The board of JPMorgan Russian Securities (JRS) has moved to allay investor fears linked to a looming change of mandate for the investment trust.

With trading in Russian stocks suspended thanks to the country’s invasion of Ukraine, the board revealed on 27 October that it was broadening the investment objective to encompass Central, Eastern and Southern Europe (including Russia), the Middle East and Africa.

The deadline to vote on these proposals on some investment platforms is likely to be several days in advance of the 23 November shareholder meeting.

Ordinary investors in the trust, some of which have contacted Shares directly, are concerned about the risks of a capital raise and of its Russian holdings being sold off at a significant discount.

One holder of the trust, Joseph, told Shares he was part of a group of around 100 private investors owning more than 5% of JPMorgan Russian Securities combined.

To facilitate the change of mandate there was a general concern the trust would pursue a capital raise. The board has acknowledged this concern and in a stock market announcement on 7 November said that there ‘are currently no plans to issue shares or raise capital, even in the event the current prohibitions on the trading and receipt of dividends on Russian securities are lifted’.

There was also a nod to the existing shareholders’ pre-emption rights, in other words first refusal on the issue of any new shares, and on promoting the success of the trust for the benefit of ‘all members’.

However, beyond this risk of being diluted by any share issue, Joseph noted ‘the new investment objective may impose a limit on the Russian exposure of the trust’, though the trust's board has denied this will be the case.

He added: ‘When the Moscow Stock Exchange reopens to foreigners there may be a rush to liquidate Russian holdings by Western investors which may depress share prices.’

He expressed the worry that this could result in the trust selling shares below their intrinsic value. Its current share price is just 79p and the shares trade at a near 70% premium to net asset value.

Joseph said a current investment in a money market fund covers the running costs of the trust and therefore it ‘could operate in the status quo indefinitely while it waits for the reopening of Moscow Stock Exchange to foreigners’.

When contacted by Shares on this point JPMorgan Asset Management declined to comment beyond the statement already put
out by the trust’s board.

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