Russian Court Order - Update

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 17^th 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 11^th 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 3^rd January 2024. The Russian courts have so far respected this. However, the situation remains dynamic.  In addition, Presidential Decree 442 published on 23^rd 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 30^th 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 30^th 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