Company's net asset value per annum and has been waived by the Investment Manager since payment of the management fee to 28 February 2022. If the Proposals are approved, the management fee will become payable going forward but, until further notice, the Company's 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.

Continuation vote and conditional tender offer mechanism

Following the passing of the continuation vote by Shareholders earlier this year, the Company's next continuation vote is currently scheduled to take place at the 2027 annual general meeting. As stated in the Company's half year report and financial statements to 30 April 2022, the Board has committed to undertake a tender offer if the 2027 continuation vote is passed but the Company's net asset value total return (in Sterling on a cum income basis) is below the total return of the RTS Index in Sterling terms over the five years from 1 November 2021.

Whilst the Board remains committed to offering Shareholders a periodic continuation vote with a conditional tender offer, the Board also recognises the need to ensure the performance related element of any tender offer mechanism, including the time period over which it is assessed, remains appropriate for the Company in the context of the New Investment Objective and Policy and the Company's portfolio. Accordingly, if the Proposals are approved at the General Meeting, the Board intends to review the existing continuation vote and conditional tender offer mechanisms and further details of the revised arrangements will be explained to shareholders in the Company's annual report in respect of the year ending 31 October 2022.

Company name

If Shareholders approve the New Investment Objective and Policy, it is also proposed that the Board pass a resolution, in accordance with the Articles, to change the name of the Company to JPMorgan Emerging Europe, Middle East & Africa Securities plc to be more reflective of the new strategy.

General Meeting

Adoption of the New Investment Objective and Policy requires Shareholder approval. A notice convening a general meeting which is to be held at 60 Victoria Embankment, London EC4Y 0JP on 23 November 2022 at 12 noon is set out at the end of the Circular. The Resolution will be proposed as an ordinary resolution and will, if passed, result in the adoption of the New Investment Objective and Policy as set out in Part 2 of the Circular, with effect from the passing of the Resolution.

A copy of the Circular has been submitted to the Financial Conduct Authority and will be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website at www.jpmrussian.co.uk.

Notes:This announcement does not contain all the information which is contained in the Circular and Shareholders should read the Circular in full before making a decision.

Unless the context requires otherwise, terms defined in the Circular have the same meaning where used in this announcement.

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