JRS.L Regulatory News (JRS)

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 2020

HIGHLIGHTS

- Total return on net asset basis outperformed the benchmark by 3.2%

- Total ordinary dividends 35.0p (2019: 35.0p)

CHAIRMAN'S STATEMENT

Performance and Overview

The turmoil in global financial markets caused by the Coronavirus (Covid-19) pandemic has also had a negative impact on the market in Russia and on the Company's results for this year. In advance of the first UK lockdown, JPMorgan introduced special work practices with the majority of employees working from home. The Board has met the Managers on line and has conducted all its affairs remotely. This shift has been a remarkably smooth operation, in response to a situation none of us could have anticipated at the start of the year. It is pleasing to report that the Company's business has been able to continue as normal, although of course we would all like to see a return to personal contact, including the holding of a physical Annual General Meeting.

Although the Company's performance has been negative over the financial year, it did outperform its benchmark; the RTS Index in sterling terms. The Company's total return to shareholders was -17.0%, against the benchmark decline of -20.7%. The level of the Company's discount was another relatively positive result, given turbulent markets. As at 31st October 2020, the discount was 11.2%, unchanged from the previous year end date. Over the reporting period, the discount averaged 12.0%, and ranged from 22.3% to 7.0%, however these more extreme levels outside the average only briefly existed at the start of the pandemic between mid March and late April. The reduction of the overall volatility of the discount level, despite the turbulent market conditions has been assisted by the Board's active share buy back programme. From the Company's financial year end to 22nd January 2021, the benchmark index rose by 26.6%, the Company's return to shareholders rose by 21.3%, and the discount stood at 10.3%.

The Company's total return on a net assets basis was -17.5%, outperforming its benchmark by 3.2%. The Company's longer term performance over three and five years is showing strong positive performance both in absolute terms and compared to its peers. The Company's peer group includes eleven other funds, including exchange traded funds (ETFs) and open ended funds.

At the beginning of the period under review there was a relatively positive outlook for the Russian market but this ended abruptly in February. First, there was a disagreement between Russia and other OPEC countries that initiated a steep decline in oil prices. Then, in late February the rapid spread of the Covid-19 pandemic led to a crash in global equity markets. The influence of the pandemic on the economy of Russia has been significant with the unprecedented fall in oil prices and all that implies for an economy which is highly dependent on energy exports. Fortunately the investment manager had already reduced the exposure of the Company to energy stocks at the end of 2019 and this proved beneficial. Whilst energy companies remain a significant proportion of the portfolio of the Company it is considerably underweight when compared to the benchmark index. The investment manager has also reduced exposure to smaller stocks preferring to invest in predominantly large, well-capitalised companies that can better withstand the prevailing difficult market conditions. Such companies have strong cash flow and a greater ability to continue to pay dividends which are an important contribution to the total return of the Company. In addition, the Company now has a greater exposure than it had in the past to companies that are technology based, or use technology to enhance their business. More details on these significant movements in the portfolio, and specific investee companies are given in the Investment Manager's report on page 14 of the Annual Report and Financial Statements.

The Russian government has introduced a number of support mechanisms and the Russian Central Bank reduced interest rates, with further reductions expected. The strength of the Russian health care system and government initiatives to reduce the spread of Covid-19 were relatively effective in avoiding the worst effects of the pandemic suffered by some other countries. The Russian made vaccine, Sputnik V, was one of the first to become available and in due course should have a positive impact on the situation in Russia although the extent and timing of the hoped-for economic recovery is still being gauged. The Russian economy has largely adjusted to the sanctions applied by the US and European Union in 2014. See page 21 of the Annual Report and Financial Statements for reference to the continuation of the sanctions rules under UK law following Brexit on 31st December 2020. The Board carries 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 23 of the Annual Report and Financial Statements, which now includes the risk of global pandemics. Compliance with the sanctions remains a key risk for the Company and JPMorgan Asset Management's compliance and investment functions monitors all investments and regularly assures the Board that processes are in place to ensure that the Company remains compliant with the current sanctions regime.

Objective and Strategy of the Company

There has been no change in the strategy of the Company which remains to deliver the maximum total return from a diversified portfolio of investments predominantly in Russia. The Board continue to pay close attention to how the Manager takes into account Environmental, Social and Governance issues (ESG) when making investments. Whilst the Manager is seeking to maximise total return and is not specifically seeking income producing stocks, in recent years the level of payout from Russian stocks has risen considerably so materially contributing to the total return of the portfolio. The Board has reviewed the policies and processes undertaken by JPMorgan on ESG matters in relation to the portfolio your Company invests in. JPMorgan has an integrated ESG bottom-up evaluation process which it uses when assessing all investments. Investing in Russia inevitably means that the Company will be invested in energy stocks as these dominate the Russian market. In addition, it holds a significant proportion of materials stocks. The Manager pays great attention to all aspects of ESG and whilst there is understandable focus by investors on environmental matters, we should not forget that Governance is equally relevant in Russia. There have been a number of occasions where the lack of suitable governance has influenced investment decisions being taken by the Manager. Therefore, the Investment Managers regularly engage on ESG issues when they meet with management of existing and prospective investee companies. The Board believes that companies that address ESG issues and adopt sustainable business practices are better placed to generate sustainable strong performance and create enduring value for shareholders. Further details regarding the Company's approach to ESG can found on pages 12 to 13 of the Annual Report and Financial Statements. The Manager also exercises the Company's proxy votes in a prudent and diligent manner in the interests of our shareholders. Further details of the Company's approach to Proxy Voting and Stewardship/Engagement can be found on page 35 of the Annual Report and Financial Statements.

The Board is keen to see the shareholder base of the Company widened and it closely monitors the marketing activities undertaken by JPMorgan on its behalf. This has been challenging this year as it has obviously not been possible for the sales team to pursue their normal visits to existing or potential shareholders. However, we have been pleased with the continued efforts of the public relations team to raise the profile of the Company. Whilst investing in Russia is clearly not for everyone, we feel that the potential prospects that Russia offers, combined with the substantial level of dividends from its leading companies, should make it attractive to more shareholders.

Dividends

Revenue for the year, after tax, was £15,375,000 (2019: £19,139,000) and the revenue return per share, calculated on the average number of shares in issue, was 34.01p (2019: 40.04p). The reduction in revenue has arisen largely as a result of the negative impact of the Covid-19 pandemic on dividend receipts, which may also be a drag on 2021 receipts. Further downward pressure on dividend income was also caused by the portfolio's shift away from stocks in the energy sector which tend to generate strong dividends, in favour of other sectors such as technology, which generally consist of lower dividend paying stocks. See the Investment Managers' Report for more detail on this shift. The Company does have revenue reserves equivalent to approximately 65% of the year ended 31st October 2020 dividend available to draw on. The Company is also permitted to pay dividends from its distributable capital reserves.

Based upon the revenue generated by the portfolio, an interim dividend of 25.0p per share in respect of the year ended 31st October 2020 was paid on 30th October 2020. The Company receives most of its dividend income well before the end of its financial year ending 31st October, and hence it considers it appropriate to distribute the large majority of its net income as an interim dividend. The Board now proposes a final dividend of 10.0p per share in respect of the year ended 31st October 2020 making a total of 35.0p per share for the year (2019: 35.0p per share). The final dividend is proposed to be paid on 12th March 2021 to ordinary shareholders on the register at the close of business on 5th February 2021. If approved by shareholders, the final dividend will amount to £4,338,000, 10.0p per share (2019: £4,615,000, 10.0p per share). Should income receipts permit, the Company will continue to make payment of an interim dividend, as well as a final dividend in 2021.

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 year. 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. 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 financial year 2,768,868 shares were bought back, approximately 6% of the Company's issued share capital at 31st October 2020. This added 4.95 pence to the Company's NAV return in the financial year. The weighted average discount at which these shares were bought back was 12.2% and these buybacks accounted for approximately 17% of traded market volume during the reporting period. The current policy was initiated in January 2018. The Board will seek authority to renew the Company's share issuance and buyback powers at the forthcoming Annual General Meeting ('AGM').

Board of Directors

As announced on 4th January 2021, in accordance with the Board Succession Plan, the Company engaged an independent search consultancy to search for a suitably qualified Non-executive Director to replace Robert Jeens as a Non-executive Director and the Audit Committee Chairman. After a thorough selection process, the Board are very pleased to announce that Eric Sanderson was appointed as a director on 4th January 2021. Eric Sanderson is a highly experienced and well regarded Non-executive Director and Chairman with extensive knowledge of investment trusts. He will make an excellent addition to the Board and capable Chairman of the Audit Committee, particularly as he will benefit from Robert's experience during the handover period.

The Board would like to thank Robert for his very considerable contributions to the Company since joining the Board in 2011, and in particular for providing invaluable support as Audit Committee Chair.

In compliance with corporate governance best practice, all Directors, except Robert Jeens, will be standing for re-appointment at the forthcoming AGM.

Following the Company's annual evaluation of the existing Directors, the Chairman, the Board and its Committees, the Board recommends to shareholders that all directors standing be reappointed. As referred to above, Robert Jeens will not be standing for reappointment.

The Company's Directors fees were last increased with effect from 1st November 2018. The Board has agreed that the current fees should remain unchanged.

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 100+ investment professionals based in both the UK and overseas. The Company benefits greatly from the extensive experience of the lead investment manager, Oleg, who has some 20 years experience of investing in Russia and has managed the Company through several previous severe Russian and world market disruptions.

The Board have been pleased that during this strange and difficult year, when no one has been able to work normally, that the support the Company has received from the various teams at JPMorgan has continued as usual. We are grateful to the JPMorgan compliance team which constantly reviews the Company's compliance with sanctions, and reports regularly to the Board. The focus on ESG was maintained through the investment management embedded ESG evaluation process that scrutinises all investments made by the Company. As mentioned above, marketing and promotional activity was continued with a significant effort being made to reach out to new shareholders, albeit on a remote basis.

The performance of the Manager was formally evaluated by the Board. Following this review undertaken in September 2020 by the recently establish Management Engagement Committee, the Board concluded that the performance of the Manager had been more than satisfactory and that their services should be retained.

Change of Auditors

The current audit firm Ernst & Young LLP has audited the Company's financial statements since its incorporation. As required under regulations requiring the rotation of audit firms, a formal audit tender was undertaken during the year and BDO has been selected as the new auditor on the basis of the experience demonstrated of the investment trust business and the strength of the audit team. Approval of the new audit firm will be put to shareholders at the forthcoming AGM. I thank Ernst & Young LLP for their work over the period they have been the Company's auditors.

Adoption of new Articles of Association

Resolution 15, which will be proposed as a special resolution, seeks shareholder approval to adopt new Articles of Association (the 'New Articles') in order to update the Company's current Articles of Association (the 'Existing Articles'). The proposed amendments being introduced in the New Articles primarily relate to changes in law and regulation and developments in market practice since the Existing Articles were adopted. The proposed amendments, if approved, include the possibility of the Company holding shareholder meetings whereby shareholders are not required to attend the meeting in person at a physical location. This will facilitate shareholder attendance in situations where they are prevented, through laws or regulations, from attending at a physical location. Having consulted a number of the Company's larger shareholders the Board understands that these shareholders do not object to the proposed change in the articles. The Directors have no present intention of holding 'virtual-only' meetings.

Proposed amendments also include changes in response to the introduction of international tax regimes (notably to take into account the broader obligations under the Common Reporting Standard) requiring the exchange of information.

A summary of the principal amendments being introduced in the New Articles which the Board considers will be of most interest to shareholders is set out in the appendix to the AGM Notice (on pages 75 to 79 of the Annual Report and Financial Statements). Other amendments, which are of a minor, technical or clarifying nature, have not been summarised in the appendix.

Annual General Meeting

The Company's AGM will be held on Tuesday 2nd March 2021 at 2.30 p.m., at 60 Victoria Embankment, London EC4Y 0JP.

The Board is very sorry, but due to the ongoing situation surrounding the Covid-19 and Government advice, we have had to revise the format of this year's AGM. The Government has, for the time being, again placed restrictions on public gatherings and therefore, apart from the quorum necessary to hold the AGM, shareholders will not be allowed to attend the AGM in person and will be refused entry.

The Board is aware that many shareholders look forward to hearing the views of the Investment Managers

and Directors and asking them questions at the AGM. Accordingly, at the time of the AGM a webinar will be

organised, to include the formal business of the AGM, which will involve the participation of two

pre-appointed shareholders/proxies, a presentation from the Chairman of the Board and the Investment

Managers, all of which may be viewed at the time by registered participants. This will be followed by a live

question and answer session. Shareholders are invited to register as participants to join the webinar and

address any questions they have either by submitting questions during the webinar or in advance of the

AGM via the 'Ask a Question' link on the Company's website www.jpmrussian.co.uk or via email to

invtrusts.cosec@jpmorgan.com. Details on how to register as a participant for this event will be posted on

the Company's website, or by requesting the details via the email address above.

In light of the changed format, the Board strongly encourages all shareholders to exercise their votes in respect of the meeting in advance, by completing and returning their proxy forms. This will ensure that your votes are registered.

If the situation as detailed above changes we will let you know by posting an update on the Company's website. The Board would like to thank shareholders for their understanding and co-operation at this difficult time. We look forward to meeting with you when, as we all hope, the Covid-19 threat has subsided.

Outlook

To counteract the grave economic impact of the Covid-19 pandemic the Russian Central Bank along with its counterparts in the USA, Europe and other leading economies have introduced fiscal and monetary support. Together with the commencement of vaccination programmes across the globe, which are expected to gradually eliminate the threat of Covid-19, it is hoped that economies will recover strongly if only slowly at first.

Whilst it is always disappointing to report a fall in the value of the Company, given the dependence of the Russian economy on energy, and the recent drop in demand with the accompanying price fall caused by the pandemic, it is not surprising that the Company experienced a drop in NAV and share price. It is however pleasing that performance was better than the benchmark. There are many well run, well capitalised companies in Russia that have relatively strong cash flows even in an economic downturn.

Whilst the Managers are generally optimistic and expect that the level of dividends from companies in the portfolio next year will be similar to that this year, there are a number of uncertainties that might influence the financial performance of companies in Russia going forward, with potential further downward pressure on dividend income arising from possible earnings volatility, changing payout ratios and strengthening sterling against the rouble.

The Managers continue to be highly selective in their choice of investments, monitoring all aspects of performance and governance very closely. As we look ahead we are optimistic that there will be a recovery in the oil price which will have a stimulating effect on the Russian economy. The Company's portfolio is well placed to benefit from an increase in global demand for both energy and materials, as well as from the expected pick up in the local economy. There are many fundamentals that make the Russian market attractive and we are confident the Managers rigorous approach to seeking long term value for shareholders makes for a compelling investment proposition for those willing to take the risk.

Gill Nott

Chairman

26th January 2021

investment managers' report

Introduction

In this report, we consider the Company's investment performance for its financial year to 31st October 2020. We discuss the unprecedented market backdrop for the period, examine the drivers of the Company's performance, and then consider the outlook for 2021.

Economic Backdrop: Covid-19, Lockdowns and Hopes for Recovery

This has been a unique period in which Russia's economy and investment markets were, along with the rest of the world, negatively impacted by the Covid-19 pandemic. It has been a testing time for us as investment managers, with Covid providing an unsettling backdrop from January onwards. The pandemic exacerbated an already challenging situation in which global trade was muted, demand for major commodities had weakened materially and corporate profitability was under severe pressure. Moreover, the country's position as the world's largest energy exporter created specific challenges, with severe oil and gas price weakness an inevitable consequence of a global economy that shuddered to a halt in early 2020 and remained challenged throughout the year.

When we wrote to investors in June, we commented on Russia's 'perfect storm' of freefalling commodity prices and very real disruption to both the Russian economy and civil activities. By the end of April, Russia had posted its worst ever drop in retail sales, unemployment had risen to its highest level in four years, and the rouble had devalued materially. Russian equities plunged some 30% as a result of the pandemic, in volatile trading days that were reminiscent of 2008's global financial crisis. Markets subsequently bounced back relatively quickly, with some commentators judging that the country's significant reserves would render it well equipped to handle the economic fall-out. However, although equity valuations have been in recovery mode since April, progress has been rather 'stop-start', with investors remaining cautious through to the end of the reporting period.

To date, Russia has managed the crisis adequately. The medical system was relatively well prepared to cope with a pandemic event like this, thanks to the Government's health care programme and its investment in new medical facilities over the last decade. Financial stimulus packages were admittedly modest by global standards, with less than 5% of Gross Domestic Product (GDP) spent on dedicated economic support. Nevertheless, financial support was made available to those residential households most affected by enforced lockdowns. There was also support for pensioners, plus a popular subsidised mortgage programme designed to bolster demand in the crucial residential construction sector. Businesses were offered credit holidays, subsidised loans and deferrals of tax payments. Also, the Bank of Russia acknowledged the uncertain environment by making successive cuts to its key interest rate to kick-start the economy and reduce domestic bills. There were four interest rate cuts in all in 2020, with the most recent one, in July, taking the rate down to 4.25%.

This time last year we were cautiously optimistic on the prospects for the Russian economy, having witnessed tentative signs of recovery and relative stability in both oil and currency prices. However, Covid-19 came from nowhere and changed everything: the Russian economy is expected to have shrunk by around 3.5% over the course of 2020. Whilst this is better than most other global economies it still has a very negative impact on the country's earnings. Oil prices, so pivotal to the fortunes of the Russian economy, have been in historic decline with the price per barrel for Brent crude oil collapsing to $20 in April before recovering to circa $40 by the end of October. Such unprecedented price movements impacted the purchasing power of households and suppressed consumer demand, not to mention shaving away 70-80% of profits for the Russian energy sector.

One positive consequence of lockdown and lower interest rates has been the record numbers of private investors shifting towards bonds and equities. In the first half of 2020, Russians invested more money in financial markets than they deposited in banks, with private investors playing an increasingly important role in market activity. One such example was the Moscow listing of maternity care specialist MDMG, which we hold, whilst other privatisations and local placings were also successful as a result of domestic demand and liquidity.

Economic signs of life were apparent from summer onwards, as demand recovered post-lockdown. Inevitably we saw a shift in household spending patterns, with expenditure rotating away from the likes of hospitality and travel in favour of telecoms, food (particularly home deliveries) and home entertainment. The Construction sector recovered swiftly, but transportation lagged. There was good news from Russia's biggest oil company Rosneft which announced the country's largest ever energy project - Vostok Oil, which will take more than ten years to complete but could boost Russian GDP by around 1.5 - 2% over the next three to five years.

Towards the end of the reporting period markets and the rouble were both in recovery mode and sentiment boosted by positive vaccine developments, both in Russia and around the world. This, in turn, should improve the outlook for energy suppliers.

Market Review: Concentrated Performance

Performance was very concentrated over the period, with some 20% of the RTS Index generating more than 80% of returns. Generally speaking, 'growth' stocks were favoured over 'value' stocks.

For the year to 31st October 2020, the Company's net asset value fell by 17.5% on a total return basis, beating the RTS Index benchmark, which fell by a greater 20.7%. Although absolute performance was disappointing, sector allocation helped the Company outperform its benchmark. The total return to shareholders over the period was -17.0% in sterling terms whilst the Company's discount to net asset value was volatile over the period but ended the year at -11.2%, almost unchanged year-on-year.

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. We aim to build a balanced portfolio of stocks from across the Russian market, with a focus on companies that demonstrate the best long-term growth opportunities. To do this, we actively manage the portfolio and continue to build up our 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.

Integrating ESG into the Investment Process

Investors want to know that their managers are aware of Environmental, Social and Governance (ESG) issues, that they take them into account when building their portfolios and that they raise relevant issues directly with investee companies. Simplistic negative or positive screening has dwindled in popularity. Investors expect to see an integrated approach to ESG and that this approach is clearly linked to driving financial returns, both through portfolio construction and stewardship. JPMorgan Asset Management has long been a leader in using such an integrated approach, seeking companies that run their businesses in a sustainable way, treat minority shareholders fairly and engage in practices likely to enhance the Company's reputation, not compromise it. We believe that all ESG factors, not just those related to governance, will play a critical role in a long-term investment strategy.

Companies that address ESG issues and adopt sustainable business practices are better placed to maximise their performance and create enduring value for shareholders. In our view, corporate governance issues have the most direct bearing on the risk/reward profile of the Company's portfolio; as such it is the area most integrated into our investment process. However, environmental concerns are an ever-increasing part of the investment landscape, partly due to the impact they can have on investment returns and cash flows; where relevant, we assess environmental issues and include them in our decision-making process. Where social issues are relevant, again the focus is on the economic impact of the involvement.

We use an active bottom-up process, with emphasis placed on direct contact with companies. ESG is fully integrated into the investment process, with ESG factors systematically and explicitly considered through a Risk Profile analysis on the economics, duration (which includes sustainability) and governance of a company; this is to ensure there is due focus on potential risks. Three quarters of the issues addressed focus on governance and specific ESG questions, including shareholder returns, management strength and the track record on environmental and social issues. Through this process, we seek to understand the company-specific or external factors which could negatively impact a company and identify issues that we wish to address in our future engagements with management.

We have recently enhanced our Risk Profile process, and a strategic classification of Premium, Quality or Trading is assigned to portfolio companies. This is an assessment of a company's potential for long-term value creation, referencing the number of issues or 'red flags' identified through the Risk Profile analysis. Whilst acknowledging that a significant proportion of the Company's portfolio is held in energy companies, we seek to identify investee companies that run their businesses in a sustainable and efficient way, with high quality board decision-making, and aim to influence their behaviour and encourage best practice through dialogue. We are always focused on efficient use of capital and efficient capital structures, although we have engaged broadly on multiple topics that affect valuation and propriety.

How Have Specific Stocks and Sectors Fared over the Year?

In this section, we consider how specific stock decisions over the year under review impacted portfolio performance.

Stock rotations were made over the period to adjust the overall risk level of the portfolio. Given the ongoing volatility of the global geopolitical and economic backdrop we have continued to reduce our exposure to smaller, less liquid stocks in favour of larger, better-placed alternatives - high quality companies that can generate earnings sustainably over the long-term. As always, the characteristics of individual stocks are more significant to us than sectoral decisions. We are confident that our stock picking focus on quality and income-generating businesses can counter any negative investment conditions we encounter.

A year ago, our holdings in the Energy sector dominated the Company's portfolio, with more than half of the portfolio's value invested there. In late 2019, we decided to diversify the portfolio away from this theme, a decision that proved absolutely the right thing to do as it reduced the portfolio's correlation to the plunging oil price over the course of 2020. Our exposure to the sector has more than halved year-on-year and we ended the year materially underweight relative to our benchmark index.

Energy names Lukoil and Gazprom both remain top ten holdings for us, but their weightings are far lower than they were a year ago. As the only fully private oil company in Russia, Lukoil is our preferred bet in the oil energy sector. 2020 was a tough year in terms of its revenue and earnings, but we are encouraged by the business's strong cash flow generation and its sustainable dividend policy. We reduced our position in Gazprom as its status as the world's largest publicly-listed natural gas company exposed it to plummeting gas prices and export volumes as a result of EU lockdowns. We envisage a challenging 12-18 months for the business which has a very leveraged balance sheet, but brighter prospects after that.

Elsewhere in the Energy sector, Rosneft and Tatneft were two other holdings that we reduced in 2020. Both are very exposed to volatility in production volumes and oil prices, whilst tax incentives received by both companies for extracting certain inaccessible reserves have been reduced, diminishing their attractiveness to us. We continue to like and hold Novatek as a long-term story and are ready to reload our holding as soon as we witness a change in the trend for gas prices. Finally, investors may recall that we exited Surgutneftegas in the 2018/19 financial year for reasons we explained in last year's annual report. The company does not fit our investment process because it remains one of the country's most secretive entities, with limited disclosure of its ownership structure, broader governance and strategic plans.

Adding to the significant increase in the share of the portfolio consisting of technology stocks, we reinvested a proportion of the proceeds of our Energy sector sales to add to our investment in multinational technology innovator Yandex which is now our second largest holding. It was a difficult decision to have to pay such a premium to Yandex's prevailing market value at the time, but it has proven to be well-judged given how the company has thrived during lockdown and subsequently. Society is becoming increasingly digitised so Yandex's position as a Russian equivalent of Google, Tesla, PayPal and Deliveroo rolled into one provides a rather compelling proposition. Its search engine, blogging, video streaming and various delivery services all boomed during lockdown, in a rapidly evolving market. Yandex's cash-rich position and its ambition makes it a very powerful player with enormous growth potential.

Moving to Financials, state-owned Sberbank dominates the Russian banking sector and has regained its position as our largest holding. It is one of our long-term favoured investments and we continue to be impressed by the bank's dynamism and innovation, both in core and non-core activities. We see ample opportunity for its asset management and insurance arms to deliver material growth from already strong current positions, but particularly noteworthy are its plans to expand further into non-financial ventures, specifically in the big tech space. Sberbank's reach is getting bigger and wider, via its investments in an impressive array of related services such as food delivery, taxis, real estate and payment systems. Sberbank is eyeing much greater future profits from these and other non-financial ventures, with aspirations for half of its total revenue to be sourced from non-banking ventures by around 2030. The bank's return-on-equity (RoE) is estimated at 17% whilst its annual spend of around US$2-3 billion on IT and acquisitions is testament to the scale of its ambition. We see very strong leadership from Sberbank's chief executive Herman Gref who confirmed in August that the bank plans to pay shareholders dividends amounting to 50% of its 2019 net profits. Although we like the business, our holding reflects our view on the relative attractiveness of the stock price against other market opportunities.

We were overweight to the Materials sector for most of the review period, thanks to our investments in Polyus, Norilsk Nickel and Polymetal, which all remain Top ten holdings. We still see good value in these names based on the outlook for Gold, Nickel and Silver as well as these companies' high dividend yields. We reduced our exposure to Norilsk in June 2020 after an oil spillage at the company's storage facility. We were right in assuming that this high profile, highly profitable company would be punished severely by the authorities, as expected: Norilsk is facing the highest ever penalty for an environmental breach, with potential costs of around US$2,1 billion. The Company has engaged proactively with shareholders, addressing their concerns with new policies, enhanced management oversight and additional budget for capital expenditure projects. We take ESG issues extremely seriously and devoted significant time undertaking thorough analysis and discussions with Norilsk about the accident and how it would avoid such situations in future. We feel confident that the spillage was an isolated breach rather than the start of a worrying pattern.

We sold our holding in diamond mining group Alrosa last year and remain on the sidelines as we continue to worry about the slow pace of recovery in demand for diamonds. We also sold steel producer MMK last year and were not surprised when it was the only stock within the Materials sector to postpone dividends this year. However, we do like Severstal and NLMK, holding both of these steel companies because we consider them amongst 'best in class' in terms of profitability and capital allocation. In July, one of our long-term holdings Highland Gold Mining announced that it had agreed to a takeover offer from Fortiana Holdings, a deal that valued the group at just over £1 billion. We accepted the offer and sold our position, delivering a significant gain for the portfolio. Another exit in the Materials sector was Phosagro which we sold in order to fund alternative portfolio picks across other sectors.

Earlier, we referenced our policy of reducing portfolio exposure to smaller, less liquid stocks whenever there is sufficient market liquidity to allow us to do so. Our exit from footwear manufacturer Obuv Rossli is an example of this policy in action. In retrospect, we overpaid for the stock when we acquired the shares through its 2017 Initial Public Offering. We had overestimated the Company's ability to grow its business profitably and, having acknowledged our mistake, it took an excessive amount of time to sell our holding in this illiquid stock. Other smaller holdings that we continue to hold are road freight transport business Globaltruck Management and railway operator Global Trans, both of which struggled through lockdown but remain solvent.

In terms of sectoral weightings, we undertake regular research trips (virtually during Covid-19 restrictions) so our positioning is kept under constant review and will change if we feel that our sectoral positioning risks us missing out on potentially compelling opportunities. Apart from the aforementioned Energy sector shift, our exposure to Financials also reduced year-on-year and we are underweight relative to the benchmark. Exposure to Materials, Communications Services, Consumer Staples and Information Technology all increased.

Notable stock changes over the year included our purchases of next generation online payment services provider QIWI and internet company Mail.Ru. QIWI is a Russian equivalent of PayPal which offers restructuring potential following its recent exit from unprofitable banking ventures. Mail.Ru operates Russia's most popular social networking sites with significant monetisation potential. It also owns several game producing studios which could be beneficiaries of people spending more time at home.

We added to telecommunications stocks this year: we believe both Rostelecom and MTS offer positive earnings outlooks as a result of 'working from home' trends and changing consumer spending habits.

Our position in the Consumer Staples sector moved from underweight to overweight over the year, through our large positions in children's retailer Detsky Mir and multi-format food retailer X5. We believe both should benefit from the redistribution of household spending towards food and e-commerce. For the same reason, we belatedly bought shares in another food retailer, Magnit, having altered our previously negative view on the stock; however we continue to prefer X5 in this space.

Investments in former Soviet Union Republics: up to 10% of the Company's gross assets can be invested in companies operating out of former Soviet Union Republics. During the course of the year we added to our holding in Belarus-based, global software engineering and IT consulting player EPAM. We also initiated an investment in Kaspi, a Kazakhstan-based e-commerce platform with its own banking payment service. We continue to be open to investment ideas from neighbouring countries, although opportunities are rare.

Outlook

Although the Company's absolute performance has been disappointing over the review period our longer-term relative record is robust. Our investment approach continues to focus on identifying long-term growth opportunities from individual stocks, as we believe this offers us the best likelihood of delivering positive absolute and relative returns to shareholders, whatever the prevailing economic, geopolitical and investment challenges.

Looking ahead, our views have not changed materially since we wrote to shareholders in June. We continue to believe that the market in Russia provides a good long-term investment opportunity, although the biggest unknown right now is how long the impact of Covid-19 will endure. Consumers and businesses are likely to remain risk-averse and wary on the economic outlook until the impact of Covid-19 recedes and there is a gradual restoration of the normal order. However, we note that the government's economic recovery plan aims to achieve 3% GDP growth in 2021.

We expect to see:

• Firmer oil prices in 2021, after the price shocks of 2020. These will be driven by production cuts and improving compliance with the guidelines, which will be positive for the earnings of Russian companies. As the world emerges from lockdown, transportation should recover and demand for oil products could be supported.

• The Central Bank of Russia likely to pause before considering further interest rate cuts from the current 4.25%, allowing time to consider how successful the cuts have been in stimulating spending and investment. We expect the rouble to recover some of the losses it sustained against the US Dollar and Sterling over the last year, bearing in mind that Russia's macro situation continues to be one of the best amongst leading global economies.

• After an extremely negative 2020, we expect 2021 and beyond to be positive for both earnings growth and the outlook for dividends.

• The environment around sanctions remaining fluid, and we will continue to monitor the situation. We do not expect any significant progress on diplomatic relations, as it will require a massive shift in stance over events such as the Ukrainian situation, which may not happen until there are leadership changes in the countries involved in this conflict. The state of the Russian economy will dictate how much pressure there is to resolve the current stalemate which clearly impinges on economic ties and trade relationships.

Notwithstanding the challenges that lie ahead, we believe the fundamentals for investing in Russia remain compelling for those investors prepared to take the risk. We remain invested in a number of companies where we expect their dividend track records to remain strong and continue to grow in line with a recovery in earnings. Many of these stocks are well supported by Russian retail investors who, like other retail investors around the world, are seeking new sources of income and are becoming significant holders of high yielding domestic equities. As part of our selection criteria, we will continue endeavouring to add value for shareholders by basing investment decisions on relatively strong and improving fundamentals, which we believe will reassert themselves as the primary drivers of returns over time.

Oleg I. Biryulyov

Habib Saikaly

Investment Managers

26th January 2021

PRINCIPAL AND EMERGING risks

The Directors confirm that they have carried out a robust assessment of the principal and emerging 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 which have impacted market sentiment. Emerging risks, although not separately identified in this Report, were also assessed by the Directors during the period.

These principal 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 and other jurisdictions that it operates in. 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, particular events can negatively impact 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.

For details of the Company's Continuation Vote and Tender Offer and Discount Control arrangements, see Key Features at the front of this document.

• Investment Underperformance 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 that the Board may consider to address underperformance 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 21(c) 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 page 34 of the Annual Report and Financial Statements. 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 independent auditors PricewaterhouseCoopers 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 calls with 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 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 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 21 on pages 65 to 69 of the Annual Report and Financial Statements. 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 20 on page 64 of the Annual Report and Financial Statements, all the Company's assets are categorised as Level 1 as they have quoted prices in an active market.

• Pandemic Risk - Covid-19

The recent emergence and spread of coronavirus (Covid-19) has raised the general risk of global pandemics. Covid-19 poses a significant risk to the Company's portfolio. At the date of this report, the virus has contributed to significant volatility in equity markets. The global reach and disruption to markets of this pandemic is unprecedented, so we have no direct comparators from which to learn. However, seismic events in the past have also been the catalyst for large market falls and huge volatility. Time after time, markets have recovered, albeit over varying and sometimes extended time periods, and so we do have an expectation that the portfolio's holdings will not suffer a material long-term impact and will recover once the vaccination programme takes effect. The Board has also reviewed updates on the measures undertaken by the Manager and major service providers to deal with Covid-19 pandemic restrictions.

Should the virus prove resistant to the vaccine and reemerge, it may present risks to the operations of the Company, its Manager and other major service providers. In addition it may pose a risk of social disorder arising at a local, national or international level. Even limited or localised societal breakdown may threaten both the ability of the Company to operate, the ability of investors to transact in the Company's securities and ultimately the ability of the Company to pursue its investment objective and purpose.

Transactions with the Manager and related parties

Details of the management contract are set out in the Directors' Report on page 29 of the Annual Report and Financial Statements. The management fee payable to the Manager for the year was £3,263,000 (2019: £3,288,000) of which £nil (2019: £nil) was outstanding at the year end.

During the year £Nil (2019: £25,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which £nil (2019: £nil) was outstanding at the year end.

Included in note 6 on page 58 of the Annual Report and Financial Statements are safe custody fees amounting to £127,000 (2019: £134,000) payable to JPMorgan Chase Bank N.A. during the year of which £21,000 (2019: £23,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £27,000 (2019: £18,000) of which £nil (2019: £nil) was outstanding at the year end.

The Company was also holding cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMF. At the year end this was valued at £3,886,000 (2019: £nil). Interest amounting to £45,000 (2019: £88,000) was receivable during the year of which £nil (2019: £nil) was outstanding at the year end.

Handling charges on dealing transactions amounting to £131,000 (2019: £189,000) were payable to JPMorgan Chase Bank N.A. during the year of which £2,000 (2019: £12,000) was outstanding at the year end.

Dividend Charges of £342,000 (2019: £368,000) identified in note 6. Other administrative expenses include £nil (2019: £10,000) of costs charged by the JPMorgan Chase Bank N.A. for American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs). JPMorgan Chase Bank N.A. cost is 'passed through' with no additional margin added.

At the year end, total cash of £243,000 (2019: £2,060,000) was held with JPMorgan Chase Bank, N.A.. A net amount of interest of £55,000 (2019: £6,000) was receivable by the Company during the year from JPMorgan Chase.

Full details of Directors' remuneration and shareholdings can be found on page 40 and in note 6 on page 58 of the Annual Report and Financial Statements.

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 financial statements 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 financial statements 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:

• select suitable accounting policies and then apply them consistently;

• 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;

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

• 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 financial statements 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 report and financial statements 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 BoardGill NottChairman

26th January 2021

statement of comprehensive income

for the year ended 31st October 2020

statement of changes in equity

for the year ended 31st October 2020

1 Other reserve, revenue reserve and the capital reserves form the distributable reserves of the Company and may be used to fund distributions to investors. See note 14 on page 15 of the Annual Report and Financial Statements for details.

statement of financial position

at 31st October 2020

statement of cash flows

for the year ended 31st October 2020

Notes to the financial statements

for the year ended 31st October 2020

1. Accounting policies

(a) Basis of accounting

The financial statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, and 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 October 2019.

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

The financial statements have been prepared on a going concern basis. In forming this opinion, the directors have considered any potential impact of Covid-19 pandemic on the going concern and viability of the Company. They have considered the potential impact of Covid-19 and the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of Covid-19. The Directors have reviewed income and expense projections and the liquidity of the investment portfolio in making their assessment.

The policies applied in these financial statements are consistent with those applied in the preceding year.

2. Return/(loss) per share

3. Dividends

(a) Dividends paid and proposed

The dividend proposed in respect of the year ended 31st October 2019 amounted to £4,615,000. However the amount paid amounted to £4,601,000 due to shares repurchased after the balance sheet date but prior to the share register record date.

The dividend proposed in respect of the year ended 31st October 2020 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 2021.

4. Net asset value per share

5. Status of announcement

2019 Financial Information

The figures and financial information for 2019 are extracted from the Annual Report and Accounts for the year ended 31st October 2019 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.

2020 Financial Information

The figures and financial information for 2020 are extracted from the Annual Report and Accounts for the year ended 31st October 2020 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

27th January 2021

ENDS

Annual Report and Financial Statements

The Annual Report and Financial Statements will be posted to shareholders on or around 29 January 2021 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 be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

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.