LONDON STOCK EXCHANGE
ANNOUNCEMENT
JPMORGAN EMERGING EUROPE,
MIDDLE EAST & AFRICA SECURITIES PLC ('the Company' or
'JEMA')
Legal Entity Identifier:
549300II3MHI98ZLVH37
Russian Court Order -
Update
The Board announces that in
conjunction with the Company's duly appointed
depositary, who appoints the Company's
custodian, the Board is considering the
options available to the Company in the event that JPMorgan Bank
International ('JPMBI'), the sub custodian of the Company's Russian
assets in Russia, becomes insolvent. The circumstances in which
such an event may occur are included in the explanation provided by
the Company's Custodian ('J.P. Morgan') below in
italics.
Further to our prior communications with clients, J.P. Morgan
has faced actual and threatened litigation in Russia seeking
payments on transactions that J.P. Morgan cannot make and is
contractually excused from paying as a result of, relevant
sanctions laws.
The
value of the current claims against J.P. Morgan exceeds the total
amount of available assets that J.P. Morgan holds in Russia. The
outcome of these claims and the impact they will have on JPMBI (our
affiliate sub-custodian in Russia) is uncertain. If the claims are
enforced despite the actions taken by J.P Morgan to challenge the
claims and to seek the proper application of law, J.P. Morgan's
assets in Russia could be seized in full or J.P. Morgan could
be prevented from complying with its obligations. This could result
in the insolvency of JPMBI and impact JPMBI's ability to continue
to operate under instruction from J.P. Morgan. As such, J.P. Morgan
may be unable to continue to provide safekeeping, settlement and
asset servicing of our clients' Russian securities in the same
manner as it does currently. Additionally this may impact our
clients' RUB cash.
As
previously notified, VTB Bank filed a lawsuit against nine J.P.
Morgan legal entities on 17th April 2024 in Russia
seeking to recover $439.5 million held with J.P. Morgan in NY.
Following preliminary hearings, the Russian court has scheduled a
main hearing on 11th September 2024, when it is due to
consider JPMBI's defence. If judgment is given at this
hearing, J.P. Morgan
would have the
right to appeal and the appeal process would likely last
approximately 2 months. No seizure of J.P. Morgan's assets
under the judgment is expected to take place during this
time.
J.P.
Morgan continues to take the appropriate legal and regulatory steps
to avoid this outcome, including challenging these claims and
appealing any judgments it does not think are valid. Whilst the
specifics of any impact of these claims or their enforcement on
clients would need to be considered on a case-by-case basis, they
may constitute a Force Majeure and / or Country Risk event (as
defined in the contracts that clients have with J.P.
Morgan).
As
previously communicated, we understand that Russian Decree 8 offers
protection to client securities and RUB cash in S type accounts
from the enforcement of court decisions issued after 3rd
January 2024. The Russian courts have so far respected this.
However, the situation remains dynamic. In addition,
Presidential Decree 442 published on 23rd May 2024
established a framework for compensating the Russian Federation
and/or the Central Bank of Russia for damage caused by "unfriendly"
actions of the United States of America. Decree 442 indicated
that a detailed procedure would be published within four months,
however, details of that further procedure remain yet to be
published and analysed by market participants.
In response the above information,
Eric Sanderson, the Chairman of the Company commented
that:
"The above information adds to our
existing concerns regarding the Company's Russian assets. If JPMBI
were to be declared insolvent the Manager has advised us that the
Company's Russian assets could not be serviced by them and due to
the current sanction regime it would not be possible for JPMBI to
transfer the Company's Russian assets to another custodian.
The Board will provide a further update once the
court decision is announced.
By way of a reminder of the extent of
the Company's holdings in Russian assets, as
stated in the Company's Half Year Report and Financial Statements
to 30th April 2024 available on the Company's
website www.jpmeemeasecurities.com, the Company's Russian securities comprised approximately 8% of
the published net asset value of the portfolio.
The Company's portfolio comprised 100 stocks. Of these, 26 were Russian
securities which have been nominally valued following the
imposition of sanctions in early 2022.
The Company's Half Year Report to
30th April 2024 also referred to the balance on the
Company's 'S' account as at 2nd May 2024 being equivalent to
approximately £25.2 million with an additional £7.9 million of
dividends that had been announced but not yet received on that date
(at exchange rates applicable on that date). As previously
detailed, the balance in the 'S' account cannot be remitted to the
Company and may never be received. They are not recognised in the
Company's net asset value or in its income statement.
It should be noted that the
value of the Company's Russian assets in its balance sheet should
be considered together with the Company's share price, which is
trading at a very elevated premium to its net asset
value."
6th September 2024
For further information:
Paul Winship, Neil Martin, JPMorgan
Funds
Limited
0800 20 40 20
Hugh Jonathan, Deutsche Numis
020 7260 1000
